GBP Trading Tips – How to Trade the British Pound Sterling
GBP Trading Tips Let’s Start with a Few Takeaways:
- Here we are tackling GBP/USD, EUR/GBP, hence low volatility currency pairs;
- Low volatility but high liquidity due to the hugeness of economies they represent;
- The fundamental analysis is crucial for this kind of pair;
- It’s ultimately important to follow the commodity market since these economies rely on many of them;
- Make sure you are trading at appropriate hours following London and New York’s best hours for trading these pairs;
- Following correlated pairs prices is also relevant.
1. GBP Trading Tips or How to Trade EUR/GBP Currency Pair
To trade whatever Forex pairs you want, you ought to understand the quote and the use and the quote currency. If you, for instance, want to trade EUR/GBP, the base currency would be EUR, and GBP comes as the quote currency.
Therefore, when trading EUR/GBP, you need to figure out how much euros you need to buy sterling pounds. In other words, you are selling pounds to buy euros. There are two kinds of prices in this process to pay attention to bid price, which represents the amount of the quote currency to buy the base currency. And asking price is the quote currency acquired once you swell the base currency.
The British Pound is a Low Volatile Currency
It means there are fewer price movements compared to other currencies, especially to falling into the group of exotic currencies. The forex market is volatile in itself, but the British pound, which is still considered as one of the reserve currencies, has a moving average of -0.02% per 50 days.
Euro is also considered as one of the strongest as it is less volatile in the world. Hence the need for the trading strategy that aches this particular property. Nevertheless, they are less volatile and massively traded, and the slightest change in price could affect your trading strategy. Hence the need for following the economic data.
The Importance of Economic News while Trading Forex
Follow the economic news when trading any currency pairs on the Forex market. It would be perfect for scheduling your smartphone to receive all financial data relative to these currency pairs.
If you go via brokerage service, it’s possible to receive the data and technical analysis in real-time to get a big instantaneous picture of what is happening in the market. You can imagine how important this was during the Brexit turmoil for the pair like EUR/GBP and all other pairs involving the pound sterling. And it still is.
Don’t neglect important updates, monetary policy news, inflation, capital inputs, and withdrawals. Morning and evening are the best times to check the updates. Also, you must check political updates that can affect your investment decisions.
GBP Trading Tips – The best hours for trading
Forex trading is divided into the three most prominent trading sessions. These encompass North American (United States), European and Asian markets, or New York, London, and Tokyo trading sessions. Each of them has its own pace, highs, and lows.
The forex market is available seven days a week, 24 hours a day. But if you want to trade EUR/GBP, make sure not to trade when it’s dark in London. Simply follow the schedule of European Forex sessions. London Exchange market starts at 7 a.m. and shuts at 4 o’clock afternoon GMT.
Identify Market Trends
For performing a successful EUR/GBP trade, you need to check for trends constantly. What does it mean? It entails a price analysis of EUR/GBP currency pairs using technical trend indicators. For starting your trading strategy on solid grounds, you need to check the average price movement of the pair you want to trade. If the price is below the average, it might be a bearish trend. So, you need to use the appropriate strategy. Rely only on short signals for EUR/GBP price pair. Once the price shifts above the average, you play differently according to the bullish trend strategy.
Look Out for Strongly Correlated Pairs
Once you master the trending of the EUR/GBP currency pair and decide to start trading, make sure you hedge your investment. One of the best ways to hedge your investment in the Forex market is using pairs with strong correlations. EUR/GBP is, for instance, strongly negatively correlated with GBP/CHF, GBP/JPY, and GBP/NZD. The interest rate of this pair goes opposite to the EUR/GBP. Hence the better chance for hedging.
2. GBP USD Trading Tips and Tricks
Yet another pair, popularly known as “cable,” contains the British pound and one of the most prominent currencies, the United States dollar. As for the EUR/GBP, this is a pair of low volatility, but every earthquake in their economic data leads to tremendous changes in the Forex market landscape. Today it’s also the third traded currency on the Forex exchange market, after EUR/USD and USD/JPY. Like the previous pair, it allows you to trade with less risk in a long-term strategy. It’s very convenient to hedge risks with correlated currency pairs such as EUR/GBP. These are the currencies of two big economies, and therefore, the cable represents one of the most liquid to trade on the market today.
How to Trade GBP/USD
First and foremost, even though these economies are stable and transparent, learn as much as you can about the factors that entice price movements. Figure out what these countries trade the most, their commodity market conditions, monetary and fiscal policy. A little spoiler for you: The United Kingdom is one of the most important exports of cars, precious stones, and medical equipment.
Understanding Political Data
For better trading GBP/USD pairs, you have to grasp their political standpoints. In general, they make part of similar political and military blocks and maintain cohesion in their politics. However, every new update from the G20 or NATO meeting could shake up the prices. Closely watch everything about these countries. But the main factor that influences these two currencies can be some fundamental factors, including monetary policies. Bank of England and Federal reserve decisions regarding inflation rate decisions, as well as the employment data.
Correlated pairs and GBP/USD technical analysis can enhance your strategy. So, you can divide the workup. While you consistently listen to the latest news and use your common sense, your best friend can take over the technical analysis. Technical charts are brought by almost every broker these days.
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