Understanding US Dollar Index
The US Dollar Index is used by traders to get the big picture of the overall trend of the dollar. It is widely quoted in the press and on quote services. The US Dollar Index is traded on the New York Board of Trade at Finex and at the Chicago Mercantile Exchange (CME).
The Federal Reserve Board had introduced the US Dollar Index in 2003. The index is the result of the Smithsonian Agreement that had replaced the Bretton Woods Agreement. The US Dollar Index is similar to the Feds Dollar Index which is a trade weighted index. The Fed gives value to each individual currency in the index based on how much it trades with the US.
However, the US Dollar Index and the Feds Dollar Index should not be confused with one another. The value of US Dollar Index and the Feds Dollar Index is different. The US Dollar Index futures contract expires on March, June, September and December. The minimum tick on the US Dollar Index is 0.1. One tick is equals $10.
Delivery is physical and means that you receive dollars based on the value of the index. Delivery is made on the second business day during the month of the expiring contract prior to the third Wednesday. The overall value of the futures contract on the index is 1,000 times the value of the index in dollars. Suppose the value of the index is 80. Its value in dollars will be $ 8,000.
Delivery day is the third Wednesday of the contract month. No trading limits are placed on the US Dollar Index. Trading hours are from 8.05 AM to 3:00 PM with the overnight trading from 7 PM to 10 PM.
The US Dollar Index was modified at the inception of the Euro. It is weighted in a way thats similar to the Feds trade weighted index as follows: Highest percentage is for Euro 57.6%, second highest is Japanese Yen 13.6%, third highest is Great Britain Pound 11.9%, then comes Canadian Dollar 9.1%, Swedish Krona 4.2% and Swiss Franc 3.6%. The US Dollar Index is best used as an indicator of trends in the forex market.
However, you must keep this in your mind that the US Dollar Index is not as good a trading vehicle as the individual currencies. The best way to trade the index is by using the currency mutual funds. One of the secrets of knowing trading success is understanding what kind of personality you have. Are you weak nerved or strong nerved.
Spot Currency trading where you trade the spot currency market is not for the weak nerved. Suppose you are afraid of taking a coffee or bathroom break for the fear the market will move against you and in a blink of an eye you will end up with a margin call. In such a case you need to invest in currency mutual funds based on US Dollar Index and relax.
You are taking away the big part of the risk involved in trading currencies by trading these currency mutual funds. You can have a pretty good idea as to how your fund is going to close at the end of the day if you check the dollar index a few times during the day. - 23212
The Federal Reserve Board had introduced the US Dollar Index in 2003. The index is the result of the Smithsonian Agreement that had replaced the Bretton Woods Agreement. The US Dollar Index is similar to the Feds Dollar Index which is a trade weighted index. The Fed gives value to each individual currency in the index based on how much it trades with the US.
However, the US Dollar Index and the Feds Dollar Index should not be confused with one another. The value of US Dollar Index and the Feds Dollar Index is different. The US Dollar Index futures contract expires on March, June, September and December. The minimum tick on the US Dollar Index is 0.1. One tick is equals $10.
Delivery is physical and means that you receive dollars based on the value of the index. Delivery is made on the second business day during the month of the expiring contract prior to the third Wednesday. The overall value of the futures contract on the index is 1,000 times the value of the index in dollars. Suppose the value of the index is 80. Its value in dollars will be $ 8,000.
Delivery day is the third Wednesday of the contract month. No trading limits are placed on the US Dollar Index. Trading hours are from 8.05 AM to 3:00 PM with the overnight trading from 7 PM to 10 PM.
The US Dollar Index was modified at the inception of the Euro. It is weighted in a way thats similar to the Feds trade weighted index as follows: Highest percentage is for Euro 57.6%, second highest is Japanese Yen 13.6%, third highest is Great Britain Pound 11.9%, then comes Canadian Dollar 9.1%, Swedish Krona 4.2% and Swiss Franc 3.6%. The US Dollar Index is best used as an indicator of trends in the forex market.
However, you must keep this in your mind that the US Dollar Index is not as good a trading vehicle as the individual currencies. The best way to trade the index is by using the currency mutual funds. One of the secrets of knowing trading success is understanding what kind of personality you have. Are you weak nerved or strong nerved.
Spot Currency trading where you trade the spot currency market is not for the weak nerved. Suppose you are afraid of taking a coffee or bathroom break for the fear the market will move against you and in a blink of an eye you will end up with a margin call. In such a case you need to invest in currency mutual funds based on US Dollar Index and relax.
You are taking away the big part of the risk involved in trading currencies by trading these currency mutual funds. You can have a pretty good idea as to how your fund is going to close at the end of the day if you check the dollar index a few times during the day. - 23212
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Know Swing Trading. Learn Forex Trading!
posted by X - Men @ 2:02 AM
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