Inverse price movement

Trading Discussion
1

I Have a very hard to ask question involving inverse price. If you know the movement of a regular quoted pair for any particular time frame (we know movement as pips) and when you re-quote the price into base currency (1/Price = price re-quoted in base currency) and determine the difference in the inverse price movement (also known as pips)… Should the movement in base currency be equal to the movement in the regular quoted pair? Example: EUR/USD rise 4 pips in value, so USD/EUR drops 4 pips in value. Logically it makes sense that they are equal but opposite right?.. One currency gains value against the currency it’s quoted against, and the other currency loses equal but opposite value against the other currency. I will post some actual examples later tonight, I’m currently at work so I do not have the ability to do so… But, my math is correct, so how come I do not get the same movements? Inverse prices movement ends up being less than regular price movement. It doesn’t make any sense to me… Anyone know why this is or any idea what it could mean?

Thanks

2

No, they’re inverses. Not opposites. I think you have the two terms confused.

EUR/USD is trading at 1.5000. So we take the reciprocal (inverse) to determine the value of USD/EUR, .66667.

EUR/USD rises 4 pips to 1.5004. Take the reciprocal for the new value of USD/EUR and you get .66649.

So although EUR/USD rose 4 pips, USD/EUR only fell about 2. Which is fine and dandy; pips are not absolute.

3

Thanks, I appreciate it. They should however be proportional correct?

4

Yup. Inversely proportional though, not directly.

5

I see what you are saying . I’m going to test out some ideas later when I get home. Have been working on one the past few weeks. I bet 99.5% of traders do not use inverse data. Lol.