NewsWhitepaper

Strategy for FOREX Triangulation

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    The USD/EUR Pair

    • The strength of the USD/EUR pair is that it's fairly easy to monitor. It is the first currency pair trade that most investors make, and it's constrained in both the boundaries of its variance and how frequently it runs through its cycles. As of January 2010, the U.S. government is trying to boost exports, and drop the value of the dollar relative to the Euro. However, as this practice occurs, it has ripple effects on other currency pairs.

    The EUR/JPY Pair

    • When the Euro rises past certain thresholds against the dollar, European exports fall, which makes Japanese exports more competitive; this causes the Japanese Yen to rise in response. The converse also happens - when the Euro falls against the dollar, the Japanese Yen drops as well, but usually with a delay that depends on a number of other factors that we won't go into here.

    The USD/JPY Pair

    • When the Japanese Yen rises against the Euro, often times it falls against the dollar, which then rises against the Euro, setting the cycle anew. By watching which way currencies are moving against each other, you can make trades based on correlations between currency pairs and generally make a small profit off of each transaction. You can even make long and short plays on different parts of the cycle to double down on your trades; this is a risky move, but can have a significant payoff.

    The USD/CHF Pair

    • There is a Forex trading pattern with a 99 percent correlation: The USD versus the Swiss Franc (CHF). When the US Dollar rises against the Euro, it falls against the Franc. This makes it a good escape valve - a way to get out of the triangulation tactic cleanly when it runs outside of your safe parameters.

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