Comparing. We are always told that comparing ourselves to other is not a good thing.
But when it comes to different jobs or simple different things comparing is more than alright – it is needed in order to be understand which is better.
And in trading comparing assets to one another can even go further. It can save you quite some money and even help you gain some of it. But how? Well, it seems that you really need to look at trades and dig a little deeper.
Let’s say you want to decide between two trades – USD/CAD and JPY/CAD. And let’s say that you can only take on one trade a time. what do you do? Well, you have to look at a whole other chart – USD/JPY.
And so, you are looking at USD/JPY. And let say that you see the chart going lower. That means that USD is doing worse than JPY and that your right answer would be to buy JPY/CAD and to stay away from its counterpart and it seems that the greenback is simply not going to so well in the nearest time.
This is known as a relative strength analysis and it has already saved a lot of trading souls from unnecessary and unwanted losses. And who is to say that this is not going to help you in the future?
Just try and remember this little trick when you can’t decide which couple to choose between the two!