Benefits of studying Price Action in groups of currenciesEach week, we traders analyze a few currency pairs for possible trading opportunities. I want to draw your attention to also look at the entire group of corelating pairs i.e., all USD, all Euro, all JPY pairs and so on. To illustrate this, let us take a look at some JPY pairs.
The following are some advantages of doing this type of analysis:
1) If you are bullish on a pair and can see that all or most of the JPY pairs are also bullish, it provides validation and higher level of confidence in your trade idea.
2) You can then study price action on all the pairs and do your technical analysis to find the pair(s) that point to the higher probability of success.
3) As you see from the charts I have posted, price action is similar but not identical in all cases. You can see pairs in early stage of a bullish move while in others it seems that the bullish mode has set in already. However, all pairs are currently consolidating and trading opportunities after a breakout/retest will be available in many of these.
4) This comparison of a few pairs also provides an opportunity to look at some fundamentals and recent news releases to find the best currency to pair with JPY based on the counter currency’s strength/weakness.
5) You also get the possibility to spread your risk in a few pairs instead of just one. While you must stay within the risk/money management parameters you have set for yourself in your trading plan, having multiple but smaller positions in 2 or more pairs, creates a kind of hedging that can be beneficial.
Nothing is 100% in trading, so as always, use sound money and risk management and stay patient in all your trades. If you like my content, please give it a “thumbs up” and follow me to get even more.
