Strategies For Euro Vs. Australian Dollar Investment To Build Wealth

March 28, 2024
Natalie Thorburn

An investment in currency, particularly the EUR/ AUD pair, is a good long-term investment and a way to build wealth. Some of the reasons why this pair is popular are its low volatility, stability, and liquidity. This means it's easy to buy and sell this currency pair without influencing the market price.

In addition, investors often use the EUR/ AUD pair as a hedging system, which helps reduce the overall portfolio risk.

Even so, it's essential to note that long-term investment in this currency pair has some risks, especially if you don't have good strategies. As with other investments, it's vital to have strategies in EUR/ AUD pair investment to build your wealth through currency appreciation ultimately.

The rest of this article will explore useful strategies of Euro vs. Australian dollar investment for building your wealth.

What is EUR/ AUD?

The Euro vs Australian Dollar, or simply EUR/ AUD pair, is a currency pair for trading the Euro against the Australian Dollar in the forex market. Typically, AUD is the quoted currency in this form, and EUR is the base currency, meaning the EUR/ AUD exchange rate reflects how much AUD is required to buy one EUR.

Since 1999, when this pair began trading, several factors have impacted its performance, such as geopolitical events, market sentiment, interest rate differentials, economic data, etc.

More recently, between 2018 and 2021, the EUR/ AUD currency pair has been influenced by trade tensions, the COVID-19 pandemic, and monetary policy responses.

Strategies To Trade EUR/ AUD and Build Wealth

1. Analyse EUR/ AUD Thoroughly

There's no shortcut to building wealth in the forex market; as an investor, you must take your time to analyze price action and trends on the chart to trade EUR/ AUD. This allows you to identify specific resistance levels and critical support for the pair.

Observe the current market movement and how it performed in the past to determine which currency is strengthening against the other. Understanding the currency pair performance refines your decisions, increasing wins and cutting losses.

2. Stay Updated with the Economic State and Events

Strong economic growth in the Eurozone or Australia can positively impact the respective currency. So, you should monitor key financial indicators, such as GDP growth, employment data, and inflation rates, to assess the relative strength of the two economies.

Also, keep a close watch on interest rates as they significantly influence the EUR/ AUD by shaping its perception. Ideally, if the rate hikes, EUR/AUD appreciates, which means you should buy. But if the rate falls, that indicates a selling opportunity due to reduced interest rates.

3. Calculate Trade Size

Another tip for trading the EUR/ AUD pair and building wealth is trading with the right lot size. Consider the percentage of money you are willing to risk in the market. Also, remember that the EUR/ AUD currency pair has different levels of volatility than other pairs, so you need a comprehensive overview.

4. Evaluate Trade Results

All successful traders have one thing in common: they reflect on their past mistakes to improve in the future. It's crucial to thoroughly assess the results of every EUR/ AUD trade you close. It allows you to analyze what factors led to that decision and what remedies you can take to increase wins.

5. Monitor Trade Progress

Currency trading requires continuously monitoring EUR/ AUD price movement to predict price direction better and avoid losses that slow wealth creation. Spend time observing the chats and leverage indicators that make it easy to spot opportunities and compare the trend on different time frames for tight entry positions.

6. Work with a Professional Forex Broker

A reputable forex broker provides a friendly training platform and trading resources to make your work smooth. However, not every forex broker has your best interest at heart. Some charge unreasonable fees, have a slow withdrawal process, and can even vanish with your hard-earned money. For a seamless experience trading EUR/AUD, choose a broker you can trust.

Risk Management Strategies

The currency market is precarious, so risk management techniques are necessary to protect capital and mitigate potential losses.

These techniques include:

1. Stop-Loss Orders

Stop-loss is a reliable risk management strategy that can reduce potential losses. It automates the manual process of exiting negative trades.

So, if the market takes an unexpected turn, the order will be closed automatically once the loss reaches a pre-set amount. The fact that you don't need to be there means you can run errands without worrying about your live trades.

2. Diversification

Diversification is a great way to manage EUR/ AUD currency trading risks. Try to diversify your investments across several currency pairs and asset classes and adopt multiple trading strategies. This will help reduce exposure to any event or factor that could significantly impact a particular currency pair.

3. Position Sizing

Another notable way to mitigate risks in EUR/ AUD currency trading is to enhance proper position sizing. The correct position sizing is influenced by risk tolerance, specific volatility, and account size. The rule of thumb is to risk 1-2 % of your account balance on a single trade.

Conclusion

High liquidity, relative stability, and tight spreads are just some of the reasons to trade EUR/AUD. Because of its stability, it's an excellent option for novice and seasoned traders alike.

However, like any other currency market, it has several risks. But the best part is that you can use these tactics to cut losses, increase wins, and build wealth.

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