Okay, so swiftly moving on from the last video where we discussed how we can identify whether an individual currency is strong or weak. We're going to go one step on from that now, and look to bring two currencies together into a currency pair, where one is strong, and one is weak, because as you'll see in a second, all currency pairs are trade. All currencies are traded in pairs. So as we'll see from the example, now, we've got the example of dollar CAD, which is the pair of is the pairing of the United States dollar with the Canadian dollar. Now there are always two currencies in every pair. As mentioned, the first currency in the pair is known as the base currency, and always relates to one whilst it's always against the second currency in the pair, which is the terms currency, and that is a variable amount that's going to be constant fluctuating as the market progresses, now let's take the dollar CAD as an example and use the current trading reading at 1.2645.

So the current exchange rate of dollar CAD is 1.2645. Well, what does that mean to us? Well, it means that for every one US dollar, we are currently getting 1.2645 Canadian dollars in exchange. Now that amount or that figure is constantly going to be moving up and down depending on the relative strength or weakness of these two currency pairs. And add job is to always always as it says in that top box, pray the currency pair, one is weak and one is strong, it doesn't matter which is the base and which is the terms we need to have confidence and a logical reason and justification as to why one is weak and one is strong in the previous section. We already started to look at that we looked at the bigger picture, giving us weakness or stress.

Then we looked at the short term picture in regards to the economic announcements also giving us strength and weakness for a particular currency. Now it's all about bringing them together, one that's weak and one that strong. On the left hand side, you'll notice here, when the base currency is strong, and the terms currency is much weaker, we would expect the exchange rate to rise. On those occasions where we can find that the base is strong and the terms is weak, we will only look to buy that currency pair because the highest probability movement is to the upside. On the flip side of that, when the base currency is weaker than the terms currency, we would expect the exchange rate to fall. On those occasions we would only look to sell because the highest probability of movement is to the downside.

So let's have a quick look at some examples using charts as an illustration. So we can see the chart here which represents the dollar CAD Moving up strongly so the price has been moving up strongly from the bottom left to the top right for several hours. What has caused that to happen? Well, when the exchange rate rises, which we can see on the right hand side, the right hand side here is showing us the exchange rate from low to high. And we can see the exchange rate is gradually being heading up. When the exchange rate is rising, it means that the base currency is strengthening against the terms currency.

So in this example, dollar CAD, the base currency, the dollar is strengthening, whilst the Canadian dollar is weakening, so we need to find reasons as to why the dollar should be strengthening or the Canadian dollar should be weakening IE news. So news comes out which is good for the US dollar would mean that this would start heading up or we get bad data out of Canada and we also get the same momentum. As it says here, a strong move up is being generated. by either good old data or bad CAD data, or in some occasions, you get both at the same time, so you get good us data and bad CAD data, which only means one thing, dollar strength, Canadian weakness dollar CAD to rise, that's where we would look to buy. This example here we can see the exchange rate has been falling. So exchange rate again is on the right hand side and we can see that top left to bottom right, the exchange rate between these two currency pairs has been falling.

When the exchange rate falls, the base currency is weakening against the terms. So in this example here, it's Kiwi dollar, which means that the kiwi is weakening, and the dollar is strengthening or the dollar is stronger than the kiwi. It doesn't matter which is which the chart is clearly demonstrating the key wheat is much weaker than the US dollar or the US dollar is much stronger. than the key word when the chart is down the base is weaker than the terms or causes this will have a strong move down is likely being generated by either bad key data or good us data or on occasions, you get both. Either way, our job is to identify why the market should move down or should move up. That's where we use the higher, bigger picture perspective of what the central bank is thinking.

And then we combine that with the economic news announcements, which would give us some short term fresh reasons as to why a currency should strengthen or weaken. And as you can see from these last couple of charts, that is massively powerful because it provides big, quick, one directional momentum that we can take advantage of as a trader. And it's really the power of opposing forces. The biggest moves come when you trade a currency pair where one is strong, and one is week I'll keep reinforcing that because I want to draw that into you. So that's all you look for. When the first currency in the pair is strong and the second is weak we only buy when the first currency in the pair is weak.

And the second is strong, we only sell as illustrated by the previous couple of slides. When news events provide us with both these, they are optimum trading conditions for a high probability trade. So on some rare instances, you can get news out at the same time. So for example, at three o'clock, you can get dollar news out and you can get Canadian dollar news out. If you get news, which then is diverging I the US data was good. And the Canadian dollar data was bad, you immediately get fresh reasons as to why that currency should move towards the upside, because the US has just benefited from positive data.

