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The Forex market has been widely known as a high risk market where you can earn very good money, especially if you know how to position your trades correctly and manage risk. Over the years, I’ve met a good number of highly successful and profitable currency traders. A few of them are real Forex millionaires and make up to $10,000 or more in a single day trading currencies. Oftentimes, they will share with me little tidbits on how they approach the Forex market. If you want to learn a few of these tidbits, then make sure you sign up for my free report because I share a number of things there that will help you consistently place winning trades and produce real Forex wealth. But enough about the report. What’s the one common factor amongst all of these traders that make them as successful and wealthy as they are?
The Answer: They all put their primary focus on trading the EUR/USD now.
In this blog post, I am going to explain why it’s beneficial to trade the euro and how you can start trading it profitably today. Now, there are several good reasons why you should consider trading the EUR/USD. For starters, this particular currency pair is the most popular and widely traded currency pair out of all the pairs in the foreign exchange market. Because of the large transactional activity around this pair, the pair is a lot more liquid than the other currency pairs, thus giving you plenty of opportunities throughout the day to scalp or trade the market for 3% or more in a single day.
Because of the volume of activity within the euro, you can patiently wait around for the perfect setup and make a days worth of income in one simple trade. When both the base currency(EUR), and counter currency(USD), are very liquid currencies, even a small movement in the market can result in larger profits. This is one reason why currency scalpers love trading the EUR/USD. Their small scalps of 4 to 5 pips can result in some nice gains.
However, that is not the only reason why traders and scalpers love trading the euro. Because of the large volume of activity with this pair, currency brokers usually charge cheaper spreads when trading the EUR/USD. Therefore, you are not spending as much in fees in order to place transactions. And since I love to save money, that’s a huge incentive for me…Lol!
The Immense Benefit of Diverging Monetary Policies For Forex Traders
At this current moment in our economic outlook, changes in monetary policies across the globe are affecting the values of currencies. Ever since the Fed started implementing QE, many other nations slowly followed suit in order to stimulate economic growth and boost exports for their economy.
So what does monetary policy have to do with trading the EUR/USD?
Well, it has a lot to do with the EUR/USD pair and most currencies altogether.
Due to economic instability and growth issues in the Eurozone, the ECB has adopted a looser monetary policy in order to stimulate growth. The ECB has prepared a package of policy options which includes cuts to the refinance rate, deposit rate, and marginal lending rate. These cuts will do the inevitable, weaken the euro dollar in order to increase global demand for products and services in the Eurozone.
However, this is where it gets real interesting.
With an economic downturn occurring in emerging economies, and a slowdown in the growth of the Chinese economy, the US is taking an opposite approach from the rest of the world in regards to monetary policy.
Many economies across the globe are moving in the direction of a loose monetary policy, which in turn, weakens that nation or economy’s currency. The Fed, on the hand, is actually discussing the likelihood of an interest rate hike before the year ends. This interest rate hike will strengthen the dollar against most major currencies if this does happen.
With the US economy, and the Eurozone, going in polar opposite directions when it comes to monetary policy, we should see a nice, definite trend in one direction, in favor of the US dollar.
Therefore, we know where price is potentially heading in the euro, which is reason alone not to ignore this currency pair. However, the problem lies with understanding how to enter profitable transactions in the EUR/USD currency pair. Just because you know the direction of the pair, doesn’t mean that you will enter the correct trade at the right time. Timing and location of the trade is critically important as a currency trader. If you mis-time your trade, although your trade bias may be correct, the trade can still end up as an utter failure.
If you want to learn a solid plan for entering precise trades in the EUR/USD, then I recommend that you click here to grab this FREE video report that will show you a strategy for trading the euro for 40+ pips a day.
Melvin Perry has been trading the Forex market since 2010. Like his brother, he attended the University of Illinois in Urbana-Champaign and graduated with a BS in Bioengineering in 2002. Although an active trader, he spends most of his time reading the Bible, studying the markets and providing content for this blog. He also does an average of two training webinars a week with the Slumdog Forex VIP community.