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| Currency Ring |
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If you do not understand the concept of a currency ring, let's start at the beginning. 1) If you buy the EUR/USD, that means you are buying the Euro and selling the US Dollar. 2) If you buy the USD/CHF, that means you are buying the US Dollar and selling the Swiss Franc. 3) Therefore, if you buy both currency pairs, you are effectively buying the Euro and selling the Swiss Franc (the EUR/CHF, what we call the cross-pair.) An example of a completed ring: 1 lot of the EUR/USD 1 lot of the USD/CHF .8 lots of EUR/CHF completes the ring. (approximate - see below calculator) When you buy the EUR/USD and USD/CHF, you are effectively buying the cross-pair (EUR/CHF). By adding the cross-pair to your trading, you can create an equalized currency ring that helps to stabilize your PowerTrader strategies. For the curious mathematicians: The product is 1 and we can confirm by calculating the numbers below.
Prices as of May/21/2007, 04:00 EST 1.3506 (EUR/USD) * 1.2273 (USD/CHF) * (1 / 1.6578 (EUR/CHF)) The result is "1"
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