And the Canadian dollar is struggling and weakening because of bad data. So sometimes you get news that comes at the same time, which gives you the opposing forces and when we pass Strong versus weak, you know exactly who is winning the battle, this is the most important thing. So when you get my information, you can then speculate with a high probability of success in regards to which direction you believe that currency exchange rate is going to go. And you'd either buy or sell based on that very powerful information. And think of currency pair, the trading tug of war, who is the stronger player in that particular pairing. When you have one side, which is much stronger than the other, that you are going to get big movements in one direction or the other as illustrated on the previous slides.

However, when both sides are very equal both a strong or both a weak then really that tug of war, that rope isn't going to go anywhere, you're going to get limited movement, and more importantly, it's anyone's guess as to who is likely to win the war. So when you think of a tug of war, when you've got one side which is much stronger than the other, that rope is going to move Very convincingly in one direction, if two are very, very similar, it's not going to go anywhere. So think of that in terms of the currency pairs, we always want to be pairing strong versus weak. Because of this principle, you get much more predictable and much greater movements in one direction. When one side of the market or one currency pair in the pairing is stronger than the other, you have a clear winner in the battle.

And that will clarify in your mind, whether you should buy or sell and remember, we get paid when we speculate on the direction correctly. This is the one thing that's going to massively help you with determining the direction you want to trade in on a particular currency pair. As well as UFC, understanding the high level and a shorter term perspective yourselves, FX Pro, which is the broker that I've suggested you open. They can also help they've got a really cool tool, which is called currency Movers. So when you log into your online platform, and click on Tools, the first thing that you will see is this box here currency Movers. And this will show you the relative strength or weakness of the various currency pairs out there against the US dollar or against the pound or against the Swiss franc, you could filter the box by dropping this clicking on this drop down box.

And you can also filter it over who's been the strongest over the last hour, who's been the strongest over the last day, etc, etc. So it can really help you filter the strongest and weakest currency pairs that are happening either right now or over a day or over a week. So it's a really cool tool to support your own analysis of what the central banks are doing, and also your own analysis of the news events that are coming out. So if you're struggling and saying, What can I pair the kiwi against, I need to find a strong currency pair then you can pop onto this particular tool and it will give you a an understanding of which is the currency pair which is performing the best on that particular day. The two extremes would be really to take the strongest in this example here the pound versus the weakest, which for the currency pairs that we trade would be the Ozzy so if The Pound is really strong, and the Aussie is really weak.

If we were to go and trade the pound Ozzie currency pair, that would then mean we've only got one direction in mind. So if the pound is strong and the Aussie is weak, which direction would we trade pound Ozzy would only be a buyer because the parent should remain stronger than the Aussie dollar it is winning the war that war because the pound is the base currency it should be pulling the price up. So we only want to be a bias are very, very powerful tool there from FX Pro. As I've already mentioned, is never trade like for like when you pair strong versus strong or weak versus weak, then your moves will be limited. And you don't know who is winning the battle. So how can you speculate confidently on the direction when you don't know who is winning the war, you don't know which currency is strong and which one's weak.

Your probability of success is therefore diminished. Trading this way is low probability trading. That is the last thing I want you to do. I want you to put the odds heavily in your favor. If you trade like for like you are not putting the odds in your favor, it's flipping a coin, and you're hoping for the best. Always, always know who's winning the battle news will help clearly define this and make your life much easier than trying to guess when news comes out and it strengthens a currency immediately start to know who's winning the war.

Okay to summarize very, very powerful topic here, we trade currencies in pairs. So you know that now so we always want to be pairing extreme opposites, strong versus weak or weak versus strong depending on which one's the base and which one's the terms. When you do that it creates the greatest one directional movement, which is key and critical for trading success because you will speculate on that direction. Never take a trade on the currency pair where both currencies are the same. stronger, stronger weakness is weak. I think you know that now, based on the last slide, knowing the bigger picture of a currency will always help us to remember the news provides us with short term strength or weakness, but don't forget that bigger picture that we've already looked at as well, because if we can combine the two, excellent, so the bigger picture is weak, and there's negative data giving us a short term weakness as well to complement the bigger picture.

So we want to complement the two and get the two doing exactly the same thing, the long term picture and the short term picture in sync for maximum effect. And you can also utilize the FX pro currency moves tool to help filter the strongest from the weakest over different timeframes to really focus in on what's particularly strong and what's particularly weak so you can get the biggest possible divergence between the two currency pairs for the greatest possible movement.