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How to trade cross currency | 90% success cross currency trading - YouTube
Channel: The Diary of a Trader
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good afternoon good morning good evening everyone聽
welcome to our another video here from Diary of a聽聽
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trader this video we're gonna talk about something聽
called cross currency cross currency is nothing聽聽
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more than a Forex pair that does not have the US聽
dollar in the pair so it could be the the Euro聽聽
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Pound the pound yen any of the yen pairs the聽
Aussie dollar Kiwi dollar anything that does聽聽
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not have the US dollar those are cross currency聽
pairs now saying that though it's it's important聽聽
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to recognize the the influence of the dollar on聽
on everything else the dollar is by far by huge聽聽
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margins the most traded and used currency on the聽
planet it is the most reserved highest reserve聽聽
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currency and in forex the dollar pairs represent聽
the great I think I think it's over 80% of the聽聽
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entire volume is with dollar pairs so knowing聽
that it is really important to understand that聽聽
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how things are performing against the dollar聽
can really increase your chances of having聽聽
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winning trades with cross currency players聽
this is actually a huge personal favorite聽聽
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strategy of mine I generally do not do a lot聽
of things outside of technical analysis but聽聽
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this is a form of analysis that kind of moves聽
further into fundamental but either way it is聽聽
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extremely useful I think you're going to see聽
a good example of that today so we have two聽聽
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charts here on the left side and the right side聽
we have $2.00 pair charts okay so we have the聽聽
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we have the euro dollar and then we have the Euro聽
Pound actually I need that to be the pound dollar
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there we go and the two blue lines are are聽
representing the same period of time in both聽聽
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charts okay so we have the euro dollar on the left聽
and then the pound dollar on the right euro dollar聽聽
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on the left and the cable on the right now you'll聽
notice that there's a little difference between聽聽
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the two charts as we look at them the the price聽
action is a little different all right they're聽聽
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divergent or they're they're going to the opposite聽
so you can see on the Left chart from August 6th聽聽
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to September 25th we see price trading down聽
and then from August 6th to the 25th on the聽聽
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pound on the cable chart we see that trading聽
up now how does that help cross currency pairs聽聽
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well I'm going to show you why because whatever聽
you know for if we're gonna look at a pair like聽聽
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the Euro Pound alright what we're looking at is聽
you know comparing the Euro against the pound聽聽
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has always been a kind of a tricky evaluation聽
especially given the brexit issue but that's why聽聽
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we we try not to look at how the Euro is doing聽
versus the pound against one another look at聽聽
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how they're doing against the dollar so you can聽
have to reference the dollar pairs in order to聽聽
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successfully you know get an advantage in the聽
cross currency pair okay so when we're looking聽聽
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at the Europe the euro dollar on the top left聽
what is that doing against the dollar is that聽聽
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winning or losing its losing against the dollar聽
okay it's weakening against the dog so the Euro聽聽
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is underperforming the dollar I look at that same聽
time period over here on the pound dollar on the聽聽
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cable I see the pound winning or losing against聽
the dollar it's gaining so on the on the top right聽聽
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hand chart the pound dollar is outperforming the聽
US dollar and because the US dollar is weighted聽聽
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so heavily in forex if there is another currency聽
that is outperforming it it will more than likely聽聽
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be outperforming everything else as well so what聽
I should see if I'm going to do a cross currency聽聽
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pair is if I know the pound is beating the dollar聽
and the euro is losing against the dollar what聽聽
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I should see is pound being able to outperform聽
the euro and if we look at that same time period聽聽
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that is exactly what we see have happening over聽
here this is the pound euro what do I see have聽聽
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occurring I see the pound trading up a good amount聽
against that's the dollar sorry that's I meant to聽聽
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have that Euro Pound on there hold on defeated聽
the whole flow of everything all right here's聽聽
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the Euro Pound okay I should see on the Euro聽
Pound pair because the Euro is losing against聽聽
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the dollar just going the inverse now because the聽
Euro is losing against the dollar I should see it聽聽
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it performed poorly against the pound as well is聽
that what occurs absolutely the euro is performing聽聽
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poorly against the dollar it is going to perform聽
poorly against the pound why because the pound聽聽
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is performing better against the dollar okay so聽
you got kind of a double whammy going on there聽聽
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and that occurred you know right around where聽
that top was in the Europe out singles true for聽聽
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pretty much any other type of currency pair if we聽
want to look at if we want to look at well let's聽聽
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look at the Aussie dollar US dollar and let's聽
look at another pair of whack so we could look聽聽
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at the same parents we could we could identify聽
if there's some divergence here or not get rid聽聽
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of that there see if we can identify a time period聽
where there's a little bit of change in direction聽聽
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sometimes you know one thing that you will notice聽
is that sometimes you don't find a huge amount of聽聽
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changes in a lot of pairs as far as their their聽
their trend directions related to the dollar聽聽
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so okay we'll do this there's a October 21st and聽
through November 5th so a pretty short time frame
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I see the I've seen the Aussie dollar US dollar聽
trading up here a little bit but then what do I聽聽
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see in the pound I see it trading pretty flat聽
against the US dollar how would I interpret聽聽
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that well one would interpret that that you should聽
see the pound sorry the Aussie dollar performing聽聽
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better against the pound than the other way聽
around is that true well let's check though聽聽
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we'll check the bottom right chart here this聽
is the pound Ozzy dollar and I am looking for聽聽
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the time period of October 21st through November聽
fifth and that is telling me that what occurred聽聽
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did I see the pound perform weaker against the聽
Australian dollar because the Australian dollar聽聽
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was performing better against the dollar than聽
the pound was against the dollar absolutely yes聽聽
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I see the pound performing weaker against the聽
Australian dollar so across currencies are a聽聽
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lot of fun especially the yen pairs the yen聽
pairs are blessed the end pairs are kind of聽聽
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like their own different beasts as far as the聽
the most active like the pound yen is one of聽聽
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the most active pairs in the world III trade it聽
frequently I think if the pair I trade the most聽聽
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I love I love the pound you end it is a fun聽
fun pair and it's it's one of the few cross聽聽
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currencies or Forex pairs out there that that聽
is very active pretty much all day long okay聽聽
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it is a very active pair it's not like like the聽
Euro Looney is can be active but it doesn't have聽聽
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a whole ton of volume but the pound yen that is a聽
very active pair additionally in quote when we're聽聽
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talking about cross currencies folks should also聽
just kind of talk about about the dollar index聽聽
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because even though you know we're talking about聽
cross currencies and non dollar related pairs聽聽
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when you see the dollar index trading down check聽
the other check all the other pairs like the the聽聽
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euro dollar the pound dollar the Aussie dollar聽
the Kiwi dollar if you see the dollar index聽聽
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trading down figure out which one of those other聽
other currencies is performing best against that聽聽
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dollar and that against the dollar and that is聽
the pair that you're probably gonna want to be聽聽
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bullish on against all the other currencies okay聽
whatever currency is outperforming the dollar the聽聽
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best that is the one that you want to trade and聽
that you want to trade and be bullish with okay聽聽
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whatever is performing the worst against the聽
dollar that's the one that you want to sure聽聽
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that's currency you want a shirt against okay so聽
hope you find this video helpful hope you found it聽聽
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useful and I look forward to speaking with you聽
in our future videos have a great day bye bye
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