Hello Traders,
This thread is yet again dedicated to Currency Strength and Weakness.
Currency pairs only move because one currency is strong and the other is weak that is it. This strength and weakness is how trends form and proceed in Forex market. Indicators only make it easier for our eyes to identify, otherwise its always the strength and weakness of price which moves the markets.
When a trader looks at the EUR/USD as a pair to trade and most likely would use a indicator and look for entries. The problem is he is looking at this instrument as a standalone pair which is where everything goes wrong.
The first thing is that the EUR/USD is not one single instrument but it is actually two separate individual currencies. The Euro and the US Dollar are two separate currencies each with its own fundamentals and direction. These two independent currencies form the EUR/USD
Currency pairs are constructed with the base currency on the left and the cross or counter currency on the right. On the EUR/USD the EUR is the base currency.
Each currency pair has two separate currencies which has to be analyzed separately. You are buying one currency and selling the other when you are trading Forex. There is only one way to make a profitable trade. When you make a buy entry the base currency must rise or the counter currency must drop and vice versa for sell.
Remember as traders you are trading individual currencies and not pairs.
Here are the eight most widely traded individual currencies in the spot forex.
USD US Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
CAD Canadian Dollar
AUD Australian Dollar
NZD New Zealand Dollar
Lets take an example :
EUR/USD
EUR/JPY
EUR/CHF
EUR/GBP
EUR/CAD
EUR/NZD
EUR/AUD
The EUR is on the left in all pairs and if EUR is indeed strong then all EUR pairs should be rising.
If EUR/AUD is rising
and AUD/USD is also falling
Then its possible that AUD weakness is causing the movement. Understanding strength and weakness is fairly simple and this is what causes pairs to move. The 28 pairs movement is totally dependent on the 8 big currencies.
I highly recommend you download mt4 from liteforex and start watching individual index charts to understand this subject better.
Please check the attached images for a strength and weakness example.
You can access the individual index charts by downloading metatrader 4 from Liteforex. I have given the link below
https://www.liteforex.com/downloads/mt4/
Its important you know the underlying strength and weakness before you place trades.
I place quick day trades due to time constraints by simply watching underlying strength and weakness and place entries on pullbacks for anywhere from 15 to 40 pips
See you in the next post
Capito
This thread is yet again dedicated to Currency Strength and Weakness.
Currency pairs only move because one currency is strong and the other is weak that is it. This strength and weakness is how trends form and proceed in Forex market. Indicators only make it easier for our eyes to identify, otherwise its always the strength and weakness of price which moves the markets.
When a trader looks at the EUR/USD as a pair to trade and most likely would use a indicator and look for entries. The problem is he is looking at this instrument as a standalone pair which is where everything goes wrong.
The first thing is that the EUR/USD is not one single instrument but it is actually two separate individual currencies. The Euro and the US Dollar are two separate currencies each with its own fundamentals and direction. These two independent currencies form the EUR/USD
Currency pairs are constructed with the base currency on the left and the cross or counter currency on the right. On the EUR/USD the EUR is the base currency.
Each currency pair has two separate currencies which has to be analyzed separately. You are buying one currency and selling the other when you are trading Forex. There is only one way to make a profitable trade. When you make a buy entry the base currency must rise or the counter currency must drop and vice versa for sell.
Remember as traders you are trading individual currencies and not pairs.
Here are the eight most widely traded individual currencies in the spot forex.
USD US Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
CAD Canadian Dollar
AUD Australian Dollar
NZD New Zealand Dollar
Lets take an example :
EUR/USD
EUR/JPY
EUR/CHF
EUR/GBP
EUR/CAD
EUR/NZD
EUR/AUD
The EUR is on the left in all pairs and if EUR is indeed strong then all EUR pairs should be rising.
If EUR/AUD is rising
and AUD/USD is also falling
Then its possible that AUD weakness is causing the movement. Understanding strength and weakness is fairly simple and this is what causes pairs to move. The 28 pairs movement is totally dependent on the 8 big currencies.
I highly recommend you download mt4 from liteforex and start watching individual index charts to understand this subject better.
Please check the attached images for a strength and weakness example.
You can access the individual index charts by downloading metatrader 4 from Liteforex. I have given the link below
https://www.liteforex.com/downloads/mt4/
Its important you know the underlying strength and weakness before you place trades.
I place quick day trades due to time constraints by simply watching underlying strength and weakness and place entries on pullbacks for anywhere from 15 to 40 pips
See you in the next post
Capito