The Best Way to Learn Forex Trading : Forex

Oil Crumbles, Cable Reverses and the Dollar Continues with Bullish Structure. Bull Flag Break Opens Door for Continuation.

Gold, USD Strong Inverse Correlation and in Confluence. FTSE Further Develops Range on Sharp Turn Lower.

A quick word of warning before you make your way through this article: In the beginning of this article, we are going to discuss some complicated subject matter. For those folks, the first part of this article may be treacherous. BUT — after the first part, we offer a very simplistic way to accomplish the same goal. The Forex market can present some compelling advantages; not only in this environment but quite a few others.

You see, in stocks — there is really just two ways to trade; you either buy or sell. Have an opinion on Apple? Ok, great — you can buy it or you can sell it. Matters are pretty simple. You can buy stocks fairly easily; and if you can find a broker to let you borrow shares, you should be able to sell it pretty easily. In the Forex market, one of the greatest benefits is also one of the most difficult things for new traders to grasp.

You will lose, even though your analysis in expecting weakness in the Euro was correct. So, you trigger the short EUR CAD position, and look for the pair to trade lower. This means that you are short Euros, and long Canadian Dollars. Perhaps, at first — the trade moves in your favor; only to be followed by news out of Canada that sparks even more weakness in the CAD than what was being seen in the Euro.

Same example, you want to sell the Euro because you expect it to get weaker; but this time, you take matters a step further and you analyze the market to see what currency has been really strong. And in your analysis, you notice that the Japanese Yen has been one of the strongest currencies in the market.

So, rather than taking the EUR CAD short position and hoping that it works out, you match up what you feel will be a weak Euro, with what has recently shown strength in the Japanese Yen. By focusing on both sides of the currency pair, the trader increases their chances of success. This has become so popular that Jeremy Wagner regularly publishes research on this system of analysis.

We outline this process in the article, How to Separate the Strong from the Weak. We can do this with a fairly simple process by focusing on the US Dollar.

We can measure the movement of each currency relative to the US Dollar so that we can look at each on an apples-to-apples basis with each other. So, for instance, if EURUSD is up considerably, but GBPUSD is down — that shows us that Euros have been stronger than dollars; and also that dollars have been stronger than British Pounds.

So, from this very simple analysis we can notice that buying EURGBP may be more amenable than buying EUR USD since GBP was weaker than USD and we want to marry that strong Euro up with the weakest currency. We can measure the movement of each currency against the US Dollar, and compare each to determine an order of strongest and weakest currencies. Taken from How to Separate the Strong from the Weak , data from From this analysis, we can determine which currency has been strong, and which has been weak.

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Notice that the NZDUSD is showing a gain of 92 pips. By dividing this into the price of NZDUSD at the time of analysis, we can see that NZD USD moved up by 1. We can also see that USDJPY has moved down by 14 pips. But, because USD is the base currency in the quote listed first , that means that the US Dollar has lost 14 pips against the Japanese Yen.

We can take all of the above information to create the following table, ordering each currency by its percentage movement against the US Dollar: Taken from How to Separate the Strong from the Weak. Notice that each currency in the previous table strengthened against the US Dollar, so that would mean that USD has actually been the weakest currency during the analyzed period.

This means, we can look to match up what has been a strong New Zealand Dollar with a weak US Dollar. With a focus on probabilities, strong risk management, and a cohesive trade management protocol — traders are ready to Trade the World. So we just went over a rather in-depth process to find some very important information that can increase our chances of success in the market.

And just as I mentioned at the beginning of this article, quite a bit of mathematics and calculation is required. After doing this analysis for a few weeks, you can get the process down to about 15 minutes of your time while doing daily chart analysis. This is the StrongWeak App from FXCM, and all of the calculations that we did previously are done automatically by the software.

The FXCM StrongWeak App grades currencies by strength based on 4 TFs.

The Best Way to Learn Forex Trading

The StrongWeak app will do all of the work that we had done previously in about 15 seconds. As you can see from the picture above, currencies are monitored based on four time frames, and a bar graph will be used to show which currency has been the strongest, and which has been the weakest over the measured period. To take matters further, the app will not only measure strength and weakness, but it will use that analysis to show the greatest disparities based on each time frame.

These could be looked at as potential ideas for traders to investigate for future trade setups. Longer-term traders can look at the Daily grade of a strong GBP , and a weak NZD to look at potential GBPNZD long positions. So, FXCM has created an alternative route for traders that might want to approach the currency market similarly to stocks or futures. My colleague Tyler Yell wrote a very in-depth description of this concept in the article, Bringing the Powerful Basket Approach to Forex Trends.

James is available on Twitter JStanleyFX. Would you like to get better with Price Action?

Please feel free to take our 15 minute course on the topic. Price Action Presentation via Brainshark. Forex — Secrets of Profitable Forex Traders.

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Get Your Free Trading Guides With your broad range of free expert guides, you'll explore: News getFormatDate 'Wed Jun 21 News getFormatDate 'Tue Jun 20 An Easy and Advanced Way to Find Trades in the Forex Market getFormatDate 'Thu Oct 24 Trading the Forex market entails taking a stance on two currencies simultaneously Traders are best served by focusing on matching a strong currency with a weak currency We cover two different ways traders can perform this analysis: Upcoming Events Economic Event.

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