Nite
Valued Contributor
In the Forex market, the domino effect refers to a chain reaction where the movement of one currency pair influences the movement of other related pairs. This phenomenon occurs due to the interrelated nature of currency pairs and their high degree of correlation. When one or two leading pairs within a group start to move, the rest of the pairs in that group tend to follow suit, akin to a chain reaction initiated by falling dominoes.
The domino effect can be observed when certain pairs break major support or resistance levels, triggering movements in correlated pairs. For example, if a currency pair breaks a significant level due to news announcements or market events, other related pairs may also experience similar movements as the market seeks to correct any imbalances.
Traders who understand and can identify the domino effect can use this knowledge to anticipate potential trends and capitalise on market movements.
The domino effect can be observed when certain pairs break major support or resistance levels, triggering movements in correlated pairs. For example, if a currency pair breaks a significant level due to news announcements or market events, other related pairs may also experience similar movements as the market seeks to correct any imbalances.
Traders who understand and can identify the domino effect can use this knowledge to anticipate potential trends and capitalise on market movements.
