Recent Strength Idea

Hey guys and girls..
Just doing some random chart research using the Recent Strength indicator from Hanover. After a quick eyeball I came up with a very basic system and was just wondering if anyone had backtested it or had any ideas why it may not work. Ran 3 trades today and all 3 worked out so will continue to forward test for a while and play, but just curious whether someone has tried anything this basic using the indicator...

Pretty much just look at the daily recent strength indicator window at the beginning of a new day to see how each of the pairs has faired over the last day- choose a combination of pairs where one is strong and the other weak (one moving up the other moving down) and then simply set a trade on that pair depending on which one is stronger... Stop loss and TP are to be toyed with at the moment but will just be using recent high lows for now and maybe consider ATR percentage..

Heres my examples...
This mornings daily recent strength chart


As you can see
AUD strengthened
USD weakened
NZD still strengthened
CHF weakened
GBP still strengthened
and so on ..

So from this i simply set up 3 test trades using this information at the start of the new day (took the trades just before Tokyo open but will try and be awake for Sydney next time)..
Buy AUDCHF

Buy NZDUSD

BUY GBPUSD


So thats pretty much it... Like i said its very simple but from a short visual backtest seems like it could be something worth looking at. I know some people will use this indicator in line with another system to give them a bias however just curious whether it could be used this simply.
Any critism is welcomed thats why I came here
Josh

Hi Nollej, I think you are looking in the right area. Not sure how or why you entered where you did, but you can combine some basics like sup/res and candles to pick the right entry. Overall I think the idea is as good or better than most so stick with it. Infact PM me your email and I will send you something that might help with it.

so ,what your indicator says about china index having 5% jump and then revert all gains till close today. Is this bullish or not based on your indicator?

Hey there Juicy,
Entry was simply at the start of the new day , after looking at the newly calculated close of the daily recent strength... It wasnt exactly at the start as i missed the new start to the day, but thats where the intended market order would have been.. either way it would have made no difference to final target(would have actually netted more pips), plus just testing at the moment

Yes trying to see how it could be used in conjunction with other entries just thought id see how it goes simply buying or selling at the start of a new day with the idea that the market will continue with the previous days moves (at least to some extent)... Finding some kind of filter or better entry is what ill be looking at over this weekend more..

The indicator doesnt look at news it only plots the movement of each of the base currencies using a wide range of pairs as far as I understand. This then makes it easy to view which currencies have previously weakened or strengthened..
Josh