If you have an interest in the foreign exchange market, one of the first strategies you will probably employ is the pairing of currencies that mirrors your own financial interests. Most traders use the EUR/CHF pair in this regard. The EUR/USD is known as the currency of choice because it is widely considered a safe haven. For example, if there is great risk of losses on the EUR/CHF pair, most traders will feel more comfortable trading with EUR and settle their losses in EUR rather than CHF. In the same way, if there is less risk in trading with the EUR/CHF, most traders will settle their losses in EUR rather than CHF.
The EUR/USD is also widely used as a reference currency by international financial institutions. For example, the Euro is used as the reference currency for currency swaps in Europe. The CHF is used as the reference currency for financial derivatives in the United States. If one follows these financial transactions, they will find that the EUR/USD and the CHF are not far from being equal. This means that most experienced traders view the EUR/USD as a strong currency pair in Europe and the CHF as a weak currency pair in the United States.
Another reason why the EUR/USD has become a popular choice is that it trades quite smoothly compared to other currency pairs. During the last two months, there have been only three days when the EUR traded between zero and minus zero. There were no double digit days during that period.
Most forex traders have noticed that the EUR/CHF pairs have the highest volatility in comparison to other currency pairs. Most CFD exchange dealers also trade the EUR/CHF pair. The EUR has been the top currency pair most traded on the CFD platform this month. While it might be a good idea to trade the EUR/CHF, there are some factors that you should consider before deciding to trade the EUR/CHF.
The first point to consider is whether you are a long term or a short term trader. The trading hours of the two currency pairs are very similar and most traders can profit from them if they know how to identify the right time to trade. Both pairs have their highs and lows during the day. Long term traders would want to trade long and choose the high of the day so that they can gain most benefit from the weak points on the chart.
Short term traders prefer to trade the EUR/CHF during the afternoon or evening hours. This is because the EUR tends to trade less during these hours. Short term traders also prefer to trade the euro currency pair more during the winter months. The low of the winter months would benefit the euro currencies’ exchange rates.
A trader could also rely on technical analysis. These analyze the price moves made by the currencies over a period of time. They try to determine what the reason is for the price moves. Technical analysts usually study technical indicators. Some of the most popular technical indicators include the MACD, Stochastics, and moving averages. These technical analyses help forex traders decide whether to enter a trade or not.
One important thing to remember is that the interest rates play an important role in deciding which currency pair you should trade. When interest rates move, so does the amount of tradeable currency pairs. Traders tend to diversify their trades and trade the different currency pairs of interest. Trading the same interest rate may not be profitable after the interest rate changes. To be successful in more you have to learn when to trade which currency pair.