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How To Trade The Dollar Index
Many times the dollar index will move in the opposite direction of the EUR/USD and the GBP/USD
. By watching the chart of the dollar index on a one minute chart, and have your forex chart set at five minutes many time the dollar index will show a move. This happens many times especially if there is a spike in the index. The EUR and GBP will move in the opposite direction.Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight.
Traders can see the US Dollar Index, which is currently showing a negative forty five percent correlation and the S&P 500 starting to show strength once again. In the chart, the dollar is attempting to break above the short term EMA to change trend. You are seeing this turn happen at a prior congestion area which was the start of the last bullish move for the USD. This corresponded with the drop in equity prices in the US as well.
Forex traders need to use risk management and understanding price action, and also like to create awareness of the aspect of trading which is most often ignored and overlooked in reading their charts. This actually is a learned thing for most traders who can follow their trading plans and money management. Reading the dollar index should be part of your trading plan. Most forex traders start with small trading accounts in the currency markets. Where the problem arises is when you have a series of losses and how it affects your trading account.Trade the dollar index
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