<s> ffirs.indd vi
1/13/09 10:13:25 AM
ESSENTIALSof ForeignExchangeTrading
ffirs.indd i
1/13/09 10:13:23 AM
ESSENTIALS SERIESThe Essentials Series was created for busy business advisory and corporate professionals. Thebooks in this series were designed so that these busy professionals can quickly acquire knowledge and skills in core business areas.Each book provides need-to-have fundamentals for those professionals who must:• Get up to speed quickly, because they have been promoted to a new position orhave broadened their responsibility scope• Manage a new functional area• Brush up on new developments in their area of responsibility• Add more value to their company or clientsOther books in this series include:Essentials of Accounts Payable, Mary S. SchaefferEssentials of Balanced Scorecard, Mohan NairEssentials of Capacity Management, Reginald Tomas Yu-LeeEssentials of Capital Budgeting, James SagnerEssentials of Cash Flow, H.A. Schaeffer Jr.Essentials of Corporate Governance, Sanjay AnandEssentials of Corporate Performance Measurement, George T. Friedlob, Lydia L.F. Schleifer, andFranklin J. Plewa Jr.Essentials of Cost Management, Joe and Catherine StenzelEssentials of Credit, Collections, and Accounts Receivable, Mary S. SchaefferEssentials of CRM: A Guide to Customer Relationship Management, Bryan BergeronEssentials of Financial Analysis, George T. Friedlob and Lydia L. F. SchleiferEssentials of Financial Risk Management, Karen A. HorcherEssentials of Intellectual Property, Paul J. Lerner and Alexander I. PoltorakEssentials of Knowledge Management, Bryan BergeronEssentials of Patents, Andy Gibbs and Bob DeMatteisEssentials of Payroll Management and Accounting, Steven M. BraggEssentials of Sarbanes-Oxley, Sanjay AnandEssentials of Shared Services, Bryan BergeronEssentials of Supply Chain Management, Michael HugosEssentials of Trademarks and Unfair Competition, Dana ShillingEssentials of Treasury, Karen A. HorcherEssentials of Managing Corporate Cash, Michele Allman-Ward and James SagnerEssentials of XBRL, Bryan BergeronFor more information on any of the above titles, please visit www.wiley.com
ffirs.indd ii
1/13/09 10:13:24 AM
ESSENTIALSof ForeignExchangeTradingJames Chen
John Wiley & Sons, Inc.
ffirs.indd iii
1/13/09 10:13:24 AM
Copyright © 2009 by James Chen. All rights reserved.Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any formor by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except aspermitted under Section 107 or 108 of the 1976 United States Copyright Act, without either theprior written permission of the Publisher, or authorization through payment of the appropriateper-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the Publisherfor permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions.Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best effortsin preparing this book, they make no representations or warranties with respect to the accuracyor completeness of the contents of this book and specifically disclaim any implied warranties ofmerchantability or fitness for a particular purpose. No warranty may be created or extended by salesrepresentatives or written sales materials. The advice and strategies contained herein may not besuitable for your situation. You should consult with a professional where appropriate. Neither thepublisher nor author shall be liable for any loss of profit or any other commercial damages, includingbut not limited to special, incidental, consequential, or other damages.For general information on our other products and services, or technical support, please contact ourCustomer Care Department within the United States at 800-762-2974, outside the United States at317-572-3993 or fax 317-572-4002.Wiley also publishes its books in a variety of electronic formats. Some content that appears in printmay not be available in electronic books.For more information about Wiley products, visit our Web site at http://www.wiley.com.Library of Congress Cataloging-in-Publication Data:Chen, James.Essentials of foreign exchange trading / James Chen.p. cm. — (Essentials series)Includes index.ISBN 978-0-470-39086-3 (pbk.)1. Foreign exchange market. 2. Foreign exchange futures. 3. Investments. I. Title. II. Series.HG3851.C437 2009332.4'5—dc222008048193Printed in the United States of America10
ffirs.indd iv
9
8
7
6
5
4
3
2
1
1/13/09 10:13:24 AM
To my parents, my wife,my children, and forextraders everywhere.
ffirs.indd v
1/13/09 10:13:24 AM
ffirs.indd vi
1/13/09 10:13:25 AM
ContentsPreface
xi
Acknowledgments
xv
Chapter 1 Introduction to Foreign Exchange Trading
1
Trading Money to Make Money
2
Striking Gold
3
Buying and Selling at Retail
4
Big and Liquid, Like the Ocean
5
Open 24/5
7
Playing in the Majors
9
Leveraged to the Hilt
12
The Players
13
What Moves the Forex Markets?
