WHAT IS THE U.S. DOLLAR INDEX? FOREX TRADING


If you’ve traded stocks, you’re familiar with all the indices available such as the Dow Jones Industrial Average (DJIA), NASDAQ Composite Index, Russell 2000, S&P 500, Wilshire 5000, and the Nimbus 2001. Oh wait, the last one is actually Harry Potter’s broomstick.
Well if U.S. stocks have an index, the U.S. dollar can’t be outdone. For currency traders like us, we have the U.S. Dollar Index (USDX).
The U.S. Dollar Index consists of a geometric weighted average of a basket of foreign currencies against the dollar.
Come again?! Okay before you fall asleep on us after that super geeky definition, let’s break it down.
It’s very similar to how the stock indices work in that it provides a general indication of the value of a basket of securities. Of course, the “securities” we’re talking about here are other major world currencies.

                                             
The Basket
The U.S. Dollar Index consists of six foreign currencies. They are the:
  1. Euro (EUR)
  2. Yen (JPY
  3. Cable (GBP)
  4. Loonie (CAD)
  5. Kronas (SEK)
  6. Francs (CHF)
Here’s a trick question. If the index is made up of 6 currencies, how many countries are included?
If you answered “6”, you’re wrong. If you answered “20”, you’re a genius.
There are 20 countries total, because there are 15 members of the European Union that have adopted the euro as their sole currency, plus the other five countries (Japan, Great Britain, Canada, Sweden, and Switzerland) and their accompanying currencies.
It’s obvious that 20 countries make up a small portion of the world but many other currencies follow the U.S. Dollar index very closely. This makes the USDX a pretty good tool for measuring the U.S. dollar’s global strength.

What is the U.S. Dollar Index?

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If you’ve traded stocks, you’re familiar with all the indices available such as the Dow Jones Industrial Average (DJIA), NASDAQ Composite Index, Russell 2000, S&P 500, Wilshire 5000, and the Nimbus 2001. Oh wait, the last one is actually Harry Potter’s broomstick.
Well if U.S. stocks have an index, the U.S. dollar can’t be outdone. For currency traders like us, we have the U.S. Dollar Index (USDX).
The U.S. Dollar Index consists of a geometric weighted average of a basket of foreign currencies against the dollar.
Come again?! Okay before you fall asleep on us after that super geeky definition, let’s break it down.
It’s very similar to how the stock indices work in that it provides a general indication of the value of a basket of securities. Of course, the “securities” we’re talking about here are other major world currencies.

The Basket
The U.S. Dollar Index consists of six foreign currencies. They are the:
  1. Euro (EUR)
  2. Yen (JPY
  3. Cable (GBP)
  4. Loonie (CAD)
  5. Kronas (SEK)
  6. Francs (CHF)
Here’s a trick question. If the index is made up of 6 currencies, how many countries are included?
If you answered “6”, you’re wrong. If you answered “20”, you’re a genius.
There are 20 countries total, because there are 15 members of the European Union that have adopted the euro as their sole currency, plus the other five countries (Japan, Great Britain, Canada, Sweden, and Switzerland) and their accompanying currencies.
It’s obvious that 20 countries make up a small portion of the world but many other currencies follow the U.S. Dollar index very closely. This makes the USDX a pretty good tool for measuring the U.S. dollar’s global strength.

Are You Willing to Pay the Price?

Buy a copy of School of Pipsology for $49 in PDF format

Buy and download a printable and easy-to-read PDF document containing the ENTIRE School of Pipsology. The PDF is an exact copy of the School section, over 250 pages (pictures included), minus advertisements and chapter-ending quizzes. Read it on-screen or print it so you can take it with you on the road.
When you buy the PDF you'll receive an email within minutes with (1) a DIRECT LINK to download the PDF and (2) a PASSWORD to open the PDF. You MUST have the password to open the PDF.
*Please add INFO@BABYPIPS.COM and SERVICE@BABYPIPS.COM to your SPAM whitelist/safe-sender list.

I agree to be charged $49 for one copy of "School of Pipsology" in PDF format. PAYPAL is the only form of payment accepted. I understand I'm purchasing a single copy for myself and I won't make copies of the book or distribute it to anyone else. If someone else wants a copy I'll encourage them to purchase their own. I also understand that I will need a password to open the PDF each time.
or Cancel
HA! Made you click!
If you really thought there actually was a way for a lazy forex trader to get rich, SHAME ON YOU!
No such thing exists. The word "lazy" and "trader" is an oxymoron. You have to be willing to pay the price to become a trader.
Which brings us to our next lesson....
So, you’ve gone through the School of Pipsology…five times, learned basic analysis and money management techniques, and maybe even opened up a demo account and started trading a plan you’ve created. (You do have a trading plan right?) Now you can sit back and relax because it’s easy money from here on out, right?
Wrong!
You’ve just taken the first step.
You’ve only familiarized yourself with the very basic fundamentals of what it takes to become a professional trader. Now it’s time to get on to the real work.
I’m sure you’re now thinking, “There’s more to learn?!”
Well, my friend, the learning never ends.
As with any profession, whether you’re a doctor, lawyer, athlete, assassin, spy, ninja, ultimate fighter, musician or any other occupation that requires a high level of skill, you can never stop learning and practicing. Otherwise, your skills will deteriorate and you’ll slowly forget what you’ve learned.
This lesson will give you a peek into what it takes – education, time, money and psychological stamina – to enter the most financially rewarding career on the planet: a professional trader.
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