Ally pairs as a new technique of giving the technical analysis to forex market.
As the matter of fact, the term “currency ally pairs” is absent (doesn’t exist at all) within the framework of the classical technical analysis that could be given to forex. At the same time, the following aspects must be taken into account.
- This very name (ally currencies) has imprinted into the memory of my students. Actually, they use this word in their everyday practice. This is why at the beginning of the year 2005 I have introduced this notion into my book “Trade Secrets Revealed (Exposed) by Trading Trader (or what B. Williams, E. Naiman et al. haven’t told to traders about forex)”.
- Nobody of the classicists of the technical analysis of forex has given the minute studying of correlation between currency pairs themselves. In fact, the following aspects have not been investigated.
a). The principles and specificities of the correlation between currencies in the pair during the long- , medium- and short- term trends.
b). Such general regularities of the currency pair movement at forex should be combined with the traditional (standard) elements of the technical analysis of forex – such as figures (patterns) of continuation of the trend and its reversal, pivot, levels of resistance and support, moving averages, slanted channels, wave analysis, divergence, etc.
Truly, the technique of detecting the correlation between ally currency pairs is rather simple: the world of forex is integrated because currency pairs are correlated. That is, the movement of a forex currency pair stimulates the movement in all other pairs.
On the background of this chaos, one can clearly trace out the certain logic and obedience (submission) to certain laws, not exposed by the classicists of the technical analysis.
The essence of the technique of giving analysis to the currency movement by making use of ally currency pairs in Masterforex-V trading system.
- At forex, all currency pairs can be conditionally subdivided into allies ones. Notwithstanding the difference in them, national currencies all over the world are allies. They “work” against a certain national currency, which participates in such pairs. There are the following examples.
a). all national currencies in the world are allies, and they “work” against USD if the latter participates in such pairs. For instance,
* GBP/USD
* EUR/USD
* AUD/USD
* NZD/USD
* gold, etc.
That is, respectively, the pairs USD/CAD and USD/CHF are falling down.
b). USD, GBP, EUR, AUD, etc. play the role of ally currencies, which are “hostile” to JPY in currency pairs when JPY participates in each of them. For instance, one can examine the chart h4 that depicts the currency movement in March-July, 2007.
Let’s consider JPY index in the following currency pairs.
USD/JPY
GBP/JPY
EUR/JPY
AUD/JPY
NZD/JPY, etc.
c) Ally currency pairs unite against any other third currency pair. For instance, USD, GBP, EUR, CHF, JPY “work” against CAD – at the chart H4, one can see the ascending trend, which depicts the rise in CAD rate, to start from the March, 2007..
Let’s examine CAD index. One can see the fall in USD/CAD and GBP/CAD. At the same time, the pairs CAD/JPY and CAD/CHF increase.
We now examine the correlation between currency indexes and trends of currency pairs at forex.
As regards the corresponding increase (or decay) in the movement of the ally currency pairs, the index of the principal (major) currency pair is dominant (prevails) with respect to an increase (or decay) of the ally currency pairs against it.
One should pay attention to the index of the fall in JPY, accompanied by the rise in all ally currency pair rates with respect to JPY.
One can study the movement of the following currency pairs: USD/JPY; GBP/JPY; EUR/JPY; AUD/JPY; NZD/JPY. One can watch the rise in CAD index and decrease in all ally currency pairs with respect to CAD. That is, one can see the fall in USD/CAD and GBP/CAD. At the same time, the pairs CAD/JPY and CAD/CHF increase.
*** íà âñåõ ãðàôèêàõ: ìàðò 2007 – èþëü 2007 = March – July, 2007.
We now examine USD influence on long-term trends of the major (principal) currency pairs at forex.
- At forex, USD makes the basic currency – as well as all over the world. USD trend (either “bear” or “bull” ones) presets (assigns defines) trends of the basic currency pairs at forex. Hence, there issues the general regularities of the ally currency pair movement against USD, which is conditioned by the total (general) weakening (or strengthening) of USD positions.
For instance, to start from the year of 2002, USD keeps on falling down with respect to all basic currencies all over the world.
One should pay attention to the chart W1. There are depicted the movements of the following pairs:
GBP/USD
EUR/USD
USD/CHF
USD/CAD
AUD/USD
3. The specialists differ the direct and inverse quotations of currencies, which are stipulated (determined) by the place that a given basic currency occupies at forex. Naturally, those currency pairs where USD takes the 1st place are falling down during the same time interval. The pairs USD/CAD and USD/CHF are falling down.