15
What to Expect from This Book
17
Chapter Summary
19
Chapter 2 Basic Foreign Exchange Trading Mechanics
21
Anatomy of a Currency Pair
22
Going Long and Selling Short
24
Market Orders—On the Spot
27
Entry Orders—Waiting until the Price Is Right
27
Stopping Losses with Stop Losses and Trailing Stops
28
vii
ftoc.indd vii
1/13/09 10:16:39 AM
Contents
Profit Limits—When You’re in the Money
31
Exit with Caution
31
Trade Size—Lots and Lots of Lots
32
Leveraging Margin and Leverage
33
Margin Call—Insufficient Funds
34
Pips—The Currency of Currency Trading
37
Spreading the Wealth—Spreads or Commissions?
39
Interest—Giving and Receiving
41
Hedging—Two Sides of the Same Coin
44
Chapter Summary
45
Chapter 3 Technical Analysis—Tools for Trading Foreign Exchange 49Introduction to Technical Analysis—Interpreting Price Action
50
Basics of Bars and Candlesticks
52
Keeping Time with Chart Timeframes
57
Support for Resistance (and Support)
59
The Trend Will Set You Free
64
How Trendy—Lines and Channels
67
The Magic of Moving Averages
72
Seeing Patterns in the Candles
78
Currency Charts Take Shape
82
Indicators of Change
88
Pointing the Way with Pivot Points
95
Fibonacci’s Magic Numbers
96
Riding the Elliott Wave
98
Getting to the Point & Figure
99
Chapter Summary
100
viii
ftoc.indd viii
1/13/09 10:16:39 AM
Contents
Chapter 4 Fundamental Analysis—What Drives theForeign Exchange Markets
103
Introduction to Fundamental Analysis—Basic Economics 104A Healthy Interest in Global Bank Rates
105
Carried Away with Trading
108
Indication of Things to Come—Economic Indicators
110
No News Is Bad News for News Traders
121
Chapter Summary
124
Chapter 5 Foreign Exchange Trading Methods and Strategies
127
Rules to Trade By
128
Position Trading—Settling in for the Long Term
130
Swing Trading—Riding the Waves
134
Day Trading—In and Out, Day In and Day Out
137
Trend Trading—Going with the Flow
140
Range Trading—Between a Rock and a Hard Place
147
Breakout Trading (and Fading)—Shooting for the Stars
150
Pattern Trading—Playing with Shapes
158
Fibonacci and Pivot Point Trading—Magic Numbers andSelf-Fulfilling Prophecies
161
Elliott Wave Trading—Two Steps Forward, One Step Back 166Divergence Trading—Separate Paths
170
Multiple Timeframe Trading—Timing Is Everything
172
Point & Figure Trading—Pointing Out Breakouts
175
Carry Trading—In the Interest of Interest
179
News Trading—All the News That’s Fit to Profit From
183
Contrarian Trading—The Majority Doesn’t Rule
184
Backtesting—History Repeats Itself
187
ix
ftoc.indd ix
1/13/09 10:16:39 AM
Contents
Autotrading—Robots for Hire
190
Chapter Summary
192
Chapter 6 Important Elements of Successful ForeignExchange Trading
195
The Boring Side of Success
196
A Risky Business
196
Fatter Is Healthier (But Only for Trading Accounts)
197
Risk and Reward
198
Fix Your Fractions
200
Trailing Stops—Loyal Followers
201
Size Matters
202
Position Overload
205
Measuring Risk with a Trendline
208
Great Expectations
209
Psychologically Speaking
210
Plan the Trade and Trade the Plan
214
Chapter Summary
216
Index
219
x
ftoc.indd x
1/13/09 10:16:39 AM
Prefaceoreign exchange trading has developed at such a blindingspeed within the last decade that is has garnered an unprecedented amount of interest from all corners of the globe. Themeteoric rise of forex can be attributed to the many advantages oftrading currencies over other financial markets. These advantageswill all be discussed within the pages of this book.More important than recognizing how forex trading can workto your benefit, however, is knowing exactly how to approach thisfascinating market with the proper prudence, attitude, and methodology to achieve consistent profitability. Only in this way can theadvantages of forex trading truly be realized. This book will assistyou in learning many of the most important aspects of playing thecurrency game effectively.I personally began my journey in forex trading when the retailforeign exchange industry was still in its early infancy. Before I evereven looked at a price chart of a currency pair or followed a forexnews feed, I placed a live trade on the EUR/USD with real money.When a substantial sum was lost on that first trade, I placed anothertrade. And then another. And yet another. Admittedly, I kept doing
