Forex Currency Pairing with Futures — Step-by-Step Guide & Transcript

[00:00] How's it going everyone? This is going to be a more advanced video tailored to those of you that trade Forex.

[00:17] We are going to be talking about pairing currencies using futures, but we will also talk about futures currencies as well. So, let's get into the PDF. The first thing we are going to have to understand is fractions.

[00:29] Yes, we are going back to math class. We are always going to start at 1 over 1 equals 1, and then we'll get into the various scenarios. Now these icons over here on the right, this is what they mean.

[00:41] If we have a gray line, that is no trend. With a bullish trend, bearish trend. Strong bullish trend, strong bearish trend. So we're always going to start with this number here. If we go to this first example, if we are raising the denominator, well then we are

[00:55] going to lower the number. So what does that look like with a currency? If we are keeping the currency on top the same, but we are pairing that with a strong currency, well then what we are left with is a currency

[01:09] that is bearish. Now if we lower the numerator, we end up with the same scenario because we are just lowering the numerator which gives us a bearish currency. Now how do we take that one step further? Well we are going to do something on both sides of the fraction. If we lower the

[01:25] numerator while raising the denominator well then we're getting a very strong bearish trend right so pairing a weak currency with a strong currency gives you a very weak currency and as

[01:38] you can see here this is something you want to avoid raising both the numerator and the denominator or lowering both the numerator and the denominator as price is not going to change or the trend will

[01:50] not change. This example down here, if we just raise the numerator, well you're taking a bullish trend, pairing it against something that is not moving, you're just going to be left with a bullish trend. Right here, if we pair a consolidation with something that is bearish, well then you're

[02:06] going to have something that is bullish. And then this is the one we want to focus on, where if we raise the numerator, lower the denominator, we're going to get a very bullish trend. So pairing something that is bullish with something that is bearish, you get a very bullish trend. So let's go

[02:22] over this in a more organized fashion, starting with what we want to avoid. We want to avoid pairing a weak currency with a weak currency or a strong currency with a strong currency, as you will end up with a currency that is not trending. It is consolidating because they are

[02:38] moving in the same direction. Now, it is okay, but not the best, to pair something with a consolidation. So you can see here, if you're pairing something that is weak or strong with a consolidation, you will have a trend, but it won't be a super strong trend. Now what we want

[02:54] to focus on is finding the weakest currency and pairing that with the strongest currency. So here you can see we have a weak currency, we pair that with a strong currency, and we end up with a very weak currency. Now we can also do that by pairing a strong currency with a weak currency

[03:09] and ending up with a very strong currency. So now that you understand the fraction side of things, the math behind it, let's go over some examples here. We are first going to focus on when the dollar is trending, or DXY.

[03:23] If the dollar is trending, I just want to focus on pairing stuff with the dollar. So here you can see the dollar is in a strong bullish trend. So what would we want to pair it with? Would we want to pair it with something that is also trending?

[03:36] No, because we are going to be left with a currency that is consolidating. We want to look for a currency that is weak. So if we come over here the dollar is trending Euro is very bearish Here are our bearish currencies The euro is the most bearish So if we want the best expansion out of a currency we want to pair the strongest and the

[03:56] weakest one together. So pairing the dollar with the euro, so euro with the dollar, we'll get a strong bearish trend or we are left with trading euro USD. The next example is if dollar is trending

[04:10] lower we'd want to then pair it with something that is bullish so taking a look over here we have a strong bullish currency and here we do as we have the yen that is very bullish so we can

[04:22] pair the dollar with the yen and we get left with a very strong bearish trend that's because we're pairing the dollar with jpy we trade usd jpy so simply put these are the rules and this is what

[04:34] you will want to screenshot. If the dollar is trending you want to pair it with something. If the dollar is bullish find the weakest currency to pair with it. If the dollar is bearish find the

[04:47] strongest currency to pair with it. Now let's say the dollar is in a consolidation that is where it gets a bit more advanced. We're not going to pair with the dollar but we're going to pair with another currency and this is what we want to focus on. We want to pair that strong currency with a

