What is Forex Currency Index, how and why to use it!

What is a currency index:

An index of a currency is the trading volume or trading weight value of the currencies of other countries at a higher rate than the currencies of one country. Which has been the official forex base currency since 1973. So the highest base currency is the USD whose indexing calculation can be used to measure the value of the Ananya currency. So in today's currency index discussion the index currency is USD i.e. USD index USDX.

The USDX is calculated with the trading value against the USD of the currencies of 22 countries over a total of 8 major currencies.

The currencies are:

Euro (EUR)
Yen (JPY)
Pound (GBP)
Canadian dollar (CAD)
Krona (SEK)
Franc (CHF)

Now the question is how to include 22 countries in 6 currencies? Yes, we know that there are 16 countries in the European zone, all of which have a single currency, the EUR, and the USD has a trending value against the single currency of Japan, Britain, Canada, Sweden and Switzerland. The simplest thing is to find out how much the USD is running against different currencies, which is called Indexing, since we will find out the index of USD, so it is called USDX.

USDX Currency Country:

Let's find out now which currencies are most involved for USDX i.e. how much of which currency is USDX for trading. Notice the image below:



The EUR is a huge part of the figure for USDX. In second place is Japan, followed by Great Britain. Thus you see a ratio of country-based currencies, with 50% of USD currency trading and more trading against the EUR. The remaining 30% off the chart is traded with unique currencies. The EUR plays the most important role for the USDX dollar and the USD is the most affected by the EUR. That is why USDX is called "Anti-Euro Index". The USDX is not calculated in the Forex market, but rather the large financial institutions that are there calculate the USDX to balance their trade or economy according to their needs. Since USDX is a global concept, many financial institutions use this formula to keep their economies afloat or to conduct business accordingly. One such institution is the Federal Reserve. They calculate the USDX as "trade-weighted U.S. dollar index". Hope you got a good idea about USDX.

USDX Formula:

USDX = EUR * 0.576 x JPY * 0.136 x GBP * 0.119 x CAD * 0.091 x SEK * 0.042 x CHF * 0.036

· When the USDX starts to fall, it means that the exchange traders are selling the USD
ীত Conversely when USDX starts to rise then exchange traders start to buy USD.

How to read USDX chart:

The USDX chart is a type of chart similar to the unique currency chart whose index is calculated on a daily and weekly basis. In this case the INDEX General value of 100.00 is calculated on a Base basis. For example, when the USDX goes up, the USD value increases. If USDX is 110 then USD value increases by 10%. Again when USDX falls to 90 then USD value decreases by 10%. Remember that since we are talking about USDX, its reflection will be around the USD currency, which is why I see the reflection of USDX rising or falling, but in my USD currency. So far the USDX level has reached a high of 160 and a low of 78.


Why useঃ

As mentioned earlier, the trading weight of USD can be measured with a unique currency through the USD Index. Since the combination of many currencies is USDX. So it is possible to forex those currencies through USDX. The effect of the strong or weak behavior of the USDX chart plays an important role in the forecasting of unique currencies. Just as we use Support and Resistance, Candlestick pattern, technical analysis or various other strategies in the case of trend lines and price forecasts, the trending trends of those currencies can also be understood through the effect of USDX or the flow of this chart.

How to use: Since the index chart of USDX is EUR / USD, GBP / USD, USD / CHF, USD / JPY, USD / CAD based on trading volume. The trading strength of all these currencies against USD is USDX. So notice that when the trend is down in the EUR / USD daily chart, the trend is reversed in the USDX chart.


This time look at the EUR / USD Daily Chart


If you consider the above two charts, you will see that they are slightly opposite to each other. Because we already know that the main traded currency of the USDX chart is EUR so this currency hits the USDX chart more. Thus the next movement of the charts is predicted according to the country based and the traded volume of USD with their currency.

Currency co-relation needs to be discussed to clarify this issue. And different Currency Strength Indicators are used to get their Forecasts by combining unique currencies with USDX. Understanding the currency co-relation will get you magic on how 4-5 currency charts create a reverse trend against a USDX chart. Today I tried to give a good idea about USDX. We will discuss currency co-relation in detail in the future.


You can see the USDX chart in your Meta Trader, in which case you need to use two indicators.

First download the USDX indicators below from attached files:

1. Copy to your Meta trader \ experts \ indicators.

2. This time open Meta Trader and bring the Create $$ USDX indicator to the EUR / USD chart and enter the timeframe value in the time frame in which you want to view the USDX chart from the Input variable, 15M, 30M, 45M 1H as desired.

3. Go to Open offline from the File menu and bring the chart you created. (Originally written offline chart and it is but live chart)



Attached Files:

Posted By feliciahoward : 01 September, 2020
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They become legends or "oracles" that people look to in the future for advice, believing they will again be able to foresee any future turmoil.Why is this so important? The hindsight bias leads us into perhaps one of the most dangerous mindsets which is that of overconfidence, our final bias and probably one that is less hidden than the others.7) Overconfidence effectOverconfidence as a trader allows us to believe that we are superior in our trading, which ultimately leads to hubris and poor decision making.Whether it's overconfidence on when to trade, what to trade (telling ourselves "sure I could normally trade AUDUSD, but why couldn't I also be good at trading the South African rand?") and how to trade a certain product.We trade larger than we should, hold losers for longer than we should, relax our own risk management policy, become arrogant or complacent in our trading, and this all leads to capital losses.What do I do now?OK, so I might have scared you. 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If none of questions 1-6 apply, then could any of the other biases above be at work?

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