Dollar index


As a new trader you may have heard people talk about the dollar index and not really thought any more about it, who can blame you, there's only so much you can take in at one time, but this really is worth a second look.

The code for this chart is USDX. Doesn't matter if your broker hasn't got it listed as you really only need it for reference purposes, it's a very strange beast indeed to trade, so if you can find it on a demo that'll do nicely.


What this chart shows is the value or strength of the $Dollar$ relative to six other currencies which are; EURO, STERLING, YEN, CANADIAN $, SWISS FRANC and the KRONA. You will find that these are commonly referred to as a basket of currencies, why? no idea.

So knowing if the USD is strong or not is obviously very important in our trading decisions, as most of our trades have USD on one side or the other.

Referring to the chart we can see that the poor old buck has been sliding down a rather slippery slope for quite some time, so if you were trying to play with lady luck on your side you would have been wise to sell dollars as has nearly everybody else on the planet, rather than swimming up stream fighting the current all the way. Keep it simple.

Recently though things have changed and if we look at this hourly chart of the same index, the dollar has kicked back a bit and slammed on the brakes as it approaches some critical resistance levels.


I use the $index as a tool to give me an overall picture of what's happening out there and refer to it several times throughout the day. It's just more ammunition for you out in the field, and an easy indicator that won't take up more space.

*apologies this post is meant for beginners boot camp
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