With True Forex Funds, you can trade some of the less popular currency pairs listed on the MT4/MT5 trading platforms. Discover how to trade these currency crosses, and find out how to use a combination of forex pairs to create your own customized crosses.
A majority of assets traded on the forex platforms are based on the US Dollar. In fact, about 80% of the assets traded in the forex market are made up of currencies and commodities that are paired with the US Dollar. If you are trading gold, copper, silver, crude oil or platinum, you will find out that these commodities are listed on the asset index of forex platforms in pairs against the US Dollar. As a result, there is always the risk of having any trades set up on these pairs being affected by a host of US fundamentals.
In a typical week, the US Dollar can come under the influence of not just the macroeconomic data listed on the forex news calendar, but also from external factors such as Fedspeak, happenings within the US government or risk-on/risk-off market sentiment. These factors can make it very difficult to trade these pairs confidently based on technicals or price action setups as a result of a host of competing fundamentals.
In contrast, there are other currencies that are only impacted by one or two fundamentals, making it very easy to trade them. Combinations of these currencies are called the forex crosses, because of the absence of the US Dollar. If you are one of those traders who is not keen on fighting those pro-US/anti-US battles in the forex market, then you may consider trading forex crosses.
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Why should you consider trading currency crosses?
A reason why some traders outperform others, or are able to maximize opportunities where others cannot is because such traders have understood the macroeconomic global climate and are able to use the information to their trading advantage. As a funded trader with True Forex Funds or a trader seeking funding via the evaluation process, you have to understand how to use this factor to your advantage. Trading off the macroeconomic climate enables you to trade with the flow of the institutional orders, increasing your chances of becoming a True Forex Funds funded trader.
What this article aims to do is to provide traders with an understanding of what lies ahead in 2023 and 2024, considering the current macroeconomic climate and expected changes to this environment as certain key factors change. By the end of this piece, you should be able to do the following:
a) Currency crosses tend to produce more straightforward trends. This is due to the fact that only one or two fundamentals may be the driving force behind the trend moves, unlike the US Dollar where a slew of fundamentals will come into play and produce a trend that has a lot of spikes and ebbs.
b) Currency crosses tend to produce stronger moves when in a trend. To buttress this point, compare the price moves of the GBP/USD and GBP/ZAR in response to macroeconomic data affecting the British Pound. When former Chancellor of the Exchequer Akwasi Kwarteng announced his budget cuts on 23 September 2022, in a move that sent the Pound tumbling, the GBP/USD fell by 475 pips over the course of two days. In contrast, the GBP/ZAR fell a whopping 1,700 pips.
GBPZAR plunge in September 2022
c) The interest rate differentials between the constituent currencies in a currency cross are typically higher than for any of the major currencies. This is why currency crosses are good for “carry trades.” If you are long on the currency with the higher interest rate and the price trends in that currency’s direction, you profit both ways.
d) Know what assets to change in response to the data from high-impact news events.
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Creating a synthetic cross: a live example
A synthetic cross is a forex cross that is created by the trader for any of two possible reasons:
a) The pair in question may not be found on the forex platforms.
b) The pairs may be too illiquid and therefore it may be hard to get order executions at good prices and reasonable spreads. How do you create a synthetic currency pair?
Method 1. Using a third currency in opposing positions
Any synthetic pair you create will definitely have a base currency and a counter currency. What you do is to look at the asset list, and see if you can get a listed currency pair that has the synthetic pair’s base currency as its base currency and another pair that has the quote currency of the synthetic pair as the counter currency. Both pairs should also have a third currency not found in the synthetic pair, but which occupies the quote currency position in one pair and the base currency position in the other.
In other words, if you want to trade the Australian Dollar against the Swiss Franc, you would do the following:
a) Look for a currency pair that has the AUD as the base currency.
b) Look for another currency pair that has the CHF as the counter currency.
Both currency pairs must have a third currency to serve as quote currency in (a), and base currency in (b) to have a neutralizing effect. The US Dollar will fit in just fine.
So you can pick the AUD/USD, and USD/CHF. By buying the AUD/USD, you are long on the Aussie Dollar and short on the US Dollar. By buying the USD/CHF, you are long on the US Dollar and short on the Swiss Franc. These combinations will keep you net long on the Aussie Dollar and net short on the Swiss Franc, leaving the long USD and short USD positions to cancel themselves out. You must use the same trade volume on each pairing to ensure the two opposing USD positions cancel themselves out.
