I posted this in my Journal, but thought it would be useful for a broader audience. Attached is an Excel spreadsheet that shows the calculated price relationships between the 7 majors and 22 crosses....a snapshot of the spreadsheet is shown below. Basically, the spreadsheet shows how the rate for any given currency pair can be calculated from many different pair sets, i.e. the mathematical dependency between all pairs. The exchange rate data is from late October, but you can input current exchange rate data if you wish.. I posted this because when reading through the forums, it seems that some traders are under the impression that exchange rates are completely independent of one another...not true...
Please note that in several calculations, you need to take the reciprocal of the rate data. For example, to calculate the following rate data for:
EURJPY x CHFJPY = EURCHF
You need to take the reciprocal of CHFJPY:
EURJPY = 133.53
CHFJPY = 122.95 = 1/122.95 = 0.0081
133.53 x 0.0081 = 1.0861 = EURCHF
At the time of the above calculation, the bid on EURCHF = 1.0860
Hope that some folks find this useful....
Dave
Please note that in several calculations, you need to take the reciprocal of the rate data. For example, to calculate the following rate data for:
EURJPY x CHFJPY = EURCHF
You need to take the reciprocal of CHFJPY:
EURJPY = 133.53
CHFJPY = 122.95 = 1/122.95 = 0.0081
133.53 x 0.0081 = 1.0861 = EURCHF
At the time of the above calculation, the bid on EURCHF = 1.0860
Hope that some folks find this useful....
Dave
Attached File(s)
Mathematical Relationship between Forex pairs.xlsx
22 KB
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