F
xi
fpref.indd xi
1/13/09 10:15:41 AM
Preface
this until I lost almost every single penny in my trading account.I had absolutely no rational reason or justification to place any ofthose first several trades in that initial trading account. To me, at thattime, forex was purely a game of instinct and gut feel.Needless to say, those early days taught me a good lesson. Mosthumans are not instinctively good at trading. For the vast majorityof us, guts and instinct left unchecked invariably lead to catastrophiclosses at some point in time, usually sooner rather than later. Onattaining this realization, I began a tireless quest to become a profitable forex trader. My efforts consisted of a prolonged, single-mindedendeavor to absorb forex-specific analytical methodologies, highlytouted currency trading strategies, and sound money managementtechniques. My search for the “holy grail” of foreign exchange trading had begun in earnest.Over time, I realized that this holy grail of forex, in the traditional sense, was not only elusive but most likely nonexistent. I cameto the conclusion that although a bunch of chart indicators all flashing the same signal at the same exact time to enter into a currencytrade is a very nice thing to see, it probably would not by itself beable to feed a typical family on a consistent basis. The true holy grail,I eventually found, is a combination of good analytical and tradingtechnique, great risk/money management, and phenomenal discipline. Without these vital components, consistent profitability inforex trading would be difficult to achieve.This is where the book you are holding comes in. It is notmeant to be an exhaustive tome that covers every detailed aspect ofthe foreign exchange world. Rather, this book is meant to serve asa practical guide to help you develop some of the most important
xii
fpref.indd xii
1/13/09 10:15:41 AM
Preface
tools and attributes necessary for approaching forex trading in anintelligent and well-prepared manner. Essentials of Foreign ExchangeTrading is the kind of book that I wish I had read during the earlieryears of my forex trading career.But even now, after many years of trading this market and analyzing foreign exchange price movements for countless traders around theglobe on behalf of FX Solutions, I occasionally find myself neglectingsome of the essential concepts of good forex trading. Therefore, I haveincluded all of these key concepts within the pages of this book—writing them down in this manner has helped me to refocus on whatis truly important in one’s quest for profitability in this market.In short, this book is highly relevant for all who strive to increasetheir probability of achieving success in forex trading.Once you have read through and digested this book, I wouldbe happy to receive any comments and/or questions you may have.Learning to trade foreign exchange is most certainly a pursuitbest accomplished by interacting with other forex traders. In thatspirit, you can reach me at anytime simply by e-mailing author@fxtradingbook.com. I welcome your thoughts.James Chen
xiii
fpref.indd xiii
1/13/09 10:15:42 AM
fpref.indd xiv
1/13/09 10:15:42 AM
Acknowledgmentsirst and foremost, I would like to give special thanks to myparents, Shou Lien and Hsiao-wen; my wife, Dongping;and my sons, Tommy and Kevin.Your tireless love, support, andencouragement both in life and throughout the entire frenzied writing process have truly been priceless.I would also like to acknowledge my many colleagues at FXSolutions who have consistently shown tremendous interest and support during the course of my writing this book.In addition, I would like to thank the wonderful editors at JohnWiley & Sons for having demonstrated a great deal of confidence inthis book project and in me as its author.And very importantly, I would like to give a special acknowledgment to all of the forex traders around the world who have madeforeign exchange trading what it is today. Without you, this bookwould not be possible.
