GBP Index breakout last week was a really sharp one. This move triggered a GBP basket currency move across all GBP pairs.
Look out for pullbacks in GBPJPY and GBPCHF for long entries
This is the last part of the currency strength weakness series.
This video explains the 2 step approach which a trader should follow before zeroing in on the currency pair to trade and why it’s important to trade Forex with currency strength and weakness.
Like we always mentioned the importance analyzing currency index before finding the right pair. Don’t rush into trading a single pair only because you like trading the pair.
Let’s say you have spotted a trading opportunity on EURUSD.
Simply looking at the pair is not the right approach. Before you really place your trade, refer to the individual currency index charts. You can access the individual index charts through Liteforex MetaTrader. Click on the link below for access to currency index charts.
Individual index charts will help you make better decisions. As a currency trader, you want to see opposite moving indexes. If Euro index is falling and USD index is rising then a BUY trade on EURUSD is a good decision.
However, as traders, it’s wiser to take your analysis one step further. If EURO index is rising then ensure the EURO pairs are also rising.
If EURUSD, EURCAD,EURNZD,EURGBP, EURCHF, EURAUD, EURJPY are all rising then it’s wise to say that euro is being brought across the board.
Conversely, if USD is being sold across the board then EURUSD will be the best pair to trade. This is the two step approach.
First – Check the individual index charts for opposite movements
Second – Check the basket of currency pairs in the group to check the movements of the group
This video explains currency strength and weakness and the two steps to follow before finalizing the trading pair.
We recommend you to read the link below for more information
Learn to trade with us today
Currency strength weakness – part 3
Currency strength weakness trading in Forex is the key to successful trading. Let’s begin with part 3 of the currency strength weakness trading learning series.
Like we always mention the most important ingredient in currency trading is identifying strength and weakness.
Lite Forex index charts make your life easy to analyze the 8 currencies. However, it is equally important to validate the move by checking the moves of the pairs in that specific basket.
Example, the latest strong trending move in the market has been NZD which has been moving up since a few weeks.
Whilst, the reasons for the move up could be several economic factors and news releases, we are not looking into those aspects in this article.
Below example shows you why is important to
1.Identify a change in trend for a given index
A fresh move in any currency index is the best time to look for trade entries. Typically, a fresh moving average crossover can be used as the initial signal for change. If the change in direction is a very impulsive strong move then chances for the move continuing is much higher.
2. Validating the new move by comparing with the pairs in that currency basket
The above image shows how the 7 currency pairs in the NZD basket have shown moves similar to the index.
All 4 currency pairs on the left are NZD base pairs which are moving up and the 3 pairs on the right are the counter pairs moving down. This indicates perfect market condition to look for trade setups in the NZD basket.
This part is crucial to understand that simply looking at index charts is not enough. What’s also important is to understand the flow of money. If all currency pairs in a basket are behaving in the same way then it’s safe to make trade entries on that specific index.
We will discuss this more in depth in part 4 of this series.
Continue reading part 4
Moving averages have been a trend traders best friend for ages. Almost every trader has at least moving plotted on his charts to understand which side of the market he is in.
Personally, moving averages can be used best when clubbed with overall strength and weakness of currency indexes.
We are looking to trade existing trends and make pips along the way. Using the currency power meter on the Daily time frame you can find the best pairs to trade.
You can simply use longer moving averages like 50, 100 and 200 ema on the 1-hour time frame to find entries each time price pulls back.
In the images above you can clearly see GBP and EUR in uptrend and NZD and CAD in a down trend making GBPCAD , GBPNZD, EURCAD, EURNZD a good bet for buy.
The Currency power meter makes it easy for you to spot the right pair to trade and then only use any pullback strategy to enter existing trends.
A trader always stumbles on this topic, now ask yourself how often have you stuck to the rules of money management.
We personally believe this one attribute that can completely make or break your trading career.
Do you stick to money management principles is directly related to your individual traits of handling money. If you are a bad spender then there is a high chance that you will never stick to money management principles. Read More
Often in Forex trading, we hear the term ‘trading strength weakness’, however sadly not many follow it.
Determining a strong and weak currency before entering any pair is the most important criteria, in fact, I would say it’s the core of the analysis. Trading strength weakness is critical to forex trading success.
There are numerous brokers who offer currency indexes in mt4 chart format, which makes life easier in analyzing currency pairs. Read More