How to Use Currency Crosses to Trade the Majors
Even if you don’t ever want to trade the currency crosses
and simply stick to trading the majors, you can use crosses to help you make
better forex trading decisions.
Here’s an example… ( To be continued)
"Hardest times produce your greatest gifts."
By Robin Sharma.
The CAD/JPY
Over recent years, this currency cross has become very
popular, becoming highly correlated with the price of oil.
Canada is second largest owner of oil reserves and has benefited
with the rise of oil prices.
On the other hand, Japan is heavily reliant on the importing
of oil. In fact, over 99% of Japan’s crude oil is imported as it has almost no
native oil reserves.
These two factors have caused an 87% positive correlation
between the price of oil and CAD/JPY.
"Nobody ever accomplished anything by thinking about it
or talking about it. They took action and made it happen."
By Billy Cox.
"Spend time doing things that matter.”
By Robin Sharma.
Trading the Yen Crosses
The JPY is one of the more popular cross currencies and it
is basically traded against all of the other major currencies.
EUR/JPY has the highest volume of the JPY crosses according
to the latest Triennial Central Bank Survey from the Bank for International
Settlements.
GBP/JPY, AUD/JPY, and NZD/JPY are attractive carry trade
currencies because they offer the highest interest rate differentials against
the JPY.
When trading JPY currency cross pairs, you should always
keep an eye out on the USD/JPY. When key levels are broken or resisted on this
pair, it tends to spill over into the JPY cross pairs.
For example, if USD/JPY breaks out above a key resistance
area, it means that traders are selling off their JPY. This could prompt the
selling of the JPY against other currencies. Therefore you could expect to see
EUR/JPY, GBP/JPY, and other JPY crosses to rise as well.
"Great things never came from comfort zones."
By Neil Patel.
Trading the Euro Crosses (Part 2)
Let’s say that the U.S. shows
positive economic data causing the USD to rise. This means that GBP/USD would
fall, driving the price of the GBP down. At the same time USD/CHF would rise,
also driving the price of the CHF down.
The drop in GBP price would then
cause EUR/GBP to rise (since traders are selling off their GBP).
The drop in CHF price would also
cause EUR/CHF to rise (since traders are selling off their CHF).
Conversely, this would also work in
the opposite direction if the U.S. showed negative economic data.
"Remember that we get what we settle for. So set
audacious goals that evoke the fiery brilliance that resides within you."
By Robin Sharma.
WHAT ARE FOREX SIGNALS?
Forex signals are buy and sell trade alerts, which are sent
to the paid subscriber’s e-mails or cell phones. Using such service is ideal
for new traders who are not confident in their own skills or for the busy, more
experienced Forex players who do not have the time to analyze and monitor the
market.
"One small positive thought in the morning can change
your entire day."
By Billy Cox.
.
Trading the Euro Crosses
The most popular EUR crosses are EUR/JPY, EUR/GBP, and
EUR/CHF.
News that affects the euro or Swiss franc will be felt more
in EUR crosses than EUR/USD or USD/CHF.
U.K. news will greatly affect EUR/GBP.
Oddly enough, U.S. news plays a part in the movement of the
EUR crosses. U.S. news makes strong moves in GBP/USD and USD/CHF. This not only
affects the price of the GBP and CHF against the USD, but it could also affect
the GBP and CHF against the EUR.
A big move higher in the USD will tend to see a higher
EUR/CHF and EUR/GBP and the same goes for the opposite direction.
Confused? Ok ok…let’s break this down.
"Make a stop doing list so you delete the misuses of
your oh so precious time.”
By Robin Sharma.
"You can’t go wrong doing what’s right."
By Billy Cox.
Trading the Euro and Yen Crosses
After the U.S. dollar, the euro and yen are the most traded
currencies. And like the U.S. dollar, the euro and yen are also held as reserve
currencies by different countries. So this makes the euro and yen crosses the
most liquid outside of the U.S. dollar-based “majors.”
"Stop managing your time. Start managing your focus."
By Robin Sharma.
How to Create a Synthetic Currency
Pair
Let’s say that an institutional
forex trader wants to buy GBP/JPY but can’t because there isn’t enough
liquidity. To execute this trade, they would have to buy both GBP/USD and
USD/JPY (earlier in this lesson, we learned that these pairs are called its
legs).
They are able to do this because
there is plenty of liquidity in GBP/USD and USD/JPY which means they can make
large orders.
If you’re a retail forex trader,
and you wanted to pretend to trade like an institutional trader, then you could
technically trade synthetic currency pairs as well. But it wouldn’t be too
smart.
Ever since the great Al Gore
“invented the internet,” technology has improved to the point now that even
weird currency crosses like GBP/NZD or CHF/JPY can now be traded on your forex
broker’s platform. Aside from having access to a larger “menu” of currency
pairs to trade, the spreads would be tighter on the crosses compared to the
synthetic pair you’d create.
And let’s not forgot about margin
use! Creating a synthetic currency pair requires you to open two separate
positions and each position requires its own margin. This locks up unnecessary
capital in your trading account when you can simply trade the cross-currency
and save on margin.
So unless you’re trading yards
(forex slang term for one BILLION units), forget synthetic currency pairs and
stick to currency crosses. You will be savings yourself some pips (thanks to a
tighter spread) as well as freeing up your capital so you can take on more
trades.
"Don’t downgrade your dream to match your reality.
Upgrade your faith to match your destiny."
By Billy Cox.
WHAT CURRENCY PAIRS ARE TRADED?
EUR/USD (Frequent)
GBP/JPY (Swing Trades Only)
GBP/USD (Swing Trades Only)
USD/CHF (Swing Trades Only)
EUR/JPY (Swing Trades Only)
"The purpose of life is not to get. The main aim of
life is to grow, and to give."
By Robin Sharma.
How to Trade a Synthetic Currency Pair and Why You Probably
Shouldn’t
Sometimes institutional forex traders can’t trade certain
currency crosses because they trade in such high volume that there isn’t enough
liquidity to execute their order.
In order to execute their desired trade, they have to create
a “synthetic pair“.
"Stars can’t shine without darkness."
By Billy Cox.
"All change is hard at first, messy in the middle and
gorgeous at the end."
By Robin Sharma.
How to Trade Fundamentals with Currency Crosses (Part 2)
What do you do?
Of course, like any self-respecting bully, you jump all over
this opportunity and go long AUD/JPY!
There’s nothing wrong with being a bully, at least not here
at the School of Pipsology.
It’s your job as a forex trader to take advantage of certain
opportunities so that you can put some silver dollars into your piggy bank.
Because of currency crosses, you now have the opportunity to
match the currency of the best performing economy against that of the weakest
economy without having to deal with the U.S. dollar.
"Always look at what you have left. Never look at what
you have lost."
By Unknown Author.
