Foreign exchange trading, also known as forex trading, is a market where different currencies from different countries are traded for each other. This includes the United Arab Emirates currency, known as the dirham.
The UAE dirham is often traded on the foreign exchange trading platform because the economy of the UAE is strong, and the currency’s value stays the same. In this article, we will go over everything you need to know about the UAE dirham in order to trade properly.
A quick guide to the UAE dirham
The dirham of the UAE is the basic unit of currency in the United Arab Emirates. It was originally used as a currency in 1973, replacing the Qatari and Dubai riyals. The dirham is abbreviated as “AED,” and its symbol is a dot. One dirham in the UAE is equivalent to one hundred fils.
The UAE dirham is one of the currencies with the strongest track record of dependability. It is set at 3.67 AED to 1 USD, implying that it is tied to the value of the US dollar. When the dirham is tied to the dollar, it helps keep the money supply stable and helps keep the exchange rate stable and predictable.
What factors influence the value of the UAE dirham?
Like the value of any other currency, there are a number of factors that affect the value of the UAE dirham. Here are some examples of these factors:
Indicators of the economy
The GDP, inflation, and interest rates are all economic factors that can affect the value of the UAE dirham. Growth in GDP, for example, may boost the value of the dirham, while growing inflation may have the reverse impact.
Examples of geopolitical activities
A range of geopolitical events, including wars, periods of political instability, and terrorist actions, may all have an impact on the value of the UAE dirham. These instances may cause investors to withdraw their cash from the country, causing the dirham to depreciate.
The price of oil
Due to the UAE’s considerable position as an oil exporter, the dirham’s value is vulnerable to swings in oil prices. When oil prices are high, the United Arab Emirates (UAE) economy does well, which may lead to a stronger dirham.
Fiscal policy
The dirham’s value could be affected by how the central bank of the UAE handles money. For example, if the central bank chooses to boost interest rates, the dirham may strengthen.
How to invest in the dirham of the United Arab Emirates
If you are interested in dealing with the UAE dirham, you can use the services of a foreign exchange broker. For traders to buy and sell currencies, they need access to the foreign exchange market. Forex brokers give traders that access.
To begin trading in UAE dirhams, you must first take the following steps:
Choose a currency exchange broker
The first step is to find a forex broker that permits you to trade in UAE dirhams. Before proceeding, make sure to choose a reputable broker with a proven track record.
Create a new trading account
After deciding on a broker, the next step is to open a trading account with them. To complete this stage, you will need to provide some personal information as well as fund your account.
Choose a trading platform to work with
The majority of foreign currency brokers provide a number of trading platforms to their customers, including mobile, web-based, and desktop versions. Pick a system that can meet all of your needs.
Make a deal
When you’ve set up your trading account and chosen a platform, you’re ready to start trading the UAE dirham. In order to perform a transaction, you must first choose the AED/USD currency pair and then decide whether you wish to buy or sell dirhams.
Trading strategies for the UAE dirham
When it comes to trading the UAE dirham, you have a variety of options at your disposal, including the following:
Trend following
Trend-following trading is the process of looking for patterns in the market and then trading in the same way. For example, if the trend is bullish, you may buy dirhams but sell them if the trend is negative. But if the trend is positive, you should sell dirhams.
Investing on a breakout
You use a breakout trading method to make a trade when the price of a currency breaks through a support or resistance level. This can be a highly rewarding strategy. If you were trading the UAE dirham, you would look for a breakout above or below a significant level on the AED/USD currency pair chart and then enter a trade in the direction of the breakout.
Trading in the range
The basis of the trading approach known as “range trading” is identifying a market that is range-bound and then trading inside that range. This trading strategy can be lucrative when there is no apparent trend in the market, and the value of the UAE dirham fluctuates within a tight range.
In the news: business
A “news trading” strategy would be to trade based on what’s going on in the world right now and the most recent economic data. For instance, if the central bank of the United Arab Emirates raises interest rates, you could buy dirhams to prepare for a rise in the value of the currency.
Investing in UAE dirhams has a number of advantages
Trading with UAE dirhams has many advantages, including the following:
Stability
Since the UAE dirham is “pegged” to the US dollar, its value is guaranteed to stay consistent, contributing to the predictability of the exchange rate. Traders looking for a safe and stable currency to deal with may profit from this stability.
A strong economic position
Since the UAE’s economy is healthy and varied, the dirham, the country’s currency, may benefit from this attribute. Together, the country’s oil wealth and investments in real estate, infrastructure, and tourism have helped build a strong economy that can handle economic downturns.
Getting access to the Middle Eastern markets
Traders that purchase and sell UAE dirhams have the potential to access the fast-growing and expanding Middle Eastern market. The United Arab Emirates is a popular location for investors since it is a hub for international business and finance.
Low trading operational costs
Trading United Arab Emirates dirhams is possible at a minimal cost due to low trading charges and narrow spreads. So, currency traders who want to cut down on their overall trading costs may find that trading in this currency is a good idea.
Conclusion
The UAE dirham is a currency that is often traded in the foreign exchange market due to its stability, powerful economy, and access to the Middle Eastern market. Traders can trade the UAE dirham via a forex broker using a number of trading strategies, such as trend-following, breakout trading, range trading, and news trading. Another trading approach that traders might use is news trading. Dealing with the UAE dirham may provide merchants with a variety of advantages, including stability, access to the Middle Eastern market, and lower trade costs. If you want to trade the UAE dirham, you should find a reputable forex broker and build a profitable trading plan.
