Okay, so that was the long term picture. What about the short term picture? What about the smaller timeframes? So we looked at maybe three months, three months plus, now what about on a shorter, shorter timeframe. So as we've already seen, every week, there are economic news announcements. And these announcements will provide short term strength or weakness in a currency as we've already discussed.

Now, the powerful thing here is that we can use the short term strength or weakness to align with the bigger picture for maximum effect and high probability trading opportunities. So the example there is when you pair long term strength with short term strength, ie, you've got a bias three months Plus, the currency is strong because their central bank is heading towards rate hikes or is raising rates right now. If you then get good data, which supports the long term picture, you are putting the two together for a very, very Powerful team, it would be vice versa. If you were looking at long term weakness, you'd be looking to pair it with short term weakness IE bad data. So these individual announcements give us the ability to pair strong versus weak from a short term perspective, which we know is ideal for trading. Okay, let me give you an example of this.

So we looked at the bigger picture with the kiwi dollar their central bank cut rates now a week after the Central Bank of New Zealand cut rates and turned bearish on their economy. We had the GDP which is a high impact news event from New Zealand. So we've got the bigger picture we only wanted to sell the kiwi. Now when this data point came in on a shorter timeframe, I 1145 on June the 17th. It came in worse than expected. How do we know that again go back to your calendar.

The expected was naught point six it came in at naught point two bad bad figure that really just backed up what the central bank was saying. They said, we're concerned about the economy. This data point has confirmed that that statement was true. So when we got the bigger picture week, and then we got the short term picture week, we had a very high probability trading opportunity. Let's have a quick look at that. So this is another chart a different chart, but similar movement.

This is the five minute chart on Kiwi dollar. Here you see that we got an 80 PIP movement from the 1145 News. So a huge huge movement in less than two hours. So a fantastic opportunity to prepare ourselves in advance. And then as soon as that bad data point came out, we would get into the trade as soon as possible and then row ride the momentum of that key weakness all the way down to a decent profit. Now it says at the bottom although not shown on the chart, this currency pair Kiwi dollar actually fell another 500 pips over the next two weeks.

That's because The key word was massively weak. And I put it against the US dollar, which if you remember back a few slides from that table, the US dollar is strong right now because the Fed Central Bank of America are moving towards a rate hike. So this was an optimum trading opportunity, massive weakness on the kiwi fantastic strength on the US dollar, providing a great sell opportunity on the kiwi dollar providing us with 80 pips very, very quickly and plenty more opportunities later down the line as well. So that is where you get the prime opportunity. So bigger picture was weak and the short term picture was weak. What about for currency is neutral?

Well, sometimes you will get a situation where a central bank has no bias. They're not bullish, not bearish. They're very very neutral. In this case the institutional traders will have no bias either so us looking to follow the institutional traders will be in exactly the same boat. It makes trading that currency very, very difficult because you Want to know whether you're buying or selling a currency based on its strength or weakness, if there is no strength or weakness, you don't know whether you should buy or sell. And then you can't speculate on your direction as confidently as if you knew the bigger picture and the shorter term picture.

So all it does is lowers your probability of success and you shouldn't be taking those opportunities. So as it says, We don't really want to trade any opportunities like that. The only time we would trade it is when we keep remember we keep up to date with the central bank, when a central bank decides to move from neutral to either bullish or bearish, then it gives us a fresh update and a new bias, we would then trade in line with that bias. So let's say for example, in the UK, they're very neutral, but all of a sudden after a good run of data, they come out and communicate to the market that now they are heading towards a rate hike. All of a sudden they've shifted from neutral to bullish, we'll be looking to buy the pound based on the strength that should arrive off the back of that change in stance from the central bank.

There are occasions where the bigger picture breaks down. So as I say here be aware of unprecedented events. We've looked at events which are very scheduled very routine. There are occasions where you get unprecedented events which come out of nowhere and affect the strength or weakness that you've seen on a particular currency pair and can cloudy the water. Some recent examples, there was the Greek stroke Eurozone crisis in around about June 2015. And what that caused was euro uncertainty.

