Currency strength indicators are the secret weapon of successful trading. Through this trading guide, our team of industry experts will reveal our exclusive package of currency strength indicators. You will learn why our in-house indicator excels with the unorthodox currency trading strategy .
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Free trading strategies every week straight to your email. Looking at charts to determine which currencies are strong and which ones are weak can be quite confusing.
When you factor in intraday noise or analyze multiple time frames, things can get more confusing. If you throw in the action mix of the same currency against a basket of other currencies, you realize that determining a currency’s strength is not an easy task.
It is possible that in the 15-minute chart, EUR is the strongest currency against the US dollar. However, when analyzing the same currency pair on the 1-hour and 4-hour charts, you get a new revelation.
New inputs could tell you a different story and EUR/USD could be in a serious downtrend.
In the forex market, conflicting analysis types are always present.
Signals conflict on different timeframes and on different currencies is the norm.
When forex charts fail to clarify currency strength, that’s where the currency strength indicator comes into play.
Before we reveal our currency strength trading strategy, let’s lay the groundwork first.
Table of contents
1 What is the Currency Strength Index?
2 How to use currency strength meter .Trading strategy
3 coins strong currency
3.1 Strategy #1: How to Use the Currency Strength Index
3.2 Strategy #2: How to trade with the Currency Strength Map
3.3 Strategy #3: How to trade with the currency strength matrix
4 Last Words – Best Currency Strength Meter
What is the Currency Strength Index?
As the name suggests, the currency strength indicator is an MT4 custom indicator designed to reveal the strength of a particular currency pair relative to its peers. At the same time, the relationship between currency pairs is organized according to how strong or weak they are. The MT4 Currency Strength Indicator will help you understand the market conflict trend.
However, not all currency strength indicators are created equal. Some may be based on ROC rate of change, or RSI, or CCI, or some kind of Intermarket correlation. So, the formula to calculate the power of a currency meter. If the monetary strength formula is wrong, the entire strength reading will be misleading.
Our team of industry experts uses more than price changes over a fixed period to calculate currency strength. We use a proprietary trading formula that aggregates prices from multiple timeframes and applies our own weights to create the most effective currency strength indicator.
Our proprietary formula for currency strength calculations outperforms all other free currency strength indicators combined. We will demonstrate how it is possible by revealing how one of our team members trades with a currency strength meter.
So now the question is Cable How to use the currency strength indicator to:
- Determine which currency pair is strongest/weakest
- What is the most efficient method for combining currency strength values
- How to time the market
This is how
How to use the currency strength meter
There are basically two standard methods for using the currency booster:
- As a trending tool
- As a trend reversal tool
Let me explain… When using a currency strength meter, we analyze individual currencies instead of currency pairs. The whole idea is to identify the strongest currency and the weakest currency so that you can choose the right currency pair to trade.
Obviously, the basic idea behind the currency strength strategy is to buy strength and sell weakness.
In other words:
- Buy the strongest currency against the weakest currency
- Or, Sell the weakest currency against the strongest one
See the currency heatmap index below:
For example, the strongest currency pair today is JPY and EUR is the weakest.
The biggest potential deal is to sell EUR/JPY.
This is not a form of trend trading . Or, trade with prevailing momentum.
Alternatively, forex traders can wait until one currency shows extremely strong readability and another shows extremely weak readability and attempt a reversal trade.
The second trading approach is riskier because currencies have no real intrinsic value.
This is the thing
The risk is that the currency keeps getting stronger and stronger (weaker and weaker) and you’ll be stuck in a bad trade.
If you manage to get your hands on our In-house Currency Strength Indicator Pack you will get a 3 in 1 stat.
See below all 3 metrics in action:
Our currency heatmap (part of the 3-in-1 money indicator) can help you gauge when a currency is losing strength and a reversal is imminent.
Plus below:
Currency trading strategy
Our strong currency trading strategy can make you a better trader.
You can use it as a standalone trading strategy or simply use it as a confirmation tool.
So now the question is Cable How to identify strong and weak currencies in forex trading?
We like to rely on our complex math formula behind the Currency Strength Index Pack to measure currency strengths and weaknesses.
We use the currency strength indicator to pair the strongest with the weakest, so you can take advantage of momentum from both sides.
For example, according to our Currency Heat Map index right now, GBP is the strongest currency and CAD the weakest.