4. The difference in the ally currency pair movement is determined by the following factors:
- The strength or weakness of such currencies with respect to one another – as a rule, analysts mention this factor as the reason for the movement in cross-courses.
- The intensity of the rise (or fall) in these pairs with respect to USD. This factor is still not examined by any classicist of the technical analysis. That is, the analysts don’t get (understand) this problem. This aspect is elucidated only by Masterforex-V Trading System. Respectively, this difference in volatility of GBP and EURO with respect to USD is depicted and fixed in the cross-courses of these currencies.
Let’s in detail examine this example by studying EUR/GBP pair movement.
Correlation between EUR/GBP currency pair and USD trend.
For instance, at the chart D1 that depicts EUR/GBP currency pair movement one can see the following.
a). The period from 2.04.2006 till 23.01.2007 (the chart w1) characterizes the beginning of EUR sweeping (rash) fall with respect to GBP. Besides, this time interval corresponds to the start of the head-neck fall in USD with respect to GBP, EUR and other ally currency pairs.
These currency pairs can’t increase (go up) with respect to USD to the same extent. Even any trader-beginner knows the following.
- In the most cases of a “bull” trend, the speed (intensity) of GBP growth with respect to USD exceeds that of EUR in comparison with USD durimg the same period of time.
- On the contrary, in the “bear” trend the speed (intensity) of GBP fall with respect to USD mostly exceeds the fall in EUR with respect to USD during the same period of time.
Here in Chart w1 GBP/USD pair movement is depicted. During the period from 2.04.2006 till 23.01.2007 GBP has passed through 2500 points (from 1.7341 and up to 1.9887).
At the same time, during the period from 3.04.2006 till 23.01.2007 EUR/USD pair has passed “just” through 950 points (from 1.2083 and up to 1.3027).
The reader should pay attention to the last “bear” sub-wave in EUR/GBP movement in the chart d1 during the period from 10.01.2007 and till 23.01.2007.
GBP/USD “makes” the last “bull” wave before the heavy (intensive) down-ward directed correction.
The down-ward directed correction of EUR/USD pair starts earlier (sooner) than that of GBP/USD pair.
In the chart d1, EUR/GBP pair “overcomes” 300% - see the last recoil at d1 (to start from 0.6686 and up to 0.6760).
b). let’s regard the period from 23.01 till14.03.2007. There occurs the upwards-directed reversal of EUR/GBP pair.
During the period from 23.01 till 5.03.2007, the corresponding increase is explicable by the following factors.
· After the jerk (spurt, jump) by 2500 points in the “bull” trend, GBP “makes” the downward-directed correction.
At the same time, EUR/USD pair waits through this correction in a flat (1.2875-1.3364).
c). during the period from 14.03. till 18.04 of 2007 the fall of EUR/GBP pair corresponds (is equal) to the joint (combined) increase in EUR and GBP with respect to USD. In this case, GBP volatility is higher than that of EUR.
Here one can observe the fall in GBP/USD and EUR/USD pairs. In this case, GBP is falling quicker with respect to USD than EUR because of its higher volatility.
d). To start from 18.04.2007, EUR/GBP pair has gotten into a flat. Under the condition of a flat, one should study more minute (minor) timeframes.
· During 5-8.06.2007, the joint fall in GBP and EUR with respect to USD corresponds to the increase in EUR/GBP pair.
· During 9-12.06.2007, the increase in GBP and EUR with respect to USD corresponds to the fall in EUR/GBP.
We now dwell on the correlation between the cross-courses movement, USD and indexes.
In a way, cross-courses can be regarded as independent currency pairs. They are characterized by their proper (own) levels of the resistance and support, figures of the reversal and trend continuation, pivots, channels, fibo, goals (aims) of the motion, etc. Hence, in case if cross-courses break through their own levels of the resistance and support, this can stimulate the movement in the basic (principal) pair.
See the chart that depicts EUR/GBP pair movement in the framework d1.
During 23.01-14.03.2007 there happens the upward-directed reversal of EUR/GBP pair after making 300% to start from the last recoil at 0.6686 - 0.6760 at d1.
If the cross between EUR/GBP increases, EUR plays the role of a natural “locomotive” (driver, engine) during the upward-directed movement when a trader works with GBP/USD and EUR/USD pairs (both in d1).
Besides, one should take into account the correlation between indexes of GBP and EUR during 23.01-14.03.2007.
· GBP index decreases;
· EUR index increases.
*** GBP index decreases; EUR index increases.
Thus, there one can see logicality in the movement of each of the currency pairs at forex.
