Dow jones fxcm usdollar index vs dxy

Hey everyone,

this is my very first post here :smiley:

I’d like to know the differences between the dxy and the dow jones fxcm usdollar index and advice about how to trade the latter :thinking:

Thanks in advance :love_letter:

The main component of the DXY is the euro which makes up 50% weighting I believe.

The FXCM dollar index is equal weighted.

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Thanks for your reply john
in your opinion which is better for usd strength analysis and how to trade it

With the exception of FXCM 'd imagine with most FX brokers you would be trading individual pairs not an FX index.

The DXY index you can trade via currency futures, but the FXCM dollar basket you can trade with FXCM with CFDs.

Interestingly you can also trade a Japan basket and emerging markets FX index too with FXCM.

I have never traded currency futures, but have traded FXCM dollar index a few times.

To be honest I’m not quite sure what your trying to ask: which is best for USD strength analysis?

A little bit more explaination is needed please.

Maybe you should be looking at trading fx pairs rather than an index. With individual pairs you could easier research which currency is the weakest or strongest against the USD

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I see traders analyze the dollar strength using the DXY and building up ideas of pairs including the USD
for example someone who saw that the DXY is at support level so it’s most probably going up i.e gaining stregth … So he looks for short setups on EURUSD and GBPUSD as they’re negatively correlated with the USD index

so my question which index is better for USD strength analysis the DXY or the FXCM

Many thanks to you :blush:

Ok I see what your getting at - but many on here would suggest looking at the technicals of the individual currency pair only.

Using technicals from either index, might not necessarily be beneficial when trading in a pair like the Eur/usd.

That said because the DXY is heavily weighted with the euro maybe trading the eur/usd would actually work.

If you really want to know fx pairs are strongest you really need to view each currency against gold. The best (or worst) performer vs gold will be the currency you should be looking at.

But analysing a currency against gold might tell you which currency to trade - not necessarily WHEN to trade it.

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Hello John,
When you say analyse against gold, how would you go about it?

There are some websites, can’t quite remember which now (maybe being one, another, that will display gold in each of the main currencies and its performance over certain time frames.

You can also calculate it yourself, (read Currency Trading and Intermarket analysis).

In that book the author Ashraf Laidi goes into depth as to why analyzing currencies against gold is a better proxy than analyzing them as most do vs other with currency pairs.

I am not saying that if you analyze which currencies are strongest against gold over say a six-month timeframe it will help with short term (or day trading).

I am saying at least you have an idea which playpen you should be playing in. As I said to @kimozelghonemy9 knowing the strongest currency isn’t going to tell you when to buy or sell - but it is a good metric of both fundamental and technical performance of a specific currency.

Then I guess you would pair the strongest currency against gold, with the weakest against gold, and that currency pairing should give you some bang for the buck.

Maybe what I am suggesting is not what @kimozelghonemy9 was referring too. But measuring currencies against gold is always a decent exercise to perform.