Friday, October 17, 2008

Most of people trading Forex that I know will trade based on pairs. They will trade EU, UCAD, UCHF etc. They trade based on individual strength of pair. Lets look at it from another direction.

When we trade EURUSD, we are actually comparing the strength of EUR and USD. Which ever is stronger we will be buying it in order to be profitable and vice versa. It is true that pair such as EURUSD will move based on fundamental and technical factor. What if we compare USD to 3 other currencies such as EUR, GBP and AUD. If you look at the chart closely you will see that sometimes these 3 pairs break the trend at once. Meaning they are syncronize.

The way I see it, if all 3 currencies of EUR, GBP and AUD becoming stronger compared to JPY at once. This is a sign of true weakness of the JPY and a huge move is going to happen. These moves can be seen once or twice a week only but it will give a huge return.

Let illustrate this for better understanding. This is just a simple example using MA. I am sure you can do better with more advance indicator. Below is chart of 3 pairs. GBPJPY, EURJPY and AUDJPY. At the yellow line, we have MA cross at the same time. See what happens afterwards. Basically this is the idea, I am using RSI to filter the noise and trade those 3 inline moves. Thats how I make money last night. I used MA, RSI and Heiken Ashi.

I would like to know what do you think of this system. Its a system because I am trading it again and again with success. Let me know what you think and your idea in order to filter it.

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