This article will help you understand how to use cross-courses to trade with maximum efficiency. First of all, we need to understand what it is? So, the cross-rate is the quotation of a currency pair in which none is an American dollar. Examples of cross rates – RUB/UAH, EUR/RUB and so on. The principles of forming the value of a currency pair remain the same as in the case of dollar assets. The base currency is the one that is sold and the quoted currency is the one that is bought. But not every currency has a cross-rate. Many of them can trade exclusively through the dollar.
Nor should we confuse the cross-rate and the rates that are displayed in exchanges or banks for ordinary people. The difference is that the former are used exclusively by traders. Of course, these are similar concepts, but you don’t have to bring them down to each other. The second are called currency conversions. This is a process in which one currency changes to another at a special price, called the conversion rate. In Ukraine, the most common rates are exchange rates of ruble per UAH, dollar per UAH and Euro per UAH (well or vice versa). Conversion allows not to exchange, for example, UAH per dollar, which is then transferred to Belarusian rubles (for example). This can be done directly. Moreover, the conversion will cost a person much cheaper than several operations on an exchange.
Highlights to consider during cross-course trading include:
1. First of all, they give the trader additional opportunities for trading. Especially if you use a trend-tracking strategy. The fact is that currency pairs in the cross-exchange rate are not so dependent on news related to the American currency. And they occur quite often. Therefore, the use of indicators and other technical analysis tools becomes more effective in building accurate forecasts. In addition, cross-course trends are longer.
2. Cross-courses are good if you want to earn on the difference between the interest rates of various central banks. I mean, on a positive swap. This is very interesting, but at the same time this topic needs to be considered in more detail, and the format of this article will not suffice.
3. The most popular cross-rate – a pair of “Euro-Yen”. It is a very volatile asset, and you can trade it almost 24 hours a day. Note that the market in which this pair is sold responds strongly to any news on the Eurozone. It is necessary to look at the news that is connected with at least one issuing country. Some countries have a nearly 100% correlation with oil. For example, the Russian ruble is very dependent on energy prices. The same goes for the Canadian dollar. This you can also consider during trading.
Thus, the use of cross-courses carries many opportunities as well as dangers. We need to be careful about trading any asset, and then you will win. The main thing is not to translate fear into panic.