Cross pairs on Forex
The main instrument on the currency exchange is still the American dollar; it is the second currency in
most transactions. Such currency pairs on Forex are called direct and, as a rule, have the smallest spread.
But the US dollar is not always involved in the transaction, for example, you want to buy euros for Swiss francs EUR/CHF, in this case the quote will no longer be direct.
This entry is called a cross pair; in fact, these are all transactions without the participation of the American dollar.
That is, such pairs include AUDCAD, AUDCHF, AUDJPY, AUDNZD, CADCHF, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURCZK, EURGBP, EURHUF, EURJPY, EURNOK, EURNZD, EURPLN, EURSEK, GBPAUD, GBPCAD, GBPCHF, GBPCZK , GBPJPY, GBPNOK, GBPNZD, GBPSEK, GBPZAR, NZDCHF, NZDJPY, etc.
It is understood that the assessment of the value of one currency to another occurs in two stages, first, each of the currencies is assessed relative to the dollar, the resulting result is divided or multiplied.
In this case, the concept of cross rate .
For example, to recalculate the cost of the euro in the same Swiss francs, a simple formula is used.
EUR/CHF = EUR/USD x USD/CHF
For example, at the moment EUR/CHF = 1.0973 x 0.9594 = 1.0527 Swiss francs per euro.
Most often, special calculators are used for calculations. which will easily show the price of the desired quote at the current rate. The easiest way is to look at ready-made Forex quotes for the selected cross pair.
Are there any differences when trading direct and cross pairs on Forex?
Not on the technical planet, but you will have to pay a little more commission than when working with direct currency pairs. low spreads on crosses .
When it comes to trading, there isn't much of a difference, direct currency pairs are a little easier to understand, but after a few days of trading you won't notice much of a difference.
In most cases, technical analysis is used for work, since trading on news in this case does not always give good results.
Due to the difference in discount rates, it is cross pairs that are most often used in the carry trade strategy on Forex.