What Is a Currency Cross Pair ?

In the past, if you wanted to change currencies you would convert them first to US dollars then convert these US dollars to the currency you desire.

For example, if you wanted to change Japanese Yen to UK sterling you would first convert Japanese Yen to US dollars then convert US dollars to UK sterling.

The invention of Currency Crosses made this process very easy as you don't have to convert to US dollar in every exchange"middle process".

Examples of cross pairs:

• EUR / GBP
• EUR / JPY 
• GBP / JPY
• EUR / CHF 
• EUR / USD
• USD / JPY

Calculating Currency Cross Rates

Do you want to know how currency crosses are calculated ?

It's all about numbers so if you like numbers, you will find this part interesting.

Of course trading platforms do this process automatically and you don't need to think about that but here we will explain the method and currency cross rates.

Forex Vs. Stocks

For example let's take EUR / JPY and we want to find the bid/ask price for them but why these 2 pairs ??

The answer is because both of them have USD as their common denominator.

• First we will look at the bid / ask price for both EUR and JPY.
• Let's say we found EUR/USD : (1.5230)(bid) / (1.5235)(ask).
• And for USD/JPY : (89.38)(bid) / (89.43)(ask).

To calculate the bid price for EUR/JPY you multiple bid prices of EUR/USD and USD/JPY which in our case will be ((( 136.13 ))).

To calculate the ask price for EUR/JPY we will do the same process by multiplying ask prices of EUR/USD and USD/JPY which in our case will be ((( 136.25 ))).

Is Forex Trading Tax Free?

Why Trade Currency Crosses ??

The US dollar is the reserve currency in the world so, about 80% of exchanges in Forex market contain US dollar.

Most agricultural and commodities like oil are priced in US dollar.

But why US dollar and not any other currency??

When countries want to buy stocks like Oil they have to own US dollar"Oil pricing in US dollar" so countries even large ones like China and Japan keeps reserve of US dollars in hand for easy buying and not to be in need to convert every time they wanna buy. that's why US dollar is so strong and considered the leading currency in the world.

3 Biggest Forex Trades by George Soros with Trading Strategies

G. Soros

 Forex trade is the fastest way to make millions of money, but you need to learn which strategy to use and how to make use of indicators. Here, we will learn the exact strategies that George Soros used to earn massive amounts of money.

1. Soros breaks the Bank of England and earns $1 billion in 1 day

 “Black Wednesday” is September 16, 1992, the most notorious forex market event where Soros earned the nickname “the man who broke the Bank of England” because of the transactions he performed together with other traders against the Sterling (British Pound).

They didn’t break the bank directly, but the devaluation of the pound was so bad that Britain had to take it out of the European Exchange Rate Mechanism (ERM).

Britain was in a recession in 1990, the pound (sterling) joined the ERM that year. It fixed the pound’s rate to the Deutsche mark in order to make the investments between Britain and Europe more predictable and stable. But as the political and financial situation in Germany changed during its unification, many ERM currencies were under big pressure to keep their currencies within the agreed limits.

Britain had the most problems: its inflation rate was very high and the USD rate (many British exporters were being paid in USD) was also falling. As it became clear that the pound was not able to artificially withstand the natural market forces, more and more speculators began circling around and making plans on how to profit from this situation.

They waited until the financial situation got as bad as it could naturally get, and then created extra pressure on the pound by selling it in huge amounts. The most aggressive of them was G. Soros who performed this transaction every 5 minutes, profiting each time as the GBP fell by the minute.

Technical analysis and forecasting methods of currency market enabled G. Soros to earn 1 billion USD in just 1 day.

2. Soros earns $790 million, crashes the Thai baht and triggers the Asian crisis

In the year 1997 G. Soros saw a possibility that the Thai baht could go down. So he went short on the baht (by going long on USD/THB) using forward contracts.

His actions were often considered a triggering factor, which resulted in the big Asian financial crisis that affected not only Thailand but also South Korea, Indonesia, Malaysia, Philippines, Hong Kong, and others.

Steps of the strategy G. Soros used in 1997:

1. Soros goes short on the Thai baht.

2. Thailand spends almost $7 billion to protect the baht against speculations.

3. Soros sells all his baht resources and publicly warns people about its possible fall and ensuing crisis.

4. On July 2, Thailand is forced to give up the fixed rate of the baht and it starts to float freely. Thailand asks for help from the International Monetary Fund (IMF).

5. Thailand takes on hard austerity measures to secure the loan from the IMF.

6. Baht falls from 1 USD for 25 baht to 56 baht and Soros gains more than $790 million!

3. Soros gains $1.4 billion from the falling yen

In the year 2011 Japan’s economy was seriously damaged after the tsunami and its economic recovery had been slow. Since then, traders have been waiting for the yen to weaken.  This started to happen at the end of 2012 when Shinzo Abe (then a candidate for the Prime Minister post) publicly spoke about his plans to weaken the yen in order to boost the economy.

Taking into consideration his high approval rating, this was a good signal for the investors to open big USD/JPY deals, betting that the value of the dollar would rise against the yen.

The first one to jump in was Soros who is legendary for his skills of shorting different currencies with high leverages and worldwide consequences. He forecasted the upcoming trend and the Soros Fund Management allocated 10% of its $24 billion to USD/JPY in mid-November 2012. Since then, they have gained $1.2 – $1.4 billion (according to sources close to the Fund) in this deal and the yen is still going down.

Here, we can see how forecasting currency rates can easily make you a huge amount of money in no time with small effort. News and learning markets changes will help besides technical indicators.

Read more: Maximize your Forex Trading profit through new Technical Indicators

Figures Source: forexillusrated.com