How to Use Trading Matrices to Your Advantage
The mathematical definition of a matrix is explained in the dictionary as "a rectangular array of numbers, mathematical functions, or algebraic symbols, esp. when such arrays are added and multiplied according to certain rules." As this is a vague description, have a look at our graphic below to give you a good understanding of what a FX trading matrix is. A trading matrix allows you to compare products on a chart. Trading matrices are great for giving you a quick update on how the forex market is doing.
USD --- 0.778 1.565 1.978 1.250 0.703 7.754 89.517
EUR 1.285 --- 2.011 2.542 1.606 0.903 9.963 115.020
AUD 0.639 0.497 --- 1.264 0.798 0.449 4.953 57.187
NZD 0.506 0.393 0.791 --- 0.632 0.355 3.920 45.251
CAD 0.800 0.623 1.253 1.583 --- 0.562 6.204 71.628
GBP 1.423 1.108 2.228 2.815 1.778 --- 11.034 127.390
HKD 0.129 0.100 0.202 0.255 0.161 0.091 --- 11.545
JPY 0.011 0.009 0.017 0.022 0.014 0.008 0.087 ---
USD EUR AUD NZD CAD GBP HKD JPY
When developing a FX trading plan, you will more than likely come into contact with Forex software. Inexpensive forex software programs are allowing anyone with a reasonable IQ and some money sense to play on the forex market and put together their own trading matrices. Most forex software packages will include a FX trading matrix.
Luckily for us these forex matrices are built to emphasize simplicity and speed. You can now, with a click of your mouse, easily select the order type, route, and duration for your order. Most of these software packages have Forex order types that include Market, Limit, Stop Market and Stop Limit, as well as Cancel and ReplaceStop Market.
Learning the basic skills in forex, such as how to read forex trading matrices, is really important. The reason for this is that, once you have the crucial skill of understanding FX matrices under your belt, it will be a lot quicker and easier when you are ready to learn and practice the actual foreign exchange trading system.
By the time you have read this article, you will have learnt how to read forex matrices and charts, as be familiar with methods on how to avoid the possible pitfalls that can happen when reading a trading matrix, particularly if you haven't traded forex before.
When reading a forex trading matrix or chart, remember that each currency pair or pairing is always quoted in the exact same way. For instance, the EUR/USD currency pair is always read as EUR/USD. In this combo, the EUR (euro) is always the base currency, and the US Dollar is the terms currency, never the other way round with the US Dollar or USD first.
Your trade size or face value is the amount of base currency that you are trading. For example, if you want to buy 10 000 EURUSD, you are buying 10 000 Euros. If you buy the currency pair, realize that you're looking for the forex trading matrix chart of that currency pair to go up, to allow you to have a profitable trade. In other words, you want the base currency of the FX matrix to get stronger when compared against the terms currency.