Abstract:Let's imagine you've done some research and checked the BabyPips.com economic calendar (shameless promotion! ), and you've discovered that the Japanese economy isn't doing so well at the moment.
If Australia's economic data is strong, you might want to consider buying the AUD. Your initial impulse may be to purchase AUD/USD.
But what if recent data also reveal that the United States is experiencing great economic growth? The AUD/USD exchange rate may remain unchanged.
One possibility is to trade the Australian dollar against the currency of a struggling economy...
Currency crosses are a gift from the forex gods!
Let's imagine you've done some research and checked the BabyPips.com economic calendar (shameless promotion! ), and you've discovered that the Japanese economy isn't doing so well at the moment.
So, what exactly do you do?
Of course, like any self-respecting bully, you seize the moment and go long on the AUD/JPY!
Take note of the relative strength of AUD/JPY vs. AUD/USD in the chart above.
You aren't restricted to these currency pairs; you could also compare AUD to EUR, GBP, and CAD.
Then you can look for the currency that is the weakest to trade against.
Being a bully has no negative consequences.
As a forex trader, it's your job to seize particular opportunities in order to fill your piggy bank with silver dollars.
Currency crosses allow you to match the currency of the best-performing economy against the currency of the worst-performing economy without having to deal with the US dollar.
Next Lesson
Why You Shouldn't Trade a Synthetic Currency Pair
These champions have one thing in common: they not only work their butts off, but they also enjoy what they do.
"Patience is the key to everything," American comic Arnold H. Glasgow once quipped. The chicken is gotten by hatching the egg rather than crushing it."
Ask any Wall Street quant (the highly nerdy math and physics PhDs who build complicated algorithmic trading techniques) why there isn't a "holy grail" indicator, approach, or system that generates revenues on a regular basis.
We've designed the School of WikiFX as simple and enjoyable as possible to help you learn and comprehend the fundamental tools and best practices used by forex traders all over the world, but keep in mind that a tool or strategy is only as good as the person who uses it.