Last Thursday during my FXStreet webinar, I mentioned I would share some links and insights into how and why I use the U.S. Dollar in my forex trading.  We had a great in-depth discussion of this and I thought it would be great to follow that up with some notes from that conversation.

First off, my familiarity with the U.S. Dollar comes from years of being a futures trader.  I started my career in trading in the futures market.  The U.S. Dollar Index is a futures contract I keep on my trading screen anytime I am trading the forex.  I use the NYBOT (New York Board of Trade contract.

This feed is not one that comes with any forex charting that I am aware of.  I have sen some other Dollar Index feeds but they are not the NYBOT feed which is the most accurate look at the U.S. Dollar.

This feed is not cheap however and each individual can decide for themselves if the live exchange fee is a reasonable price to pay.  If you are a full-time trader, I think the live is feed is a must.

However all is not lost if you do not want nor feel you are ready for the live feed.  There are places to get 30 minute delayed data and charting.  You can go right to the exchange, www.nybot.com

You can also get delayed data and charts at www.quote.com.  I use eSignal for all my charting so the www.quote.com site is a place I visit.  To bring up a quote and chart, use the symbol DX A0  - that DX <space> A0 (zero)

Once you have the feed the best thing to do is use it as a secondary confirmation to the price action on the majors (EUR/USD, GBP/USD, USD/CHF, USD/JPY).  The correlation is strongest with the EUR/USD (inverse) and USD/CHF (direct).  Be sure to always check the price action of the U.S. Dollar Index against any pair you want to use it with.  Correlation does change; sometimes it is stronger, sometimes it is weaker.  For example, right now there is very little correlation with the USD/JPY.

When there is correlation however the U.S. Dollar Index can provide tremendous insight into support and resistance.  This is exactly why I want to know not only where the Index is trading but the support and resistance on the chart.  Think of the U.S. Dollar Index like the Dow Jone Industrial Average for stock traders.

I start each of my webinars with a look at the U.S. Dollar Index and you can get a better idea of how and why I use it during my twice weekly webinars as well as this month at my three hour presentation for FXStreet