Understanding Currency Cross Pairs

By Adam Horak

Foreign Exchange

Understanding just one currency may give you ample opportunities to trade; unlike the stock market which sees thousands of stocks moving at different times, for different reasons and often in the opposite direction of the overall trend of the market. This can leave traders wondering what is actually taking place. It is not uncommon to see a stock rally in the face of the biggest bear market or sell off during a bull market rally.

This is much less common in the currency market; although such divergences do exist, currencies are often affected greatly by individual new events. This gives the ability for a particular currency to move simultaneously in the same direction against a number of cross currencies. By using FOREX cross pairs, you can make a number of trades that are unaffected by the day-to-day fluctuations of one particular currency.

As most FOREX traders realize, you are either a Bull or Bear on a particular currency; this significantly narrows the number of currency pairs a trader has to manage by allowing you to focus on the underlying move of that particular currency. Now you can place the trade to follow the weaker or stronger cross currency. However, you will notice that not all currency pairs have the same Average True Range (ATR) meaning that some currency pairs may move more or less than the other cross pairs. So as a trader, it is important to be able to recognize what fundamental reason a particular currency has to move. Traders use this data in order to decide what pair to follow which will allow to you maximize your potential profit for that particular trading session.

Trading currency cross pairs is often used as a main part in any trader’s trading plan. This allows you to recognize the overall trend of a particular currency much easier. Whether the move is an upward trend, downward correction, or in a sideways channel, understanding the cross pair of a currency can benefit any traders trading strategy. So understanding currency cross pairs will give you a greater variety of trades while still following the overall trend of a particular currency.

Understanding Market Conditions

By Adam Horak

Bear Market

It’s time to put your money on the side of change…traders often don’t look at the “big picture” and often can get caught up in what is happening right in front of the them while not seeing what is going on around them. It pays to know what the markets are doing and why.  Are we seeing an area of consolidation (range trading) or are we seeing an area of higher highs or lower lows (trend trading).

Understanding what kind of a market you are entering will greatly increase your success as an investor. … Continue Reading

The Final Word – October 2009

By Adam Horak

With the US and global economies on the brink of a potential recovery when and how much should the Federal Reserve raise interest rates? Let’s start off by looking at a formula often used by traders to predict the target rate for a central banks short term interest rates.

Proposed by John Taylor in 1993, today The Taylor Rule is widely accepted by economists as a gauge for appropriate interest rate levels in conjunction with current economic conditions. We are able to predict how much or if a central bank should change short term rates as real inflation and/or real GDP diverge from the target inflationary rates and potential GDP. … Continue Reading

Hyper Inflation

By Adam Horak

Adam Horak
senior forex trainer

Overall, there has been a significant improvement in risk appetite due primarily to the rally in equity markets, which will weigh on the USD. In addition, worries by Chinese Premier Win Jiabao over its massive US Treasury holdings has also caused USD selling. China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe.

China is clearly concerned that the Fed will solve this crisis with the fiscal deficit with Quantitative Easing measure by printing more US dollars; this will increase inflation and make their investments less valuable. … Continue Reading