Method 2. Using opposing positions in two pairs to create a synthetic pair
Another way of creating a synthetic pair is to use opposing positions on two currency pairs that have the base currency and counter currency in the same positions as your preferred synthetic pairs. In other words, if you want to trade ABC/DEF, choose two pairs that have ABC and DEF in the same position (e.g. as counter currencies). Then take opposing positions on the pairs you have chosen (i.e. go long on pair 1 and short on pair 2). This action will ensure that the long and short positions on the base currency of the two pairs will cancel themselves out, keeping you net long on the base currency of your synthetic pair and short on the quote currency of your synthetic pair.
Here is an example. Suppose you want to trade the Brazilian Real against the Chinese Yuan, and the analysis has shown that a resurgent Mexican economy will push the Real up against a Yuan that will be weakened by government intervention. Now the BRL/CNH is not found on any forex platform available to retail traders. So how do you trade the situation?
The BRL/CNH may not be on the trading platforms where True Forex Funds hosts its evaluation programs. But there is a USD/BRL pair, and there is a USD/CNH pair. You want to be net long on the BRL, and short on the CNH. What you do is to sell the USD/BRL pair (keeping you long on the Real), and buy the USD/CNH pair (keeping you short on the Chinese Yuan). The opposing positions on the two pairs will cancel each other out, leaving you long on BRL and short on CNH.
Getting Started: Breaking Down the True Forex Funds Advantage
As far as trading forex crosses is concerned, it would interest you to note that True Forex Funds offers you the opportunity to trade more than 130 trading instruments, with a large collection of forex pairs. This also gives you the opportunity to create your own synthetic pairs using some of what is available on that MT4/MT5 platform.
Overview and main benefits of True Forex Funds
True Forex Funds is a proprietary trading firm that provides an opportunity for traders to get additional capital to trade live accounts via an evaluation process. You stand the chance of being funded with a minimum of $10,000 and a maximum of $400,000. To achieve funded trader status, you must pass a 2-stage evaluation within the allotted time limit. For as low as 89 euros for a $10,000 account, you can participate in the evaluation process and if you pass and get funded, your registration fee is refunded with your first payout.
The benefits of trading with True Forex Funds are as follows:
- There are no restrictions on what you can trade. You can trade any of the forex crosses available, or use the currency pairs that are listed on the platform to create your own synthetic pairs.
- You can use these pairs to trade the news and you can also keep positions open overnight. Best of all, if you are long on the currency with a higher interest rate, you earn from the rollover fee as part of a carry trade.
- Your fees are refunded with the first payout once you achieve your first profits as a funded trader.
- Starting from $10,000, there is an opportunity to scale up your capital to as much as $2,500,000..
- The profit split is one of the fastest in the industry, with an average arrival time of under 24 hours, as the trader can receive as much as 80% of all profits made.
Pointing your broker’s platform to True Forex Funds’ trading servers
After you have registered with True Forex Funds and received your login details, it is time to download the trading platform and point the platform towards the True Forex Funds servers.
Download the MT4 or MT5 platform from your True Forex Funds client area. Once you have completed this task, click on the “Login to Existing Account” tab on the dialog box that opens. Enter your login user account number and password as provided to you by True Forex Funds. Under the “Server” textbox, enter TrueProprietaryFunds-Demo. This will point the MT4/MT5 platform’s servers to the server of True Forex Funds, while retaining all elements of the broker’s platform client.
Click Ctrl + U, or visit View -> Symbols. Click on “Forex Raw”, and then SHOW in the dialog box that opens. This action will cause all the forex crosses available for trading to be listed. There are twenty-five non-USD forex pairs listed on the MT4 platform of True Forex Funds’s server. You can trade these crosses, or use them in combination as described above to create a synthetic pair.
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Trading with forex crosses is an alternative way to trade the currency markets on True Forex Funds, using currencies that have straightforward fundamentals and which are not subject to too much of market risks from conflicting macroeconomic data. You may either trade the crosses listed on the True Forex Funds trading platform, or you can create your own currency crosses as shown above.
Can I trade the news with the True Forex Funds?
Answer: Yes, news trading is allowed.
Am I allowed to use my EAs to trade forex crosses on the True Forex Funds platform?
Answer: You can trade the forex crosses with expert advisors. True Forex Funds welcomes any type of EA or bot that is trading according to real market conditions.
Where can I get the news to trade forex crosses?
Answer: Apart from the regular forex news calendar, there is a separate calendar that covers currencies of emerging markets. You can access this calendar using the search engines by typing the phrase “economic calendar for emerging markets.”
I have registered with True Forex Funds and downloaded the platform. What next?
Answer: Follow the instructions in the section on how to point your platform to True Forex Funds’s trading servers. The MT4 and MT5 platforms are the preferred option because it has more currency pairs listed than most other brokers.