F
xv
flast.indd xv
1/13/09 10:14:30 AM
flast.indd xvi
1/13/09 10:14:30 AM
CHAPTER 1
Introduction toForeign ExchangeTradingAfter reading this chapter, you will beable to:●
Understand the basic facts and history of the globalforeign exchange market.
●
Appreciate the characteristics that set forex apart fromother financial markets.
●
Assess who the real market players are, and how theymay affect currency prices.
●
Decide whether foreign exchange trading is rightfor you.
●
Know what to expect from this book.
1
c01.indd 1
1/13/09 9:51:56 AM
I n t r o d u c t i o n t o F o r e i g n E x c h a n g e Tr a d i n g
T rading Money to Make MoneyForeign exchange trading is essentially about trading money. Thereare several reasons why people and institutions would want to trademoney. The two primary reasons are currency conversion and speculation. Currency conversion is simply the changing of money fromone currency to another for the primary purpose of purchasinggoods, services, or assets from a foreign country. For an Americancompany to buy British goods, for example, would necessitate theconversion of U.S. dollars to British pounds.This book will focus exclusively on foreign exchange trading forspeculative purposes, or trading money with the explicit goal of making money. This speculation process is very similar to trading in stocksor futures. The goal, whether on a long-term or short-term basis, isto earn profits from price changes. Just as a stock like Microsoft willmove up and down in price, currencies will also move up and downin price. The real trick is to be on the right side of the move, and toreap profits in return for assuming the risk of taking the trade.Of course, there are many important ways in which trading foreign exchange is completely different from trading stocks or futures,but the primary objective is the same. If a trader buys shares inMicrosoft, for instance, the hope is that the value of the shares willgo up and the trader will earn profits. In the same vein, if a traderbuys the Japanese yen, the hope is that the value of the yen increasesso that the trader will earn a profit on owning that currency.Learning how to make money by trading money is not an easytask. There are many factors that combine to make any given foreignexchange trader a successful one. This combination usually includes
2
c01.indd 2
1/13/09 9:51:58 AM
Striking Gold
plenty of often painful trading experience, good risk managementskills, solid technical and fundamental analytical abilities, and a soundpsychological make-up. All of these will be discussed in detail further along in the book.To begin with, though, an introduction to the world of foreignexchange trading is in order. This will cover all of the basics, and willbegin with a very brief history lesson.
S triking GoldAlthough money in one form or another has been around prettymuch since the beginning of time, modern speculative foreignexchange trading (also known as “FX,” “forex,” or “currency trading”) is considered to have begun on a major scale relatively recently.In modern times, the world’s currencies truly began to float freelyand be traded extensively in the early 1970s, after the collapse of theBretton Woods Agreements.These agreements, established during the tail-end of WorldWar II in July 1944, came about as a result of meetings betweenrepresentatives of all the Allied nations in Bretton Woods, NewHampshire, U.S.A.Among other accomplishments resulting from Bretton Woods,each of these nations agreed to adopt a monetary policy that wouldeffectively fix the exchange rate of its currency in relation to theU.S. dollar, which in turn would be fixed to gold at a rate of USD$35.00 per ounce of gold. These changes were akin to reinstating characteristics of the Gold Standard, but this time via the U.S.dollar.
3
c01.indd 3
1/13/09 9:51:58 AM
I n t r o d u c t i o n t o F o r e i g n E x c h a n g e Tr a d i n g
Clearly, with the Bretton Woods Agreements in place, foreignexchange trading on any significant scale was virtually impossibleand nonproductive due to the nonfloating nature of currency values. While the valiant purposes of Bretton Woods were to controlconflict, maintain monetary stability, and discourage currency speculation, the agreements underwent increasing pressure as the U.S.suspended the dollar’s convertibility into gold in 1971. The BrettonWoods Agreements finally collapsed in the same year.By 1973, with the complete collapse of Bretton Woods andother similar agreements that strived to impose order on the global currency system, the world’s currencies truly began to floatmuch more freely. This meant that the market forces of supply anddemand would take precedence over international political consensus, and that mass speculation by banks and institutions would soonbecome rampant. Although most individual traders could not takepart in the new market, this time period marked the birth of modern-day forex trading as we know it today.
