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Trading Two Minor Forex Currencies
Trading two minor Forex currencies can be very profitable. However, there are a number of ways that commonly lead to profits and there are a number of cautions to keep in mind when trading two minor Forex currencies. Understanding the fundamentals that drive a minor Forex currency is commonly more important than technical analysis of minor Forex currencies in gaining profits and avoiding loss. Tools such as Japanese candlestick signals, which are a mainstay for many in technical analysis of major Forex currencies, are commonly less useful in trading two minor Forex currencies. Minor currencies trade in lower volume than do the majors. Liquidity is less and volatility can be substantially higher. Higher volatility can lead to substantial profits in the hand of astute traders and devastating losses in the hands of a naïve trader.
Minor Currencies to Trade
The more highly traded and visible minor currencies are the Hong Kong Dollar, Swedish Krona, New Zealand Dollar, South Korean Won, Singapore Dollar, Norwegian Krone, Mexican Peso, Brazilian Real, Russian Ruble, Chinese Yuan, and Indian Rupee. All of these currencies represent viable and reasonably open economies. In trading any currency the trader needs to have a clear view of trade figures, political and economic policy, monetary policy, and economic data such as unemployment figures. Having such data at hand allows a trader who is not native to one of these nations to trade their currency with some degree of assurance. In trading less active currencies and currencies of countries where some or all economic and monetary data is suspect is dangerous unless you are an insider in at least one of the nations when you are trading two minor Forex currencies. Fundamental analysis of Forex pairs is especially important in trading two minor Forex currencies and the necessary data must be there before you even consider such an endeavor.
Trading by Way of a Major Currency
For many minor Forex currencies there is simply no way to trade one directly against the other. In such cases the trader will trade one against a major currency, typically the US dollar, and then trade the dollar versus the other currency. Because the dollar trades in huge volume such pairs of trades can commonly take place fairly rapidly. Remember that in trading two minor Forex currencies the trader is usually not worrying about technical aspects but rather anticipated changes in fundamentals. As such he or she will typically not worry about the finer points of trading versus the dollar or other major. What he or she wants to do is convert one minor into another before a major shift in fundamentals changes the relative values of the minor currencies or at least before the market catches on. The best Forex volatility profits can, in fact, be found in trading two minor Forex currencies.
2. Trading two minor Forex
currencies can be very profitable.
www.TheForexNittyGritty.com
3. However, there are a number of
ways that commonly lead to profits
and there are a number of cautions
to keep in mind when trading two
minor Forex currencies.
www.TheForexNittyGritty.com
4. Understanding the fundamentals
that drive a minor Forex currency is
commonly more important than
technical analysis of minor Forex
currencies in gaining profits and
avoiding loss.
www.TheForexNittyGritty.com
5. Tools such as Japanese candlestick
signals, which are a mainstay for
many in technical analysis of major
Forex currencies, are commonly less
useful in trading two minor Forex
currencies.
www.TheForexNittyGritty.com
6. Minor currencies trade in lower
volume than do the majors. Liquidity
is less and volatility can be
substantially higher.
www.TheForexNittyGritty.com
7. Higher volatility can lead to
substantial profits in the hand of
astute traders and devastating
losses in the hands of a naïve trader.
www.TheForexNittyGritty.com
9. The more highly traded and visible
minor currencies are the Hong Kong
Dollar, Swedish Krona, New Zealand
Dollar, South Korean Won, Singapore
Dollar, Norwegian Krone, Mexican
Peso, Brazilian Real, Russian
Ruble, Chinese Yuan, and Indian
Rupee. All of these currencies
represent viable and reasonably open
economies.
www.TheForexNittyGritty.com
10. In trading any currency the trader
needs to have a clear view of trade
figures, political and economic
policy, monetary policy, and economic
data such as unemployment figures.
www.TheForexNittyGritty.com
11. Having such data at hand allows a
trader who is not native to one of
these nations to trade their currency
with some degree of assurance.
www.TheForexNittyGritty.com
12. In trading less active currencies and
currencies of countries where some or
all economic and monetary data is
suspect is dangerous unless you are an
insider in at least one of the nations
when you are trading two minor Forex
currencies.
www.TheForexNittyGritty.com
13. Fundamental analysis of Forex pairs is
especially important in trading two
minor Forex currencies and the
necessary data must be there before
you even consider such an endeavor.
www.TheForexNittyGritty.com
15. For many minor Forex currencies there
is simply no way to trade one directly
against the other.
www.TheForexNittyGritty.com
16. In such cases the trader will trade one
against a major currency, typically the
US dollar, and then trade the dollar
versus the other currency.
www.TheForexNittyGritty.com
17. Because the dollar trades in huge
volume such pairs of trades can
commonly take place fairly rapidly.
www.TheForexNittyGritty.com
18. Remember that in trading two minor
Forex currencies the trader is usually
not worrying about technical aspects
but rather anticipated changes in
fundamentals.
www.TheForexNittyGritty.com
19. As such he or she will typically not
worry about the finer points of trading
versus the dollar or other major.
www.TheForexNittyGritty.com
20. What he or she wants to do is convert
one minor into another before a major
shift in fundamentals changes the
relative values of the minor currencies
or at least before the market catches
on.
www.TheForexNittyGritty.com
21. The best Forex volatility profits can, in
fact, be found in trading two minor
Forex currencies.
www.TheForexNittyGritty.com
23. There can be many profitable
strategies in this regard.
www.TheForexNittyGritty.com
24. One has to do with energy prices.
Consider trading the Brazilian Real
versus the Korean Won.
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25. The threat of conflict in the Persian
Gulf sends oil prices sky high.
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26. Brazil is an oil producer and exporter
while Korean imports its oil. In all
likelihood the Real will go up and the
Won will go down.
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27. If there are more specific aspects of
this situation they can lead to greater
changes in these currencies.
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28. Trading two minor Forex currencies
such as these can be profitable.
However, to start with you need to do
your homework, understand the
factors that drive both currencies, and
be ready to trade promptly when
profits beckon.
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