The best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for a profit based on their more precise information.

In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 123 Japanese yen to the United States dollar means that JPY 123 is worth the same as USD 1.

Unlike the fundamental analyst, the technical analyst is not much concerned with any of the “bigger picture” factors affecting the market, but concentrates on the activity of that instrument's market.