From the last article,assume that Ali is EUR, JPY is Joe and USD is yours truly. So, now the first bout translates to EURJPY and the second bout translates to EURUSD. For the past 2-3 weeks, we have seen that the euro has been strengthening, Instead of blindly going long on some pair based on its strength, you needed to spend 5-10 mins to find the best pair to go long. So,now, you have decided to go long on EUR. Choose the pair which pairs the Euro against the weakest. Surely, JPY is not the weakest. How do we know that. We can know this by seeing that it is gaining against USD. Now we know that USD is weaker. Now, we see whether USD is gaining against any other currency. We continue doing this till we find a currency which is not gaining against any others. Now, we see that USD is not gaining against any currency. So, we come to the conclusion that it is best to play the strongest, Euro, against the weakest, the USD. True to this, we can see that EURUSD has gained 600 pips in 2-3 weeks while no other pair has gained that much.
I could see that there were a lot of people who tried going long on GBPUSD, EURJPY etc. but all that you needed to do was go long on EURUSD. This guarantees good returns and the risks were also very low. If you had more money to invest, take more lots on EURUSD rather than going long on other pairs just because one of it was strong. In the boxing example, we knew Ali was strongest but we had to pick the bout which pitted the strongest against the weakeast.Lesser risk,lesser nail-biting,lesser tension, higher returns. So remember to always pit the strongest against the weakest.
In the next article, i will explain how i predicted (in my twitter feed) 3 weeks ago that EURUSD would go till 1.4050 before a deep correction.
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Winner’s Edge Trading, as seen on: