How to Use Oil Prices As A Signal in Currency Exchange
- Author Maikeisha Cuyler
- Published February 14, 2019
- Word count 652
If you have ever traded stock, then you understand the importance of buying or selling when stocks split or when the company buys back shares. It's true. Similarities between the stock and currency markets exist; but, success in currency exchange entails understanding the relationship between currency pairs. The pairing of the US Dollar and the British Pound proves a dependence between an import and export economy.
Oil and Export Economies
More analysis of the Pound as a leading exporter demonstrates the significance of oil in conducting business; there are shipping costs and other business costs. Yet, the Japanese Yen gives another scenario of the point that oil plays a major role in export. Traders should beware. Attention to the national average gas price and movement of stock related to oil will be strong signals in a currency exchange. So, the trading signal provided by a stable national average gas price should work in both the Dollar and Pound and Dollar and Yen exchanges.
But first, understanding the link between oil and gas allows traders a view of the numbers related. Specifically, in the energy industry the Crude-Gas Ratio measures the value of crude oil and gas; eventually the demand for one or the other causes an increase in prices. Do the math. Because the link between oil and gas carries significance traders should take an advantage when market forces shift both together.
National Average Gas Price
In brief the national average gas price should provide a reliable entry signal for exchanges between the British Pound and Japanese Yen. Clearing a long-term link between oil and gas, traders would only have to use historical data on gas prices as a point of entry into a trade. When the national average gas price holds steady, fluctuation less than $.05 for more than 200 days initiate a trade.
Next, movement of oil and gas related stocks can be a strong exit signal for traders in the energy industry. After market forces move both oil and gas prices together, the energy industry has to react. The 2008 crisis prove a downward shift in oil prices during the recession; then, around 2012 an increase in oil prices and decrease in the price of natural gas. So then, oil and gas companies begin to look for a profit and decide to drill for oil. The "long-run" link between oil and gas occurs. Finally, the stock market rebounds after oil and gas companies look to support from related business and products.
Entry and Exit
To demonstrate a reliable exit signal for a trade of the Pound or the Yen, the movement of pricey, blue chip stocks gives a reference point for traders. Blue chip stocks perform the duty of insuring the respective industry financial depth; you respect the stock because of its ability to close gaps in the market. So, when wide-spread movement of blue chip stock occur, it is expected that several other things are happening. It is important to study. Most markets including the NYSE, S&P 500, FTSE, etc feature several blue chip stocks in respect to industry.
The movement of oil and gas related stocks in the energy industry gives a strong exit signal. Traders should expect links because of the causation. For instance, in the energy industry, the blue chip stock CAT or Caterpillar presents an example of how oil prices affect certain currency exchanges. The Dollar and Pound exchange allows a support of the movement of oil related stocks.
When participating in an exchange, knowing the relationship between the currency pairs allows for confident entry and exits. The use of oil prices as a reliable signal in trade can lead to profits. Referring to stable national gas average prices and the movement of blue chip stocks will improve your trading strategy.
Visit Forex.com for more analysis and trading tips. Research the major currency pairs and the factors that affect them.
After receiving a Bachelor of Arts Degree in English from Florida State University, I began my Freelance writing career. The Demand Studios platform provided a perfect place to start writing online and I became a Proficient writer with the platform.
Finally, after a few years with Demand Studios, I began my first Business Finance blog which is still active. I am still looking for more writing opportunities.https://articlebiz.com
There are no posted comments.
- What Are Forex Signals?
- Investing In Stocks
- Blockchain strategies and approaches
- Why is it worth having your savings in a different currency?
- Getting To Know How Forex Trading Can Change Your Life
- The Importance Of Opening A Forex Trading Demo Account
- Interest in cash is falling - what's the next banknote?
- Should You Prefer Trading Commodities Using Futures Contracts Or Options?
- Why USD is a Safe Haven During the Crisis
- What you should Know about Ubanker Nigeria
- What I Discovered About Forex Trading
- The One Skill Every Forex Trader Should Master To Succeed And How To Master It.
- Factors that inhibit the popularity of Forex in numerous countries
- USEFUL TIPS: HOW TO CHOOSE A FOREX BROKER
- How to find the best Forex signals?
- What type of regulation to expect in finance in 2020
- Top forex trading tips
- Third world countries where trading is most popular
- Forex Reviews 2020 by Top Forex Brokers Reviews
- 4 things to look for before investing in a stock
- What Forex Brokerages Should Look For in a Forex Trading Platform
- Does the license of a brokerage determine how worthwhile it is for traders?
- How to review a Forex Broker
- How An Investor Can Use A Financial App To Select The Best Stocks?
- Should We Trade With Brokers With Lowest Spreads?
- 5 Lowest Spread Forex Brokers Review
- The Strategies from the Genus’ of Investing: Investing style is a mater of finding your personality type and risk tolerance
- Market Numbers Through 2017... Not Quite as Impressive as You Think
- Investing In Gold Smart Strategy