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Chapter 22, Part I. Cross Pair – What the Beast is That? Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 22, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Technical precious

    Commander in Pips: There are some. Tell me, where most speculators will be sitting?

    Pipruit: Hm, I don’t know, probably they are distributed proportionally among all currencies…​

    Commander in Pips: You’re absolutely right, but I give you a hint question. Since 90% of forex transactions involve USD… Hence…?

    Pipruit: Right, hence most speculators will be upon USD-borne pairs.​

    Commander in Pips: Absolutely. I will tell you even more. Since the US economy stands among the most tracked by investors, if not absolutely the most tracked – there are a lot of macro data release particularly from the US. This forces the market to be jumpy, shaky sloppy and choppy over time. Now imagine speculator’s contribution and you’ll see spikes, fakes and other kind of doom & gloom in data release days.

    Pipruit: So what – we can’t eliminate it…​

    Commander in Pips: Right, but you can find pretty much calm price action on some cross pair, that also shows trend but without nervous procedure:

    Chart #1 | EUR/USD Monthly

    Chart #2 | EUR/CHF Monthly

    Just look at these two charts and feel the difference. Once we’ve eliminated US problems and questions about the USD – we get a calm and smooth trend on EUR/CHF. Although these charts are of big scale – monthly, the same easily could happen on other time frames, even intraday.

    So if your approach to trading is based on “follow the trend” rule, currency crosses could be extremely good for you. Very often they show more smooth moves, and hold trends longer than major pairs. Also they could not have so many spikes and fake outs as major pairs.

    Now let’s pass to the rate difference application…

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post themon the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
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