How to use the Matrix


With all the charts analysed and the scores recorded now comes the good bit, how do we choose which currency pairs to trade? To do this we first need to fill in the last column titled ‘FOR’ and bottom row titled ‘AGAINST’ on the Matrix. The FOR column is filled in by adding up all the scores in each row for each of the currencies in the left hand column, Figure 4.1. The AGAINST row is filled in by adding up all the scores in each column for each of the currencies on the top row, Figure 4.2.
                                

It is these FOR and AGAINST scores we will use to determine the strongest and weakest currencies and in turn the best currency pairs to trade. The reason for this is that by identifying the strongest and weakest currencies and then pairing them together we have a higher probability of getting the movement and the direction we expect. Most traders will have at one time or another experienced being in a trade that went nowhere and this is usually a result of trading a pair of currencies with a similar strength without you realising it. Using the Matrix correctly reduces the possibility of this happening.

The strongest currency will be the one with the highest ‘FOR’ score combined with the lowest ‘AGAINST’ score, with the weakest currency being the one with the lowest ‘FOR’ score combined with the highest ‘AGAINST’ score. The maximum possible score for each is 7, with the best pairs being a combination of those at the extreme opposite ends to each other.

Looking at the Matrix in figure 4.3 we can see the currency with the highest FOR score is AUD and it also has the lowest AGAINST score, making it the best buying option for the week ahead. On the other side of the scale, EUR has the lowest FOR score and also the highest AGAINST score making it the weakest currency and therefore the best sell option for the week ahead. We can also see that CAD has a 0 FOR score but a slightly better AGAINST score than EUR with it being 5, making it marginally stronger than EUR but still a good sell option. This gives us two great high probability currency pairs to trade:

                                                                         EURAUD and AUDCAD

We will be looking to sell EURAUD, this will mean we will be selling the weak currency and buying the strong one, while also looking to buy AUDCAD, meaning we are buying the strong currency and selling the weak. 

                                 
The scores will of course change from week to week and there is no limit to the number of currency pairs that could be paired up as a result. There will also be weeks when there are no currencies with extreme scores at either end of the scale. If there is no currency with a FOR score of 7, 6, or 5 and no currency with a AGAINST score of 0, 1, or 2 then I recommend you be very cautious and look to stay out of the market until things become clearer. There will be times during the year when markets soar and times when everything stands still. If you follow the MATRIX it will tell you what to trade in the good times and it will also tell you to take a break during the bad.


Happy trading