Hi guys, I've been learning to trade currencies for about four months now and there is one question that I've yet to find an answer to, or be able to figure out. I'm having trouble understanding why exactly the charts of currency futures are tied so closely to there respective pairs. For example the 6e to the EUR/USD or the 6b to the GBP/USD. Ignoring the price differential, they seem to move in an almost identical manner down to the 1 min chart. I've been told that it is similar to how the 6a follows gold or that it's similar sentiment or that when you buy the 6e the exchange is actually buying the EUR/USD with the money. None of these explanations seem to make sense to me looking at how closely they actually track. I've read futures books by Ross, Hull, Wasendorf and Bernstein, taken the courses on Investopidia, babypips, TD Ameritrade, tos, and others but none talk about this as if it were a basic understanding you were supposed to have but I have missed. Any help with this would be greatly appreciated, if even pointing me in the direction of where I can understand it. Thanks!!
Basically the future is a contract to buy/sell the underlying instrument at the settlement date. So the futures would move in tandem with the underlying instrument . If 6E was to move in opposite direct to spot EUR/USD, I can immediately sell one and buy the other to gain a instant profit (arbitrage)
Its the same reason why YM is tracking DJ, TF is tracking Russell, NQ is tracking Nasdaq and ES is tracking SP500 (although I read that in reality it is ES that is leading SP500)
So if I am looking at trading the AUD/USD, I could look at crude (since AUD imports 80% of it) Mining (since it's the AUDs primary way for economic growth although not nearly as large a part of it's actual GDP) the US dollar index and the ES to get a look at market sentiment and it would be of no real value to me to look at the 6a for swing trading if I'm already looking at the AUD/USD?
The currency futures and the spot Market are essentially the same Market but traded in a different way. Think of it as a commodity spot is the actual physical and futures is a piece of paper, a contract to take the physical at a given time. You are trading the same thing in a different way.
Personally if you are trading short term you will be better off looking at the futures due to the fact the short term price fluctuations are more precise as it's a centrally traded instrument. Orders can get filled in an odd way on spot sometimes short term.
What do the more experienced traders think tomorrow will be like, with NFP coming out and Europe on holiday, i.e. a low volume session?
I'm talking from the perspective of a short timeframe trader (3-mins).
Just trying to work out whether to take the day off or sim trade it for the experience. I want normal experience though - if it's going to trade like orange juice futures, I'd rather take the time off.
My current prediction is big volatility and big bid/ask spreads and big slippage, mixed in with a load of chop.
You can discover what your enemy fears most by observing the means he uses to frighten you.
However, if we find 3000 holding, then a move up to 3080 area seems certain. I am personally leaning towards 2965.
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