The US Dollar Index Tool
Binary Options Free Trading Tool 3: Dollar Index
The US Dollar index is a measure of the performance of the US Dollar against a basket of six currencies. These currencies are:
- Japanese Yen
- British Pound
- Swiss Franc
- Swedish Krona
- Canadian Dollar
The symbol for the US Dollar Index is USDX. It is not just a measure of the performance of the USD against a basket of currencies, but it has also evolved to become a traded instrument on its own.
Why the US Dollar Index Sucks as a Trading Tool
Traders who are just starting out at binary options and who do not understand the fundamental factors affecting the US Dollar simply will not be able to make sense of this tool. Nearly every international trade is denominated in US Dollars, be it crude oil sales, imports and exports, and even financial trading. As such, the USD is exposed to a host of fundamental influences and the trader has to spend quite some time to learn about these.
Why the US Dollar Index Does Not Suck as a Trading Tool
Once the fundamental bases of the USD’s movements are understood, the USDX code is as good as cracked. Traders can now use this knowledge to pull a lot of possible trades in the binary options market. Traders will be able to understand that the relationship between crude oil and the USD is an inverse one, and be able to trade all manner of crude oil-based binary options trades, using the movement of the US Dollar Index as a guide.
Using the US Dollar Index as a Binary Options Tool
Compare the chart above, which is the chart of crude oil vs USD, and that below which is the chart of the USD Index.
Notice that as the USD Index is rising, the value of crude oil vs the US Dollar is decreasing. As long as the USD Index is rising, crude oil will keep dropping. With this information, these are the following trade types that can be taken on the binary options platform:
- No Touch (Crude Oil) using a value above the nearest retracement point from market price.
- Touch (Crude Oil) using a lower value than market price, which is not lower than the multi-month support.
The expiry times should not be within a one week time frame so as to give your trade enough room to be in the money, but not too much time as to stage a reversal.