[05:02] weak currency or a weak currency with a strong currency. Now there will be times where we have all the currencies trending up and we don't have something that is bearish. That is when we can pair it with something that's consolidating and we will still get a trend. Let's take a look at

[05:15] these exotic examples. So since the dollar is consolidating, we want to look for a bullish currency and a bearish currency. So taking a look, euro is very strong, yen is very weak. So those

[05:28] the two we would pair together. So we would pair the Euro, which is bullish, with the Yen, which is bearish. What do we end up with? A strong bullish trend. So taking a look at another example here, the dollar is consolidating, so we want to find a bearish and a bullish currency,

[05:44] the pound and the New Zealand dollar. By pairing those together, we get a strong bearish trend. Now what do you do if you just trade futures and you don't trade forex? Well, if the dollar is

[05:56] trending is very simple. You're just going to find the one opposite that is the strongest or weakest. So if the dollar is bullish, you want to find the most bearish currency future and that is

[06:08] what you will be trading. If the dollar is bearish, you want to find the strongest currency future and that is what you will be trading. Now what do we do if dollar is consolidating? We have two options. We can once again just find the one that is trending the most and trade it or if we want

[06:23] have a similar framework to the exotic pairs we can trade them both in opposite directions. Let's say the dollar is trending we have a bearish trend in pound and NZD has a bullish trend well

[06:35] then we could long one and short one and that's very similar to just trading GDP NZD. So I know this can be confusing it'll just take a bit of practice to understand. Let's go into trading view and we can go over a few examples of pairing some currencies together. So here we are in our

[06:52] first example and we're taking a look here at dollar and the dollar is trending downwards right we have a nice bearish engulfing monthly candle we respect the lower half of that and we're trading a continuation lower we could look for this to continue lower now if we are bearish on dollar

[07:07] what do we want to find we want to find a bullish foreign currency so let's take a look here euro that is bullish pound you see how that is not as bullish as euro but so far we could look at euro

[07:21] USD, we want to avoid GDP USD. I'm taking a look at Yen. That is quite bullish. We could look at that. CAD, we would want to avoid that, right? Because it also bearish SWIFI we could look at that It pretty strong but it has just taken out a pretty big target And NZD AUD also bearish So by taking a look at this which one do we want to focus on

[07:44] Well, we could focus on JPY or Euro. So then we could look at Euro USD for the next day or USD JPY for the next day. So let's take a look. Let this play ahead. And what do we get? USD, JPY,

[08:01] gives an expansion lower. Euro USD gives an expansion higher. So that is how you can pair those together. First, you want to take a look at the dollar and get a bias. So in this case,

[08:13] it's bearish. Then you want to pair it with foreign currencies that you have the other direction anticipated. Now, if you go ahead and take a look, we had pound not really doing much. So if we take a look at GBP USD, it's not really going to have an expansion day like Euro USD does. So that's

[08:31] it's important to consider the futures and pairing those currencies together to make sure you align yourself for expansion. So here we are in another example and I want to say there's not always going to be just one best currency to trade. A lot of times there are multiple different options for a

[08:47] single day but there are certainly ones that you want to avoid. So taking a look at this what do we have? We have a candle to closure here on the dollar and then we have equal lows below. If you to check out this trade review it is on my channel i ended up trading cad futures but we have a candle

[09:05] to closure to trade lower so i want to look for a bullish foreign currency so taking a look is euro set up for expansion yeah it has a nice bullish candle but it's not super great in that as there's pound yeah pound has a nice candle to closure right here but euro or pound you know

[09:22] you could both trade those jpy well we're wanting to see a bullish asset right this is quite bearish but I'm going to want to avoid JPY, so I wouldn't want to trade USDJPY.

[09:34] Now CAD, what do we have? We have a nice closure and a nice fair value gap here, and then an ideal candle to closure, and this is why I took it because it looked the best to me on this time frame. Now let's go take a look at SWIFI.

[09:47] Right, not that great. NBD and AUD are also both strong. But taking a look at this, because we have a bearish dollar, we could really pair this against anything, But I would want to avoid JPY or the SLIFI as there is not relative strength in those markets.

