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An indicator for the strength of a currency

  • #61
  • Jun 24, 2019 4:18am Jun 24, 2019 4:18am
Quoting Fred-IV
{quote} ... I mean I have an impression that you assume that total pips in plus and in minus since open of every pair is ... zero! This is nonsense. It seems to me that you have defined your indicator as having a feature that at any point its sum equals zero and then you are suddenly surprised that it .. equals zero. ...
Of course, the sum of all signals is zero, and that is not very surprising, referring to the formula. I tried to note to this point that the indicator is created according to
all 7 pairs of a major currency! So, trading only some pairs of a currency do not necessarily match the change of currency strength and its direction, using this indicator.

We can ignore and delete, for instance, AUD, CAD, CHF, and NZD pairs and work with EUR, GBP, JPY, and USD currencies, in which, the sum of these 4 signals will be zero too. But, if we want to trade according to this indi with 4 currencies, it is better to trade all 3 pairs of one of them simultaneously.

I wish, I could state my view about zero summation.
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  • #62
  • Jun 24, 2019 4:49am Jun 24, 2019 4:49am
Quoting Rafei
{quote} Of course, the sum of all signals is zero, and that is not very surprising, referring to the formula. I tried to note to this point that the indicator is created according to all 7 pairs of a major currency! So, trading only some pairs of a currency do not necessarily match the change of currency strength and its direction, using this indicator. We can ignore and delete, for instance, AUD, CAD, CHF, and NZD pairs and work with EUR, GBP, JPY, and USD currencies, in which, the sum of these 4 signals will be zero too. But, if we want to trade...

I think what Rafei, is trying to say is, the market is always in equilibrium. If one currency is bought some other(s) must be sold.

Asw
  • #63
  • Jun 24, 2019 5:04am Jun 24, 2019 5:04am
Quoting Asw
{quote} I think what Rafei, is trying to say is, the market is always in equilibrium. If one currency is bought some other(s) must be sold. Asw
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  • #64
  • Jun 24, 2019 5:26am Jun 24, 2019 5:26am
Quoting Rafei
... With the help of comments, I have created a new version of the indicator which calculates the pips changes for each currency. ...
The new indicator for calculating pips change for each currency is added to the first post.
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  • #65
  • Jun 24, 2019 7:59am Jun 24, 2019 7:59am
Quoting Rafei
... *** RSI The RSI of the signals are calculated in this indicator. RSI period can be selected. The currencies can be selected to be displayed or not. RSI of pips change indicator ...
RSI of the signals are calculated and the corresponding indicator is added to the first page.

These are some figures of the RSI of the currency changes and the price chart:

AUDCAD:
Attached Image (click to enlarge)
Click to Enlarge Name: 2019-06-24_17-17-22.png Size: 60 KB


GBPAUD:
Attached Image (click to enlarge)
Click to Enlarge Name: 2019-06-24_17-28-16.png Size: 63 KB
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  • #66
  • Jun 24, 2019 7:59am Jun 24, 2019 7:59am
Quoting Gauer
The best way to use this kind of indicator is going back to the past and then check when the currencies made a top or bottom, and then mark the OB/OS lines on the indicator. Then when you have one currency on overbought and the other on oversold, you have higher odds of success, you can either short one or buy the other.
RSI of the signals are calculated and the indicator is added to the first post.
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  • #67
  • Edited 8:32am Jun 24, 2019 8:07am | Edited 8:32am
Hi Rafei,

Can you code one with the COT Index formula ?

COT index = 100 x (current Net – Minimum Net) / (maximum Net – Minimum Net)

This is what I talked about, of it working like a COT index, so we can experiment, makes the indi more flexible. The net position in this case would be the currency strength value.

100 * (X-B)/(A-B)

where

X = current currency strength value
A = maximum currency strength value for the last N days (or weeks in the case of the weekly indi)
B = minimum currency strength value for the last N days (or weeks in the case of the weekly indi)

So you gotta check back in time and tell the indicator the A and B values, and the number of days (or weeks) you want it to use in the calculation. What do you think? It is worth a shot. Cheers
  • #68
  • Jun 24, 2019 8:12am Jun 24, 2019 8:12am
Quoting Gauer
Hi Rafei, Can you code one with the COT Index formula ? ...
Hi, Gauer.
Good idea, I will code it.
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  • #69
  • Edited 8:53am Jun 24, 2019 8:21am | Edited 8:53am
Quoting Rafei
{quote} Hi, Gauer. Good idea, I will code it.
Cool!


