The Best known Open SECRET of Foreign Exchange Trading is the ' US Dollar Index ' as known in the industry as the DXY symbol or the DXc1- continues technical data on the value of the US dollar traded and measured from a basket of major foreign currencies. It is a trade weighted average or a geometric means of the US Dollar's value against the Euro, which is the currency used by the unified group of European nations, the Japanese Yen, the Pound -Sterling known as the GBP, Canadian Dollar, the Swedish Krona and the Swiss Franc. Each currency has an equivalent value or percentage share to the composition of the US dollar index as it is traded in the Inter-Continental Futures Exchange at the New York Board of Trade.

Although, the JP Morgan Dollar Index is also being used & compared with the US Dollar value and its direction, except that the composition of the index has at least 18 other foreign currencies incorporated in the equation in measuring the basis points. Please take note, that major banks dealing in FX trading are not limited to the US Dollar alone as the basis of trading the Foreign Exchange Market. And that there are financial institutions that have other foreign denomination of currency on hand that needs to be hedge every now so often.

It began in March of 1973 and subsequently after the dismantling of the Bretton Woods System has been the major indicator used to measure the equivalent value of the US Dollar versus the world's other foreign currency. During that particular period of time, the value of the US dollar was around the 100 basis point and was traded to as high as 150s - 160s mid-range levels and then to the lower levels of 70s basis points. The amazingly low price levels made by the index was on March 19, 2008; where it reached a low of 70.91basis points which was lower than the all time low of 77.56. Unfortunately this year it has penetrated that price level and registered a 77.30 low just this month of August 2009.

The ICE 's Dollar Index and crude oil has a relative co-relation of minus 0.61 in the past couple of months now, compared with the 0.26 since the start of the year, based on percentage moves according to the compiled data provided by Bloomberg News. A reading of 1 indicates that the two are in lockstep, while a reading of minus -1 means that they always go in the opposite direction. This is in reference to Bloomberg data on the matter dated the 21st of May 2009. As a matter of information, the US Dollar index as tracked by the Inter-Continental Exchange Inc. versus the majors have dropped considerably to as much as 1.5+ percent to 80.91, the lowest level since Dec.31 on reduced demand for safety and flight to quality as the World's Reserve Currency.

The Dollar Index has been widely used as the main indicator by most professional strategist as a higher sophistication of trading tool to guide them to where the direction of the value of the US dollar is headed and how it affects the futures market as a whole. Not only in the financials but also in the commodity, precious metals market as well as crude oil in the different exchanges in the world where they are all electronically traded and linked.

The US dollar measured on SPOT and TRADED in the futures market has their trading limits like any traded instrument and has a heavier influence in the market sentiments. It is also the barometer used to find the price levels and value of other foreign currencies in both the spot and futures market. If one would only do due diligence in researching on this subject matter, it would not be surprising if it would show the intricacies and behavioral patterns that reflects the mirror image of the other foreign currency.

However, some traders do follow the index, but seldom use it as an equivalent hedging strategy whenever trading the Foreign Exchange market. The Strategy of Relevance Trading can only be found amongst some group of dedicated analyst that rely heavily on the sentiments that the index provides, whether it be on a technical basis coupled with some fundamental factors affecting the dollar. It is not only vital to follow the US Dollar index direction, but by utilizing its very unique features of price range and net change just to name a few can provide a mathematical equation as to the corresponding price fluctuation or movement of any spot foreign exchange currency pair. This is one of the best well kept open secret in trading techniques in the Foreign exchange market in the interbank trading and should be well capitalized for its advantages in trading.

We hope that this information may well serve its purpose, but refrain from over-leveraging in the FX market as this resulted to the downfall of one of the best companies like Long Term Capital Management dealing in Quantitative Analysis of the FX market. They had the best minds in formulating mathematical equations but market forces still prevailed during those times. As it is known that fundamental factors maybe harder to equate during certain times and certain market conditions. Losses do occur and investors should always be considering their financial conditions before engaging in these financial markets either spot or futures Foreign Exchange Trading.

As a matter of sequence and better understanding of our articles; we would like to suggest that the related articles be viewed in the following order as each article is not only related to one another, but the trend of thought process can easily be inter-connected into one sequential process as a training ground for . . ' Six Sigma Trading Principles ' . . of the FX Market. Which would also be in the upcoming original articles from ITREX.

The Sequential Process are as follows:

1. Strategic Techniques in FX Trading                   - published 07-06-2009
2. Maximizing Leverage for Potential Profit             - published 07-07-2009
3. An Ideal Trading Solution                                   - published 07-20-2009
4. FX Trading Solution - Top 3                               - published 07-30-2009
5. FX Trends & Investment                                     - published 08-05-2009
6. Trend following Strategy                                     - published 08-09-2009
7. US $ Dollar Index - Best Technical Guide           - published 08-16-2009

Thank you for your time in supporting our articles and that each one may be of use while trading in the Foreign Exchange market.