People like to buy. That seems to simply be a fact of human behavior. One of the things that most traders and investors look for are markets that are heading up and will continue going higher. I can no more tell the future than anyone on Wall Street, and my guess is that your crystal ball is at the repair shop as well. So what can we do? Given the widespread preference for buying, the best thing to do is find a market where you can find a bull market no matter what. That’s the forex market.
This is where the U.S. dollar comes in. The six most popular pairs in the forex market are either U.S. dollar–correlated majors or U.S. dollar–based commodity currencies also known as “comm dolls.” You didn’t think I was going to let you sound like a newbie now, did you?
Let’s briefly discuss the difference. U.S. dollar–correlated majors are the euro/U.S. dollar, the U.S. dollar/Japanese yen, the British pound/U.S. dollar, and the U.S. dollar/Swiss franc. The four pairs trade against the U.S. dollar. The reason these are “correlated” is that the movements of these pairs have a strong relationship to the U.S. dollar, which we can track with the U.S. dollar Index. We’ll talk in the next section about the relationships in detail, but for now keep in mind that the forex is a game of comparison. Is the U.S. dollar gaining or losing ground to another nation’s currency?
If it seems as though I am spending an inordinate amount of time driving this point home it is because I think far too many traders forget that trading forex is a very tangible thing. It personally affects our everyday lives and the everyday finances of corporations and banks. Our world and collective economies are not isolated, and the global economy is now more intertwined than ever. Anyone who for a moment bought into the theory that somehow the U.S. economy was dislocated from Europe, Asia, and the BRIC countries (Brazil, Russia, India, China) should now know different after witnessing a cataclysmic global slowdown. My point here is that forex, the relationship between different currencies, is at the heart of the worldwide financial system and the more you understand this relationship the better overall trader you will become. Now who said forex trading couldn’t make you a better person?
This is where the U.S. dollar comes in. The six most popular pairs in the forex market are either U.S. dollar–correlated majors or U.S. dollar–based commodity currencies also known as “comm dolls.” You didn’t think I was going to let you sound like a newbie now, did you?
Let’s briefly discuss the difference. U.S. dollar–correlated majors are the euro/U.S. dollar, the U.S. dollar/Japanese yen, the British pound/U.S. dollar, and the U.S. dollar/Swiss franc. The four pairs trade against the U.S. dollar. The reason these are “correlated” is that the movements of these pairs have a strong relationship to the U.S. dollar, which we can track with the U.S. dollar Index. We’ll talk in the next section about the relationships in detail, but for now keep in mind that the forex is a game of comparison. Is the U.S. dollar gaining or losing ground to another nation’s currency?
If it seems as though I am spending an inordinate amount of time driving this point home it is because I think far too many traders forget that trading forex is a very tangible thing. It personally affects our everyday lives and the everyday finances of corporations and banks. Our world and collective economies are not isolated, and the global economy is now more intertwined than ever. Anyone who for a moment bought into the theory that somehow the U.S. economy was dislocated from Europe, Asia, and the BRIC countries (Brazil, Russia, India, China) should now know different after witnessing a cataclysmic global slowdown. My point here is that forex, the relationship between different currencies, is at the heart of the worldwide financial system and the more you understand this relationship the better overall trader you will become. Now who said forex trading couldn’t make you a better person?
