Currency conversion

In the world of forex currencies as we know, are all traded in pairs, with the 'base' currency always appearing first as  we can see in the EURUSD chart example below. Naturally enough it is irrelevant which pair we use for demonstration purposes since the same applies for all monetary pairs.

As we can see here the EURUSD chart is telling us that:

1 Euro = 1.09678 U.S. Dollars

But what is the opposite? What is a Euro worth if the U.S. Dollar had been the base currency?  The answer is to simply divide the Euro by the Dollar. As in:

1.09678/1 thus giving you:

1 U.S. Dollar = 0.91175 Euros rounded to the same 5 decimal places after the point.

Contrarian verses conformist

When it comes down to the broader perspective picture of the forex market gameplay there are either buyer's or seller's. Now amongst the collective participants in play there maybe more buyer's than seller's and other times more seller's than buyers. This is the natural cycle, but in either case there will always be a larger sentiment on a given side, whether buyer's or seller's.

So who is correct?
The masses or those who oppose the conventional wisdom especially when the concensus opinion appears to wrong. There is an inherent danger in following the 'herd' at times since this mentality creates in the economic world 'financial bubbles' such as the mass home loan purchases which eventually escalated into the ill fated GFC.

Yes this was of cause madness on a big scale but the danger of herd mentality was behind it all, and as such happens often on a small scale also. Contrarians tend to oppose the conformist and as such wait diligently for the inevitable 'market correction'. You need to look no further at the logical power of this in action when studying the greatest contrarian investor of all time than Warren Buffet.

So what has this to do with the forex market?
Simply we go against the mass perspective, and we do this via a very informative tool which goes by the name of the 'speculative sentiment index' which along with any of the given major pairs shows us in which direction the market sentiment is being held most.

The forex analysis site Dailyfx has a SSI graph on one of its pages along with a statistical breakdown and reasoning of number crunched data which gives a very clear high probability of a pair's movement bias. The link of which is here.