The X days (not the same X of current currency strength value, I should have used N Days, I hope I didn't create confusion, I updated the post with the formula) must be the same for A and B for the indicator to work properly, Larry Williams usually use 3 years, but it is good to leave this input open because with lower values you increase the sensitivity of the indi and also make it more flexible. You really don't need a separate N days value for A and B, the same N days is used for the calculation. Just clearing the ambiguity.

So those user inputs on the indi would be:

Max Currency Strength:
Min Currency Strength:
Lookback Period:
  • #70
  • Jun 24, 2019 9:01am Jun 24, 2019 9:01am
Quoting Gauer
{quote} ... So those user inputs on the indi would be: Max Currency Strength: Min Currency Strength: Lookback Period:
You said that "Max Currency Strength" and "Min Currency Strength" are the user inputs, but according to the formula these are:
A = maximum currency strength value for the last N days (or weeks in the case of the weekly indi)
B = minimum currency strength value for the last N days (or weeks in the case of the weekly indi)
which I thought that these should be calculated from the data series!
Am I missing something?
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  • #71
  • Jun 24, 2019 10:07am Jun 24, 2019 10:07am
Quoting Rafei
{quote} You said that "Max Currency Strength" and "Min Currency Strength" are the user inputs, but according to the formula these are: A = maximum currency strength value for the last N days (or weeks in the case of the weekly indi) B = minimum currency strength value for the last N days (or weeks in the case of the weekly indi) which I thought that these should be calculated from the data series! Am I missing something?
Sorry if I made confusion.

It should be like this:

100 * (X-B)/(A-B)

where

X = current currency strength value
A = maximum currency strength value
B = minimum currency strength value

Alright, but we need a period that the indicator is gonna use for calculation, otherwise it is gonna calculate the whole history of the chart and we don't want that, we wanna limit it. Larry Williams usually use 3 years (so that would be the default of fixed setting, but we wanna be able to choose this period, so we need this extra input). So we need a "look back" period input which is the number of bars that the indicator is gonna use in it's calculation. Shorter look back periods (1 month, 3 months for example) you will be more sensitive then 3 years (or one year).


Is it clear now?

That is why we need those 3 user inputs, we have to tell the indicator the max and min values inside the period we want it to analyze. The shorter the period the indicator is gonna give you more swings, the larger the period the indicator is gonna give you fewer swings.
  • #72
  • Jun 24, 2019 10:24am Jun 24, 2019 10:24am
Quoting Gauer
{quote} Sorry if I made confusion. ...


Quoting Gauer
{quote} ... That is why we need those 3 user inputs, we have to tell the indicator the max and min values inside the period we want it to analyze. ...
If I am true, the user gives the period and the indicator finds the maximum and minimum and calculates the formula.
Or user gives the preferred maximum and minimum?
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  • #73
  • Edited 11:55am Jun 24, 2019 10:25am | Edited 11:55am
Today, we saw an interesting price action from currencies:

Attached Image (click to enlarge)
Click to Enlarge Name: 2019-06-24_19-50-37.png Size: 73 KB
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  • #74
  • Edited 1:19pm Jun 24, 2019 12:46pm | Edited 1:19pm
Quoting Rafei
{quote} {quote} If I am true, the user gives the period and the indicator finds the maximum and minimum and calculates the formula. Or user gives the preferred maximum and minimum?
No, the user gives the period AND the max and min values. Because let's say I am interested only in the most recent price action, in the last 3 months for example, then I will load the Strength_waves_all_daily_101.ex4 indicator and scan the chart 3 months back in time and see the max levels reached, then I will put that data in this other new index indicator you are gonna code, in the max and min levels inputs and use a look back period of 90 days, for example.

Or if I am interested in the yearly data, I would load again the Strength_waves_all_daily_101.ex4 and then scan the chart for the max and min levels for this period of one year, would put this levels in the max and min inputs of the indicator and choose a look back period of 52 weeks or 365 days.