B uying and Selling at RetailFast forward to around 1996, as computers and the Internet beganmaking online financial trading both practical and in demand.With stock trading starting to go online, foreign exchange brokers/market-makers began emerging to create and satisfy a new demandfor retail forex trading. Prior to this time, access to speculative forextrading was reserved almost exclusively for banks and large institutions. With the advent of online platform trading, however, accessfor the average individual trader/investor opened up in a major way.
4
c01.indd 4
1/13/09 9:51:58 AM
Big and Liquid, Like the Ocean
This new frontier of retail currency trading was in the arena of“spot forex,” which was clearly differentiated from futures and forwards. Spot foreign exchange trading is distinguished by its almostimmediate delivery of the currency, rather than future delivery. Ofcourse, in speculative currency trading, the actual physical currencynever gets delivered—delivery is simply “rolled over” continuously tothe next delivery date ad infinitum (or until the trading position isclosed). The foreign exchange broker performs this important function in order to facilitate speculative trading, as opposed to havingcustomers actually convert money to/from a foreign currency. In spotforex, the customary delivery settlement timeframe for most currencytrades is the date of trade execution plus two days (T+2).
B ig and Liquid, Like the OceanThere are many characteristics that set the modern-day foreignexchange market apart from other financial markets like equities(stocks) and futures. Many of these characteristics help to make foreign exchange an appealing market for traders and investors comingfrom other financial markets.When most people first hear about the foreign exchange market,they are usually introduced first to the sheer size of the global forexsystem. Along with this size comes a magnitude of liquidity almostunimaginable in any other financial market. Liquidity is defined simply as the degree to which an asset, like a currency, can be boughtor sold in the market without having a significant effect on theasset’s price. The liquidity of currencies, especially the “major” oneslike the U.S. dollar and the euro, is unrivaled by any other financialinstrument, including stocks, bonds, and futures contracts.
5
c01.indd 5
1/13/09 9:51:59 AM
I n t r o d u c t i o n t o F o r e i g n E x c h a n g e Tr a d i n g
Among other implications of this high level of liquidity, because ofthe staggeringly high volume of transactions and the countless numberof traders (both institutional and retail) involved in this market, it isextremely difficult for any individual market participant to manipulateforeign exchange prices artificially in any significant manner.This blanket statement, however, notably excludes the world’scentral banks (e.g., the U.S. Federal Reserve (the Fed), the EuropeanCentral Bank (ECB), the Bank of Japan (BOJ)), which can and doattempt to manipulate the markets. This type of manipulation activity,however, has become an accepted part of the forex trading game, andgenerally does not offer an unfair advantage to any speculative marketparticipant. Furthermore, central bank attempts to manipulate currencies for the purposes of furthering national economic policy areusually much easier to accept than, for example, the profit-mindedmanipulation of individual stocks by often unscrupulous traders.Apart from potential central bank manipulation, just how big isthe foreign exchange market that it can claim its place as the mostliquid market the world has known? According to the most recentstatistics issued by the Bank for International Settlements (BIS),which serves as an international organization and “bank for centralbanks,” the average daily turnover in the primary foreign exchangemarkets is estimated to be around $3.2 trillion (as of April 2007). Thisfigure represents an unprecedented three-year growth rate of 69%,and far eclipses the volume traded in any other financial market inthe world.Of this $3.2 trillion, about $1 trillion is in “spot” foreignexchange trades, which, as mentioned earlier, are forex trades that aredistinguished by immediate delivery of the currency. Spot foreign
6
c01.indd 6
1/13/09 9:51:59 AM
Open 24/5
exchange is the type of trading that most individual traders in theretail forex market are primarily concerned with. While some individual traders get involved with currency futures and other derivative financial instruments, the growth of the spot foreign exchangearena has largely eclipsed these smaller markets.
