Forex Market Analysis and Mathematics

[FXMentalist]

In the forex market, there are 8 major currencies. From these, 28 major currency pairs are formed. The total daily, weekly, or yearly changes of these 8 currencies always sum to zero. The same rule applies when calculating the exchange rates of these currencies by adding the other 7 currencies; you will see that the sums of the currencies on the left side of the 28 pairs and those on the right side also equal x and -x. Forex is built on this zero principle. In this zero design, 4 currencies compete with the other 4, and the winner determines the trend of the forex market. After writing down the currencies used on the left and right sides of the 28 pairs, if you simplify, you will find that EUR is used on the left side of 7 pairs, while JPY is used on the right side of 7 pairs. GBP is used 6 times on the left and once on the right, while CHF is used once on the right and 6 times on the left. THIS WAY, YOU CAN DISTINGUISH THE CURRENCIES.

 

[FXMentalist]

Mathematical breakdown of the 28 currency pairs formed by the 8 currencies that make up the market.


The sum of the instantaneous exchange rates from 1 to 8 is 0.

2-After the 8 currencies find their own strength; if you sum the left-side currencies of the 28 pairs vertically with their repetitions, x will be on the left side, while the right side will yield -x. When you take the difference, this creates the forex index.


3-If you simplify the currencies used in the 28 pairs by calculating their repetitions on the left and right sides, you will see that the currency pair that most influences the market direction is EURJPY.

 

[FXMentalist]

The forex index found with 28 currency pairs can actually be calculated with 4 pairs. Among these, EURJPY and GBPCHF are the main carrier pairs. When both of these pairs are viewed simultaneously with any EMA, if both are above the moving average, the market is bullish. The currency pairs that are most compatible with the forex index among the 28 pairs can be found by converting the currencies on the left into the currencies on the right. Thus, the number of 28 pairs is reduced to 16. If the forex index is rising, trading trends with these 16 pairs or any of them yields much more efficient results.