But since we gonna have to do this for the currencies we are interested in, I believe we need an input for the currency too. Because we are gonna be using the indicator to trade a pair, you are gonna be interested in the two currencies that form that pair, right? So you scan the currencies you are interested in using Strength_waves_all_daily_101.ex4 . This other Index Indicator will depend on user input to work, it is not just a matter of loading it and that is it.

Now that I think of it, the indi would need more inputs. For example, you wanna trade the EUR/USD and is interested in the yearly data. Then you load Strength_waves_all_daily_101.ex4 and check the max and min levels that EUR and USD reached in one year, write that down.

Then you load the strength indicator based on COT Index formula. The inputs will have to be:

Look Back: 52 Weeks (Or 365 days)

Currency A: EUR
Max: X
Min: Z
Line Color: Yellow

Currency B: USD
Max: X
Min: Z
Line Color: Green



Then the indi will plot the index for the pair using two independent lines, but if you leave currency B empty for example (USD in this case), then the indi calculates the index only for EUR (in the case you are only interested in seeing the strength of only one currency).
  • #75
  • Jun 24, 2019 6:09pm Jun 24, 2019 6:09pm
Hi Rafei, great indicator your have here. I was wondering if you could add the following code to the next release of your Daily indicator as any color customization keeps getting wiped out when you reset/re-open MT4.

extern color cCurrency1=clrLime; // AUD Color
extern color cCurrency2=clrRed; // CAD Color
extern color cCurrency3=clrViolet; // CHF Color
extern color cCurrency4=clrYellow; // EUR Color
extern color cCurrency5=clrDarkViolet; // GBP Color
extern color cCurrency6=clrBlue; // JPY Color
extern color cCurrency7=clrDarkGreen; // NZD Color
extern color cCurrency8=clrDimGray; // USD Color

int init()
{
SetIndexStyle(0,DRAW_LINE,STYLE_SOLID,2,cCurrency1);
SetIndexStyle(1,DRAW_LINE,STYLE_SOLID,2,cCurrency2);
SetIndexStyle(2,DRAW_LINE,STYLE_SOLID,2,cCurrency3);
SetIndexStyle(3,DRAW_LINE,STYLE_SOLID,2,cCurrency4);
SetIndexStyle(4,DRAW_LINE,STYLE_SOLID,2,cCurrency5);
SetIndexStyle(5,DRAW_LINE,STYLE_SOLID,2,cCurrency6);
SetIndexStyle(6,DRAW_LINE,STYLE_SOLID,2,cCurrency7);
SetIndexStyle(7,DRAW_LINE,STYLE_SOLID,2,cCurrency8);
...
}
  • #76
  • Jun 24, 2019 11:41pm Jun 24, 2019 11:41pm
Quoting Gauer
{quote} No, the user gives the period AND the max and min values. ...
Now, I understand the concept. Thanks for your complete description. I will inform you when it is ready.
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  • #77
  • Jun 24, 2019 11:43pm Jun 24, 2019 11:43pm
Quoting mraye
Hi Rafei, great indicator your have here. ... color customization keeps getting wiped out when you reset/re-open MT4. ...
Hi mraye,
Thanks for your comment. I will add it.
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  • #78
  • Jun 24, 2019 11:54pm Jun 24, 2019 11:54pm
Quoting Gauer
{quote} ... the user gives the period AND the max and min values. ...
Something that I've missed is that, this daily indicator is the difference between current price and the open price of the day and updates each day! How do we change the formula so that we can monitor, for example, one year?

I think that for this case, I would not use daily open price as the reference, rather, I would take zero level as the reference. In other words, I would utilize price itself as the criterion. So, the formula at the first post will be changed to this:

for ( j = each pair of currency )

currency[i] = currency[i] + iClose( Pair[j] , Period() , i );


What is your idea about this?
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  • #79
  • Jun 25, 2019 12:38am Jun 25, 2019 12:38am
Quoting mraye
... color customization ...
Color setting is added to the indicator:
StrengthDaily104.ex4
StrengthWeekly104.ex4

Thank you for your feedback.
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  • #80
  • Jun 25, 2019 7:08am Jun 25, 2019 7:08am
A view on the current day:

Attached Image (click to enlarge)
Click to Enlarge Name: 2019-06-25_16-28-55.png Size: 74 KB


What do you think?
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