How to Choose a Currency Cross
Apr 14, 2021
By: Frank Kaberna
Trading foreign exchange markets can often feel like picking a winner at the Masters: you try to execute on a general opinion only to be met with a whole mess of choices.
So, what do you do in an asset class that seems straightforward yet is divided among too many options? You start basketing. Looking at driving distance? Choosing DeChambeau AND Cameron Champ could yield a higher probability of success. Putting accuracy interest you more? Picking the top two putters (Webb Simpson and Patrick Reed) might reduce your chances of picking the right category but wrong golfer.*
Traders can translate this strategy to the vast, intimidating world of currency crosses! For example, if you think Asian currencies will appreciate against the US dollar, then you could try buying Japanese yen AND Chinese renminbi against USD. This one degree of simplification already works to increase probabilities and reduce your fear of missing out.
Source: dxFeed Index Services (https://indexit.dxfeed.com)
Taking your ideas to execution using a product that offers diversified, basketed exposure similar to an equity index might be a more efficient alternative. Small US Dollar futures spread USD exposure across euro, yen, renminbi, and more, so you don’t have to stress out about picking to correct cross.
Small US Dollar \ SFX
Source: dxFeed Index Services (https://indexit.dxfeed.com)
As foreign exchange markets and golf tournaments heat up for the first time all year, you probably don’t want to research every player just to join in on the fun. Start with a simpler route to this opportunity unlike any other.
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The Small Exchange has also created a limited number of subscriptions for a one-time payment of $100 that give traders a lifetime of reduced exchange and market data fees when trading the Smalls.
For more information on the Small Exchange’s products and subscription service, visit smallexchange.com. And be sure to check out my new show on tastytrade, Small Stakes, where Pete Mulmat and I will show viewers how to navigate Small Exchange products every Monday-Friday and always on demand.
*All stats from https://scores.nbcsports.com/golf on 4/8/21
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