Thursday, October 1, 2009

Buy the Strongest, Sell the Weakest

One of the best technical tools we can use in our analysis is the status other currency pairs. If you are of the opinion that because of fundamental reasons the US Dollar will weaken, your next step would be to find the currency pair that gives you the best chance for a profitable trade.

Instead of automatically picking a pair like the EUR/USD and placing a buy, you might want to take a look at some of the crosses to see which currency is currently the strongest and play that one instead. An example would be to first check the chart of the EUR/GBP. If this pair is rising, that means that the EUR is currently stronger than the GBP and buying the EUR/USD would be preferred. However, if the EUR/GBP is falling, then the GBP is stronger than the EUR and buying the GBP/USD would be preferred. You can also add the CHF into the equation by first checking the EUR/CHF and the GBP/CHF. You should get a good idea of which of the European currencies is the strongest of the three and trade that currency against the weakening USD. The idea is to buy the strongest currency against the weakest to increase your chance of success.

Buy the Strongest, Sell the Weakest


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