Correlation of currencies takes place when the price of two or more pairs changes, making them very close, to each other. Correlation can be of two kinds - positive or negative. With a positive option, the price of currency pairs tends to change in the same direction, with a negative, respectively, the pairs change in different directions. For exchange traders, understanding the relationship between currency pairs is a very valuable skill, since the notion of correlation affects the level of risk to which the trader's resources are exposed. The pairs of currencies themselves include two different currencies, where their value is calculated as the ratio of one currency to another. Each of the constituent pairs is related to the economy, which in turn affects the demand and supply of currency. The dependence shows that if the value of one currency increases or vice versa, it falls, the currency itself grows or falls in price, relative to other currencies, and not against any particular currency. For example, if the European currency increases in price against the US dollar, then it is entirely expected that the euro will increase against other currency pairs, and not just against the US currency. Such interrelations show one thing: currency pairs are not traded alone, that is, isolated from each other. Logically, the cost of the instrument will change by a similar amount against the other currency pairs of the market. If the Euro rises against the US dollar by 100 points, it can not be said that the increase against the Australian currency will also amount to 100 points. But the value against the Australian currency is likely to increase by a fixed amount (a certain value or percentage). A positive correlation is a change in the price of two pairs, with an identical direction. That is, if the cost of one pair increases, this means that the cost of the other is also different. For a better understanding, you need to consider several tools, for example, currency pairs EUR / USD and AUD / USD. The first pair includes the Euro and the American dollar. The price of the pair is growing, and demand for the Euro rose, or the demand for the dollar fell. In any case, the value of the European currency may increase if compared with the value of the American currency. With the growth of EUR / USD, due to the weakness of the dollar, we are more likely to get an increase in the pair AUD / USD. Thus, it is possible to observe a positive currency correlation between both pairs. A negative correlation shows that the value of both currencies will change, moving in the opposite direction: it increases the currency, therefore, the other falls. This is well traced on the currency pairs EUR / USD and USD / JPY. In case of an increase in demand for the dollar, the price of the EUR / USD pair is falling, while USD / JPY is rising. It's all about the dollar, or rather the representation of its value in each instrument specifically. Currency correlation can affect the overall risk for a trader's trading account, increasing the level of possible risk. In the case of a positive correlation, between two pairs, for example, EUR / USD and GBP / USD, the cost of one pair can change the direction (direction), and therefore the price of the other will change, choosing the same direction. And then, one of the pairs will be against the player's transaction, and, consequently, the other will behave as well. This is approximately 4% of the risk of the trader's account, which he admits in one transaction. The US dollar is not only the most popular currency in the world but also the main component of most currency pairs in the Forex market. Therefore, today, I would like to touch upon some events and facts that are directly related to the US currency. 1.Fact the first. The US currency is an American dollar, very similar to a promissory note, more precisely a receipt. Issued receipts in the Fed, this organization, which is called the Federal Reserve System. This organization belongs to the number of private, and the buyers of the dollar private companies, individuals, countries and holdings affect the dollar exchange rate, the increase in demand for the currency and strengthening its positions. 2. The denomination that had the largest volume, and which was started to stamp in the US, was equal to 100 thousand dollars. It was issued and was in circulation until 1945, and then it was stopped, and in 1969, the head of state Nixon imposed a final ban on the issue and seized a bill from the financial turnover. 3. Despite such restrictions, a 100-thousand banknote, by and large, have certain solvency. But paper notes, which were issued in Massachusetts in 1960, have no power at that time, America was not an independent country, and in its modern territory, there were colonies. 4. The design of the dollar, which we all know well, was developed in the 1920s, and was standardized in 1929. The appearance of the currency has an explanation, a portrait on the front and a monument on the back in compliance with strict requirements on the part of the authorities. 5. Military needs contributed to the rapid increase in the popularity of the US currency. The dollar is a currency of a military nature, which confidently entered into circulation only at the stage of the Civil War. But the banknotes in circulation were sorely lacking, the citizens lacked money, and the release of new ones, during the war, completely died down. 6. One-dollar bill is the most common in circulation. If compared with the rest of the US dollar, the total amount of one-dollar papers is about 50% of the rest of the mass. 7. Despite the emancipation of women and their bold statements about gender equality, it is worth noting that the woman's portrait on paper bills was present only once. The denomination, denominated in 1 dollar, went into the sale in 1886, when it was printed by Martha Washington. Since then, not a single portrait of a woman, in American currency, has been observed. 8. Practically on any bill of dollars, due to expertise, traces of the cocaine drug will be found. Vendors of poison always conclude transactions in currency and receive payment green. 9. Bills themselves bills, made of the thread: it's cotton and flax, and not paper, as we all are confident. 10. Dollar bills have very high resistance. To damage or tear up paper money, you need to make great efforts. 11. based on the demand for dollar notes, the average indicator for the turnover time is calculated. That is, for example, 1 dollar is in circulation for about two years (22 months), 5 dollars - 24 months, and 10 - 18 months. 20 dollars can last us 25 months, and 50 bucks, as long as 55 months, well, 100 dollars, beats all records: 5 years of active use. 12. Two dollars is a very rare bill. It is in the process, although it was last printed only in 2003. 13. Despite the equality of rights, the portraits of African-American personalities were never depicted on dollars. 14. The colour of the dollar is green, but what does it have to do with it? The origins date back to the distant 1869, when the US Treasury, signed a contract with a company in Philadelphia, to produce a special paper for money. Money papers were issued with watermarks, barely discernible strips, of small width. At the same time, the US Treasury, for the first time, produces dollars, using green paint when manufacturing. This change was explained by the appearance of the photo, and the green dye, which already was, could be used in large volumes, and new ones simply can not be bought. But a stable green dollar colour appeared already in 1929. In addition to the cheapness of such green colours, the colour was stable and liked the inhabitants of the United States, causing good emotions. But after a century, dollar bills again differ in yellow and pink shades. The US dollar is not only a well-known and the most unique world currency, with its history and currency characteristics, but also a powerful financial instrument that influences not only the world economy but also other market currencies. But the correlation links between pairs themselves can not be exact. Everything depends on the fundamental indicators: the factors act on the correlation, strengthening or weakening it. In financial markets, this parameter is measured from +1 to -1. So, +1 indicates a positive ideal correlation, -1 indicates a holistic negative correlation, zero also shows a complete lack of correlation. As for the advantages, the correlation can be at the player's hand: watching one pair, one can predict the future movement of another if they are correlated with each other.
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