The ultimate guide to forex pairs

THE ULTIMATE GUIDE TO FOREX PAIRS ...--- ---- (-) CURRENCY BASICS THE US-DOLLAR IS THE WORLD RESERVE CURRENCY. GOLD AND OIL ARE PRICED IN US-DOLLAR. THE EURO ZONE IS THE SECOND LARGEST ECONOMY. 33% OF DAILY FX MARKET TURNOVER ARE IN EUROS. JAPAN IS A BIG NET OIL IMPORTER. THEREFORE, THE YEN BENEFITS FROM LOW OIL PRICES. THE POUND IS THE 4TH MOST TRADED FX CURRENCY AND THE 3RD MOST HELD RESERVE CURRENCY. CANADA IS ONE OF THE BIGGEST NET OIL EXPORTERS. LOW OIL PRICES HURT THE CANADIAN DOLLAR. AUSTRALIA IS THE THIRD LARGEST GOLD PRODUCER. THE AUSSIE DOLLAR AND GOLD ARE HIGHLY CORRELATED. PAIRS BY TRADE VOLUME [EUR/USD] 24% [USD/JPY] 18% [GBP/USD] 9% [AUS/USD] 7% 4% [USD/CAD] THE FOREX MARKET IS BY FAR THE LARGEST MARKET IN THE WORLD. IN 2013, DAILY TRADING AVERAGED $5.3 TRILLION. THE TOP 3 INSTITUTIONAL TRADERS ARE CITI (16%), DEUTSCHE BANK (15.7%) AND BARCLAYS (10.9%). FX PAIRS ARE CORRELATED +85% +85% ИУ - 85% +65% -75% +24% (-) +70% CORRELATIONS IN A NUTSHELL - IF THE EUR/USD RISES 1%, THE AUD/USD GOES UP 0.85% [CORRELATION: +85%] - IF THE EUR/USD RISES 1%, THE USD/CAD GOES DOWN 0.85% [CORRELATION: -85%] NOTE THAT CORRELATIONS VER TIME AND VARY DEPENDING THE TIME- FRAME. CORRELATION ALSO DOESN'T MEAN CAUSATION. WHY DO FX PAIRS MOVE WHEN THE FIRST (BASE) CURRENCY APPRECIATES AND THE SECOND (QUOTE) CURRENCY DEPRICIATES, THE FX PAIR RISES. EUR/USD 1 EUR/USD DEPENDING ON THE STRENGTH OF DEPRICIATION AND APPRECIATION OF THE SINGLE CURRENCIES, THE STRENGTH OF THE FX PAIR MOVES VARIES. EUR/USD EUR/USD IF BOTH CURRENCIES APPRECIATE OR DEPRIACTE WITH THE SAME STRENGTH, THE FX PAIR MOVES SIDEWAYS. EUR/USD EUR/USD THE FOREX TRIADS FOREX TRIAD MATH 1.239 115.178 EUR/USD x USD/JPY = EUR/JPY EUR/JPY / EUR/USD = USD/JPY EUR/JPY / USD/JPY = EUR/USD 142.735 SINCE CURRENCIES ARE BEING TRADED AS PAIRS OF TWO, IT IS POSSIBLE TO BUILD FOREX TRIADS. BY WATCHING A FOREX TRIAD, TRADERS CAN GAUGE THE STRENGTH OF THE INDIVIDUAL CURRENCIES AND CAN OBSERVE WHO IS THE MOVER AND WHO IS THE FOLLOWER. tradeciety t www.tradeciety.com twitter.com/tradeciety 9 [email protected] from traders, for traders' 40% +66% II