And what it meant is that there wasn't really any strength or weakness going through the Euro because the market was uncertain. It didn't really the big institutions were uncomfortable holding positions on the euro. So it became very difficult to trade because there was a lot of uncertainty around the Euro because of the Greek euro Greek stroke Eurozone crisis. It was very, very hard to trade so I just left the Euro alone. loan and continue to do so, until that is resolved. And the markets opinion on that currency becomes clear again, because once that once the line is drawn underneath the Greek Eurozone crisis, all of a sudden the market will be concentrating on what is the bigger picture, the Euro is weak start sending the Euro, but during that time, there was a lot of uncertainty around the euro.

So I just leave it, I just left it alone. There was also the Russia and krim Crimea war that broke out. And what that meant is that the Japanese yen strengthened for a short time because the Japanese yen is a safe haven. So when there's fear in the markets, people will buy the Japanese yen but that goes against the bigger picture. The bigger picture is that the Bank of Japan is very bearish on their economy. Interest rates are at record lows.

So the Japan The Japanese yen is very, very weak on a big picture perspective, however, temporarily that weakness broke down because of the war and because of people buying Because it's it's seen as a safe haven again in that case, I left the Japanese yen alone until that dissipated and the war, the Russia and Crimea war was sorted out and we're able to then start start looking to sell the Japanese yen against strong currency pairs. And then finally when the Swiss National Bank the Central Bank of Switzerland, they removed the Euro Swiss peg that creates some Swiss strength again remember we want to see Swiss weakness because that's the central bank stance they want to see the Swiss franc weaker. And so our bigger picture is that we want to be selling the Swiss franc However, during that removal, the Swiss franc became very strong. So again, I left it alone until the markets settled down, because it was a very unprecedented event.

So as a part of the bottom there your action if ever unsure about currency, do not trade it until you are. Your job is to be very clear as to whether a currency is strong or weak and whether you should be buying or selling it. If an unprecedented event hits the market, and you're unsure, leave that currency alone until you are to simple instruction. Unfortunately, we can't predict these events, they come out of the blue. Our job is just to try and protect ourselves during those times and until the clarity comes back to the market. Okay, so just to summarize this particular topic, hopefully it's really giving you some enlightenment in terms of how to, to find strong and weak currency pairs, both from a long term perspective and a short term perspective.

So the long term perspective, we find that from digesting communication from the Central Bank of a nation, they will tell us whether they have a bullish or bearish stance on their economy on their currency. And that will give us our bias as to whether the currency is strong or weak and whether we should be buying or selling. If the central bank is neutral, we have no bias so we don't trade that currency until we do. Now we can also then look on the short term perspective. So this is where we use The economic event releases to trade in line with the bigger picture. Using the kiwi dollar trade is a classic example, the kiwi, the Central Bank of New Zealand were bearish on their economy from a bigger perspective, then we had a really bad GDP reading on a shorter timeframe, that gave us an opportunity to sell the kiwi against a strong currency pair.

As it says there we trade the currency that we have a bias on against it opposite so weak against strong or strong against weak we go into more detail on that in the next chapter. When you put the two together, it will provide you with the highest probability of success and some fantastic PIP returns in a very short space of time. As you'll go through all of the video examples, the examples in the course you will see that there are some fantastic moves for you to take advantage of. But your job is to be able to pinpoint those economic news events which have the highest probability to move them up. And then which currency pairs are the most optimum to trade at that particular time. Now, if there is unprecedented events and you're uncertain on a currency, strength or weakness, simply don't trade it until you are.

Protection of your capital is massively important as well as taking opportunities when they arrive. If the water has been muddied by an unprecedented event, you just stay away from that particular currency. Okay, so I'm going to wrap up there, and I'll catch you in the next video which is going to be all about pairing strong against weak currencies.