The News Breakout System - Limit Trading System (Professional Guide)
Understanding Market Movement or Direction The Forex market is traded in pairs comprising of two currencies; the base and counter currency.
An example of a market in Forex trading is EUR/USD.
The EUR is the base currency and the USD is the counter currency.
Both currencies when paired are called a market or investment instrument.
The base or counter "title" is determined by the position of the currency in the pair.
The first currency is usually referred to as the "Base" currency while the second is the "Counter" currency.
A weak US economy also means a weak US dollar and what investors are expected to do is to sell off the dollar.
Going back to our pair EUR/USD, if I am selling the dollar, then I should be buying the EUR.
My order to my broker will be to BUY EUR/USD.
This is because I am basing all my order on the base currency.
Again assuming the weak USD was in the base currency position as in USD/JPY then my order to my broker will be SELL (USD/JPY).
Note we cannot enter a fresh market by selling; it is not possible in the real sense though we told our broker to sell USD/JPY and this was a fresh order.
Really what we actually told our broker was Buy the Japanese Yen (JPY) and later exit me from the market by Selling the USD.
To make things easier, we use the market direction in terms of moving up (Long) or moving down (Short) to place our order.
The rule is; Sell a Falling (downward moving) pair (market) and Buy a rising (upward moving) pair.
Now lets go back to our example of a weak dollar, a pair like: 1.
USD/CAD will fall, therefore we should SELL this market (the weak dollar is in base position) 2.
EUR/USD will rise, therefore we should BUY this market (the weak dollar is in counter position) 3.
USD/JPY will fall, therefore we should SELL this market (the weak dollar is in base position) From the examples above you can see that a single economic information from the U.
S economy affected every market where the dollar was present.
The direction the affected markets will take will depend on the position of the US dollar in the pair.
An example of a market in Forex trading is EUR/USD.
The EUR is the base currency and the USD is the counter currency.
Both currencies when paired are called a market or investment instrument.
The base or counter "title" is determined by the position of the currency in the pair.
The first currency is usually referred to as the "Base" currency while the second is the "Counter" currency.
A weak US economy also means a weak US dollar and what investors are expected to do is to sell off the dollar.
Going back to our pair EUR/USD, if I am selling the dollar, then I should be buying the EUR.
My order to my broker will be to BUY EUR/USD.
This is because I am basing all my order on the base currency.
Again assuming the weak USD was in the base currency position as in USD/JPY then my order to my broker will be SELL (USD/JPY).
Note we cannot enter a fresh market by selling; it is not possible in the real sense though we told our broker to sell USD/JPY and this was a fresh order.
Really what we actually told our broker was Buy the Japanese Yen (JPY) and later exit me from the market by Selling the USD.
To make things easier, we use the market direction in terms of moving up (Long) or moving down (Short) to place our order.
The rule is; Sell a Falling (downward moving) pair (market) and Buy a rising (upward moving) pair.
Now lets go back to our example of a weak dollar, a pair like: 1.
USD/CAD will fall, therefore we should SELL this market (the weak dollar is in base position) 2.
EUR/USD will rise, therefore we should BUY this market (the weak dollar is in counter position) 3.
USD/JPY will fall, therefore we should SELL this market (the weak dollar is in base position) From the examples above you can see that a single economic information from the U.
S economy affected every market where the dollar was present.
The direction the affected markets will take will depend on the position of the US dollar in the pair.
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