UNDERSTANDING THE FOUNDATION AND QUOTE CURRENCY

There’s always a foundation and quote currency when it comes to trading forex pairs. The pair is the result of a price comparison between the base currency and the quote currency, which shows the amount of the quote currency required to purchase the base currency.

In the case of the EUR/GBP, the EUR is the base currency in the first place, while the GBP is the quoted currency in the second place.

So when it comes to trading EUR/GBP, we are looking at how much GBP is required to purchase EUR. You are selling GBP to buy EUR, in other words.

In addition, two values are involved, which include the offering price and the asking price. The bid price is the amount of the quoted currency for the acquisition of the base currency, while the asking price corresponds to the amount of the quoted currency obtained after the sale of the base currency.

TIMING IS KEY

Trading activity on the forex market typically hits a peak in major financial cities around the world at certain times. Forex trading is thus differentiated into three operation sessions: sessions in North America (New York), Europe (London), and Asia (Tokyo). Notably, the London European Forex session begins from 7 am to 4 pm (GMT).

While you can trade in the 24/7 forex market at any time, during the European Forex session, it is ideal to trade the EUR/GBP pair; an easy way to note this is do not trade when it is dark in London.”

 

TRENDS ARE IMPORTANT, LOOKOUT FOR IT!

It is important to recognise ongoing patterns if you want to conduct a profitable EUR/GBP trade. You can either use the EUR/GBP price analysis or a technical trend predictor for the EUR/GBP pair.

Take for example, the Simple Moving Average of the 200-Day Period; if the chart is trending down and prices are shifting below the moving average, it is a bearish pattern. You can only obey short signals from the EUR/GBP pair to avoid having false trend signals.

Similarly, it is an upward trend if the chart is trending up and prices are shifting above the moving average. You can only obey the pair’s long signals to avoid having incorrect pattern signals.

 

RESEARCH ON THE PAIR’S CORRELATION

You should still look out for other forex pairs and how they correlate, though you have your sights fixed on EUR and GBP. You should ideally search for parallels from the past three months.

Pairs with a good correlation are likely to have EUR or GBP; EUR/JPY and GBP/JPY, for example.

You can get trading signals for the EUR/GBP pair using correlation. Similarly, currencies are perfect for hedging with clear correlations.