One idea: buy pair with base currency strenght going up and quote currency going down. Avoid extreme values like 0-1 and 9-10 as they may revert. Sell for reverse.
Not financial advice. For testing purposes only. Do not use on live account
One idea: buy pair with base currency strenght going up and quote currency going down. Avoid extreme values like 0-1 and 9-10 as they may revert. Sell for reverse.
Ignored
So if you saw EUR going up from 2 to 5, and you saw USD going down from 9 to 6- then you would buy EURUSD?
I like your idea and in theory it sounds good, however personally I would never take a trade based on such limited information. Remember the indicator you mentioned only reveals what has ALREADY happened- which is: that over the past little while EURUSD has gone up (which you can see on a EURUSD chart anyway). It can't tell you anything more than that.
The only way of knowing if your idea gives you a trading edge is by testing it.
Lets say you tested your idea over 100 trades.
If Currency A goes up x number of places verses Currency B going down x number of places on the indicator, what is the outcome over 100 trades?
Once you have this sort of data, you will know whether its worth trading this way or not.
I trade using currency strength- in fact I don't even really look at charts to make trading decisions. I have developed my own currency strength indicators and then observed their behaviour over years.
Recently I have been experimenting with trading a currency basket instead of a currency pair, effectively just buying or selling one currency. e.g if I thought that EUR would strengthen, I would buy EURUSD, EURGBP, EURJPY, EURCAD, EURAUD and EURNZD all at the same time, and close them all at the same time. My logic is that it seems mathematically easier to get one thing right than two (I can often pick if one currency will strengthen or weaken, but its difficult to know what to match it against!). So as long as EUR is stronger than at least 3 other currencies, I will be in profit. I am only demo trading and testing this idea at the moment. Who knows, I might be onto something, or might not- time will tell.