Brief conclusions submitted by Masterforex-V Trading System.
Judging by the above-given charts, one can claim the following.
1. The world of forex is integrated and interconnected (interrelated).
2. currency pairs can be conditionally subdivided into groups of allies. There exists clear correlation between the pair members themselves, the fibo levels and the wave analysis, given to each of it.
3. Respectively, the integrity of these currency pairs and correlation between them are realizable in this very form just by the principal computer at the controllable market of forex.
a). Such computer can present all aspects of the technical analysis as a whole (to start from the wave analysis and up to figures (patterns) of reversal or trend continuation). This is correct with respect to a separate (single) currency pair. It’s also true when one deals with any classification of any currency pair with respect to the allies and adversaries.
b). This computer synchronously realizes quotations for all hundreds of currency pairs at forex.
4. As regards traders at forex, the controllability of this market is rather a blessing than evil. Actually, it permits finding regularities in the currency pair movement – they are installed in the software of the major computer of the world.
Questions put by Masterforex-V Trading System that concern regularities in the ally currency pair movement in the framework of the long-term trend to start from d1 and to higher ones.
Seeing this correlation between the ally currency pairs, the reader should (independently) try to find answers to the following questions on his own. Otherwise, the successful trading at forex would be impossible.
1. What a long-term trend you choose while working with your currency pair (to start from d1).
2. In the medium-term trends at h1-4, what a wave does characterize the given long-term trend. According to the classicists of forex, a trader must determine what stage in the trend development the given long-term trend occupies at present i.e., is it the beginning, the middle or the end of the trend?
3. One should also determine the conditions for the continuation and the end of this long-term trend from the following aspects (viewpoints):
· A singled-out currency pair at forex;
· Ally currency pairs;
· Indexes;
· By means of the analysis (the wave analysis, fibo levels, patterns of the continuation and reversal of the trend, slanted channels, pivots, etc.).
· The synthesis of the all above-enumerated factors when one deals with long-, medium- and short-term trends
4. By finding answers to all these questions, the reader can clearly see where, when and what deal (on “buy” or “sell”) should be opened.
· Is it worthwhile to open long and short positions? Besides, for what kind of trend this should be done (long-, medium- or short-term ones).
· The reader must also calculate the levels of resistance/support (the basic and minor (accessory) ones).
· Besides, the reader must detect the conditions of the trend end (respectively, one talks about closing such deals along the trend).
In Masterforex-V Trading Academy, we can teach you to all these specificities by giving the every-day training on-line – when one deals with the current trading.
To be continued. In the next chapters the author of this book will give analysis to the prompts that the ally currency pairs can give under the following conditions:
· Medium-term trends within the framework of the charts h1-4;
· Short-term trends within the framework of the charts m5-15;
It should be considered that under what conditions currency pairs at forex are moving towards the same direction. It will be explained that in certain cases such pairs can move in different directions. The reader will understand what it could mean for the currency pair movement at forex.
You can discuss the chapter with the Academy members by following the link
Chapter 1. Trend definition in the Masterforex-V Trading System >>
Chapter 2. Levels of resistance and support in Masterforex-V Trading System >>
Chapter 3. Actual and false breakout of the resistance and support level. Rebound from technical level.>>
Chapter 4. Technical levels of Forex by Dow Jones agency. >>
Chapter 5. Pivot point of currency pairs >>
Chapter 6. Slanted Channels, as a tool of the Forex market analysis >>
Chapter 7. Opening of positions when using Slanted Channels >>
Chapter 8. Slanted channels in the Masterforex-V trading system >>
Chapter 9. Classic figures of technical analysis - Trend Reversal >>
Chapter 10. Classic figures of technical analysis - Trend Reversal (ending) >>
Chapter 11. Technical analysis - patterns of continuation of trend - rectangle >>
Chapter 12. Patterns of continuation of trend - Gaps >>
Chapter 13. Patterns of continuation of trend - flag, pennant and wedge >>
Chapter 14. Models of the Forex technical analysis - triangles >>
Chapter 15. Symmetrical triangle - regularities and traps >>
Chapter 16. Ascendant and descending triangles - secrets of the strong signals for opening the positions >>
Chapter 17. Expanding triangle - unresolved problems of classics of the Forex technical analysis >>
Chapter 18. Trading On News: mistakes and unresolved secrets of classical analysis >>
Chapter 19. Trader's code of good practice by news under the Masterforex-V trading system >>
Read more:
Part II. Algorithm Of Trading Technical Analysis >>
Book 3. Points of opening and closing of positions at the Forex market (basic course) >>
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