[10:04] So taking a look, let's see how this plays out. If we take a look at anything other than those two assets, you can see we get a nice expansion here on Euro. GDP has a nice expansion as well.

[10:16] And you can see JPY doesn't really do much. And that's because you're pairing a weak currency, as we can let this play out, with a weak future, right? you want to pair it with a strong future.

[10:28] So USD, JPY doesn't really get much of a move. While you look at CAD, it does okay. CHF does okay. NDD and ADD do really well. So this is just an example showing when you have a dollar bias,

[10:40] it's not always going to be perfect. You're not going to have one asset that's just, hey, this is the strongest asset. There are a lot of times multiple different choices. For instance, you could have traded this on euro. You could have traded this on pound.

[10:52] You could have traded on CAD. You could have done NZD or AUD, really any of those works. But really what you want to do is really focus or hone in on the ones you don't want to trade. If you're trying to trade that day on JPY, you're not really going to get much movement

[11:06] because it is not that bullish relative to the other currencies. So here we are in our next example. And in this example, we're going to go over exotic pairing or pairing with things that are not the dollar.

[11:18] Now just to review the dollar when the dollar is trending just focus on the currency futures that are opposing it So here if the dollar is trending lower you want to find the bullish futures currencies and then pair those together or trade those if you trade futures. Now if the dollar is not trending

[11:36] or consolidating, let's talk about what to do there. Now when can you anticipate consolidation? Generally after a large expansion or hitting a higher time frame key level. Here we have both,

[11:48] And this is what I was talking about on Twitter. So we have dollar reaching into a important level after expanding. What can we anticipate for the dollar? Either a new phase of price, so either retracement, reversal, or a consolidation.

[12:02] I'm personally anticipating consolidation or retracement on the dollar. So I'd want to look towards foreign currencies and pair those together. Now if the dollar is retracing or consolidating, that means euro or pound are going to be doing what?

[12:17] doing the same but in the other direction. So if we can anticipate euro or pound to go lower, right, then we can pair something with that. Let's give it one more day to give a little bit more context. So we'd let that new day print and you can see we are getting a consolidation

[12:31] or retracing back into the range. So generally speaking, that makes euro or pound bearish. So you can see we have bearish euro and pound also bearish. Now looking at these candle closers

[12:43] together, what do we see? Well, I see that Euro is more bearish. So that generally makes me want to focus on Euro. So if I'm looking at Euro, I want to pair it with something that is what?

[12:55] Bullish, because I want to do opposites. If I'm looking at a bearish currency, I want to find a bullish currency. So then I look, bullish, no. Bullish, no. Oh, I found a bullish currency. So now, instead of pairing with a dollar, I found a currency that

[13:12] is bearish and I found a currency that is bullish, the Euro and CAD. We can take a look at the other ones to see if I'm missing anything. We could do NBD or ABD. So really I want to do Euro against

[13:24] the CAD or Euro against the New Zealand dollar or the Australian dollar. So let's take a look at that Euro CAD, pull that up. You can see we got an expansion off of a high, a reversal, and then

[13:38] trading towards a low, you could be trading this day lower. Let's take a look at something like Euro versus NZD. And same thing, we're getting an expansion lower. Let's take a look at Euro AUD.

[13:54] And once again, not as good of an expansion, but an expansion lower. Now if we try to pair stuff against the dollar or look at Euro USD, you see how we're just stuck in a consolidation. So that's why when the dollar is consolidating, I can focus on pairing futures currencies together to find the forex pair that I want to trade.

[14:13] I'm going to do that by finding one asset that is going in the opposite direction of the other, or a very trending asset with one that is opposing it or consolidating. So I did that by looking at Euro and then finding stuff that was strong, which ended up with giving me EuroCAD.

[14:30] and that also had a nice daily framework as we ran out these highs and then we could trade through these lows. Now I don't want this video to get too long. I know it is a lot of information and can be

[14:42] quite confusing but it's just going to take some practice right. You have to understand how fractions work and then really simply you want to pair things that are going in the opposite direction and that's how you're going to find expansions within the forex currency market. If you did

[14:57] If you enjoyed this video, please give it a like and subscribe, and I'll see you guys next time.