See the currency heat map below:
If we pair the two currencies, we end up with the GBP/CAD pair. See the forex chart below:
As you can tell buying GBP/CAD here would be a big mistake.
Why?
Honestly, buying here is like chasing the market after a big rally.
As you can tell the currency strength indicator is meaningless if you don’t know how to use it properly.
Well, that’s what we’ll reveal next, so stay tuned
If you want to learn more about our exclusive currency strength indicator, here is a quick overview of its 3 key features:
- This Currency Strength Indicator – Indicator places itself in a separate table and shows a diagram of the strengths for each currency for the current timeframe. It can show you historical changes in currency strength and the power they have right now.
- Currency Heatmap Indicator – Very useful to see the market state globally. It shows all possible relationships between pairs and sorts and colors them according to their strength or weakness.
- Currency Strength Color Table – Gives you an overview of the market in a compact view. When compared with the other 2 indices, this one works with all TFs and shows the result information summarized by painting the currencies with different colors. It also provides a final recommendation for each currency, using all timeframes to make the assessment.
Now, what’s next?
Obviously, we will show you how to combine all 3 main features and trade like a pro.
At this point, we will show you three different trading strategies you can implement to accurately read the strengths and weaknesses of the major currencies.
Note * Our proprietary indicator is very versatile that can be used in a variety of approaches.
Strategy #1: How to use the currency strength indicator
We like to start things off with the currency strength chart found below the chart.
This is how we want to use our diagram As a general rule we want the currency magnitude to print a new histogram bar of a different color above and below the 0 line and at the same time or for up to 2-3 bar chart.
There is no better way to explain this than by showing you a chart of currency strength directly.
See below:
Note * each color is associated with a specific currency. The technical readings of the GBP/AUD chart also confirm that buying the currency pair here is a good trade.
See the chart below:
According to our proprietary currency strength measurements, we can distinguish the following:
- The New Zealand Dollar (turquoise) is the strongest currency
- And, EUR (light green) is the weakest currency
However, there is a problem; we can see that it breaks the first transaction rule.
The strength chart does not print NZD strength and EUR weakness at the same time or at least in the first 3 bar charts.
New Zealand’s strength came only after EUR had printed 6 weak histogram bars.
So this is the lesson you need to learn The Currency Strength Index can only help you if you know how to read it correctly. Next…
Strategy 2: How to trade with the Currency Strength Map
We want to trade using a currency strength map to generate short term rallies. Heat maps can be used as a good barometer to gauge a currency’s short-term strength and weakness.
And here’s how we use it According to current heat map readings, NZD is the strongest against all other major currencies and CHF is the weakest.
Therefore, we combine the two currencies and end up with NZD/CHF, which has a potential buying opportunity.
After a few hours of trading activity, here are the results of that trade:
The strongest currency continues to strengthen and the weakest currency continues to weaken. Next…
Strategy #3: How to trade with the currency strength matrix
The currency strength matrix is based on price action and correlations between currencies. Compared to the other two strategies, the currency matrix will give us a more detailed view of the currency’s strength across multiple timeframes.
In addition, the matrix will also reveal the average strength across all timeframes. This will give us a brief overview of the currency’s overall strength and weakness.
The forex chart below will reveal what our currency strength matrix looks like right now:
Looking closer we can see that although CHF is the strongest currency, on intraday timeframes we can see a different story. Here’s how it works…
When all timeframes converge and point in the same direction you know, we have a strong reading of currency strength and weakness. Let me explain… If we study the currency matrix again, we can note that USD is showing a constant reading across all its timeframes.
Different shades of green on all USD timeframes show real strength. At the same time, EUR is showing different shades of red on all timeframes, which means it is the weakest currency. This is how it looks on the chart.
See below:
Final Words – Best Currency Strength Meter
The currency strength indicators can be very attractive especially for novice traders who are still learning how to trade.
This is the best currency strength meter you will ever find to give you an accurate reading of currency strength, we use 56 charts simultaneously into our proprietary formula.
This is a secret all forex traders need to know. Instead of trading currency pairs, try trading individual currencies in general. To do this, you will need to identify the strongest and weakest currencies to trade.
And this is where our exclusive Currency Strength Index Pack comes into play. If you want to learn how to find the strongest and weakest currencies to trade, put your hands on the Currency Strength Index .