O pen 24/5Besides the sheer size and liquidity of the foreign exchange markets,which can certainly be a great advantage to the average speculative trader, another distinguishing characteristic of forex is its global,decentralized nature. Essentially, it is an over-the-counter (OTC)market, where the different currency trading locations around theglobe electronically form a unified, interconnected market entity.Among other advantages stemming from this fact, all currencies canbe traded electronically 24 hours a day as the major global marketsopen, overlap, and close, one after another.From the perspective of New York time (U.S. Eastern Time), themarkets open up as follows.The very beginning of the week falls on Sunday afternoon inNew York, when the New Zealand banks open at 2:00 pm New Yorktime. At 5:00 pm (still New York time) the financial markets in Sydney,Australia, open. Tokyo then opens at 7:00 pm, followed by Hong Kongand Singapore concurrently at 9:00 pm. At this point, all five of thesecurrency-trading financial markets are open: New Zealand, Australia;Japan; Hong Kong; and Singapore.In the wee hours of Monday, Frankfurt, Germany, opens upthe primary euro market at 2:00 am, New York time. By this time,
7
c01.indd 7
1/13/09 9:51:59 AM
I n t r o d u c t i o n t o F o r e i g n E x c h a n g e Tr a d i n g
New Zealand and Australia are already closed, and the East Asianmarkets of Tokyo, Hong Kong, and Singapore are on their last legs.The European time zone continues shortly thereafter with theopening of the pivotal London session. Customarily the market withthe most liquidity (as most foreign exchange trading has traditionally occurred within the London market), London session opens anhour after Frankfurt, at 3:00 am NY time.Finally, at 8:00 am on Monday morning, the New York financial markets are the last of the major global markets to open. SinceNew York is also a strong foreign exchange trading market, much likeLondon and Frankfurt, the overlap between these three markets—around 8:00 to 11:00 am NY time—represents among the mostactive, liquid, and volatile trading hours available in forex. At the sametime, however, the period surrounding the London opening currentlytakes the crown for the most active foreign exchange market.A couple of hours before the close of the New York market, theNew Zealand market opens up again at 2:00 pm to begin the wholeglobe-hopping process all over again. After Monday, this seamlessprocess continues on every weekday until Friday, when the close ofthe last foreign exchange market in New York signals the end of thetrading week at around 4:00 to 5:00 pm New York time. Therefore,from around 2:00 pm on Sunday to 5:00 pm on Friday, forex tradingtakes place 24 hours a day, five days a week.One important note to keep in mind about trading currencies atall hours of the day and night is that even though a particular markethappens to be closed, it does not mean that the currency specific tothat market is not being traded. For example, when London opensin the middle of the night in New York while the U.S. markets are
8
c01.indd 8
1/13/09 9:51:59 AM
Playing in the Majors
closed, some of the most active trading of the U.S. dollar occurs.Beginning traders are often under the mistaken impression that acountry’s currency is only traded when that country’s markets happen to be open. This is untrue only because the foreign exchangemarkets are traded by people and institutions around the world viaa global, decentralized network. Therefore, U.S. dollar trading, forexample, is not dependent on the business hours of any centralized,physical exchange located in the United States.The fact that foreign exchange can be traded 24 hours a daymeans that traders have the advantage of choosing when it is mostconvenient to trade, considering their own personal schedules. Forthis reason, many traders hold full-time jobs while trading forex during off-hours. This provides a tremendous amount of flexibility thatis not offered in other major trading markets. Of course, those tradersthat choose to take advantage of the most active markets must necessarily watch the currencies during the most active times, like duringLondon or New York market openings. But the fact that all currencies can be traded 24 hours a day means that there is almost alwaysprice movement available upon which to trade.
P laying in the MajorsJust because there is price movement in a given currency does notnecessarily mean that the currency is liquid and heavily traded.On the contrary; although the number of currencies in regular usearound the world comes close to the number of countries in existence,only a very small handful of these currencies make up the vast majority of forex trading volume.This is yet another unique characteristic of
9
c01.indd 9
1/13/09 9:52:00 AM
I n t r o d u c t i o n t o F o r e i g n E x c h a n g e Tr a d i n g
the foreign exchange market in comparison to other financial markets,and it can certainly be considered an advantage for traders.According to the BIS, the most-traded currency, by far, is theU.S. dollar, with consistently greater than 85% of the average dailyturnover in foreign exchange trading. The distant second place currency is the Eurozone’s euro, with around a 37% share. Roundingout the top currencies are the Japanese yen with approximately 16%,and the British pound with 15% (because there are two currenciesin each traded pair, the percentages of all the currencies combined,including the top-traded currencies cited above, will equal 2