Correct way to calculate Currency Strength (CS)

hi friends, I have searched through internet regarding correct way of calculating CS (Currency Strength). Many pages showing very few information and none of them discuss clearly about calculating CS.

I have reading the code in CM available in openly in internet namely Currency Meter or Strength Meter. I have used these Meter to trade and few time i can catch the trend but many times i was ended in failed trade.Every meter taking "EURUSD", "GBPUSD", "USDJPY", "USDCHF", "EURJPY", "AUDUSD", "EURCHF", "USDCAD", "EURGBP", "NZDUSD" these pairs for calculating strength of "USD","EUR","GBP","CHF","JPY","CAD","AUD","NZD". Is this method correct? Is this reliable way to calculate CS using above ten pairs? Some people says we should calculate using Majors and Minors together to get absolute strength of CS. I have interpreted the coding for calculating CS. I will show it in my next posts. Any one having ideas please share your view regarding calculating CS and plz don't post any indicator which is not required here.

This is the Code for Calculation :

This code is for simple calculation for CS. This is part of my code written in Vb.Net. So you change according to your code style.


Dim point, range, ratio, ret, hival, loval, cbid As Double
Dim val, id, c, d, count As Integer
Dim hpair, fpair As String
Dim pairval(10)()
Dim FullPairs() As String = {"EURUSD", "GBPUSD", "USDJPY", "USDCHF", "EURJPY", "AUDUSD", "EURCHF", "USDCAD", "EURGBP", "NZDUSD"}
Dim HPairs() As String = {"USD","EUR","GBP","CHF","JPY","CAD","AUD","NZD"}

For c = 0 To HPairs.Count - 1
hpair = HPairs(c)
count = 0
ret = 0
For d = 0 To FullPairs.Count - 1
fpair = FullPairs(d)
If hpair = Strings.Left(fpair, 3) Or hpair = Strings.Right(fpair, 3) Then
point = MarketInfo(fpair, MarketInfoModeType.MODE_POINT)
hival = iHigh(fpair, PERIOD_D1, 0)
loval = iLow(fpair, PERIOD_D1, 0)
cbid = MarketInfo(fpair, MarketInfoModeType.MODE_BID)
range = (hival - loval) * point
If range = 0.0 Then Continue For
ratio = 100.0 * (((cbid - loval) / range) * point)
val = 0
If (ratio > 97.0) Then
val = 9
ElseIf (ratio > 90.0) Then
val = 8
ElseIf (ratio > 75.0) Then
val = 7
ElseIf (ratio > 60.0) Then
val = 6
ElseIf (ratio > 50.0) Then
val = 5
ElseIf (ratio > 40.0) Then
val = 4
ElseIf (ratio > 25.0) Then
val = 3
ElseIf (ratio > 10.0) Then
val = 2
ElseIf (ratio > 3.0) Then
val = 1
End If
count = count + 1
If hpair = Strings.Right(fpair, 3) Then
val = 9 - val
End If
ret = ret + val
End If
Next
If (count > 0) Then
ret = Math.Round(ret / count, 1, MidpointRounding.AwayFromZero)
Else : ret = 0
End If
id = Array.IndexOf(HPairs, hpair)
Array.Resize(pairval(id), 2)
pairval(id)(0) = hpair
pairval(id)(1) = ret
Next

My question is these pairs {"EURUSD", "GBPUSD", "USDJPY", "USDCHF", "EURJPY", "AUDUSD", "EURCHF", "USDCAD", "EURGBP", "NZDUSD"} is enough to calculate strength of a Currency?

I would say that the more information you include in your calculations, the more accurate the computed strength will be. So I'd pick all 28 pairs and then for each currency use the 7 associated pairs. If your feeling is that majors are more dominant, you could play with weighting factors.

Hi thanks for your response.

Please check this below link
https://www.forexfactory.com/attachm...9&d=1430045007

Is these 28 pairs enough to calculate CS?

For a correct calculation you would need real volumes (which you don't have). From Bloomberg or so. Where you in the end multiply a calculated value per ccy with the volume of that ccy. Once I have seen such a formula on the inet, but forgot it again bcause of the lack of ccy volume data.

Since you can see the code, then add every associated pair your broker allows you to trade. I have 38 pairs coded in my meter, but I only display the currencies I actually trade. Some pairs are used for measuring even though they are united with currencies I do not trade. Understand that any meter you use will be late and unreliable. In my opinion, sample sizes of trades taken is the most accurate way to see the flow of the Level II trades. Or, you could try to trade the Level II platform by placing pending orders around large pending orders, but that doesn't mean price will continue in any certain direction. You still need the averages in order to calculate probability. Since we cannot measure volume and there are numerous books because it is not centralized, then averaging is how I do it. Up to you though. I have not found a meter that can keep up with directional changes yet. Also, news is the most likely catalyst for larger trades, and there is no way a meter can signal a news release. I still have one on my chart, from habit, lol, but technically it is way too slow and is useless as a signal. I don't need it nor use it, but like I said, habit, lol. I have useless semaphores too, lol, from habit. I spent years analyzing, modifying, and testing, and those tools are just a carryover...from habit. Good Luck with your project though. Hope you find something useful.

Hi Thank you for your valuable response. Actually I am automating trade using

"EURUSD", "EURCHF", "EURGBP", "EURCAD", "EURAUD", "EURJPY", "EURNZD", "GBPCHF", "GBPUSD", "GBPCAD", "GBPAUD", "GBPJPY", "GBPNZD", "NZDCAD", "NZDJPY", "NZDUSD", "AUDCAD", "AUDJPY", "AUDUSD", "CADJPY", "USDJPY", "USDCHF", "USDCAD", "USDSGD", "EURSGD", "GBPSGD", "AUDSGD", "SGDJPY", "USDHKD", "EURHKD" these pairs.

But i calculate CS using

"EURUSD", "EURCHF", "EURGBP", "EURCAD", "EURAUD", "EURJPY", "EURNZD", "GBPCHF", "GBPUSD", "GBPCAD", "GBPAUD", "GBPJPY", "GBPNZD", "NZDCAD", "NZDCHF", "NZDJPY", "NZDUSD", "AUDCAD", "AUDCHF", "AUDJPY", "AUDUSD", "CADCHF", "CADJPY", "USDJPY", "USDCHF", "USDCAD", "CHFJPY", "USDSGD", "EURSGD", "GBPSGD", "AUDSGD", "CHFSGD", "SGDJPY", "USDHKD", "EURHKD" these pairs.

I am trading 30 pairs and calculate strength using 35 pairs same way as you do. But sometimes i feel what i am doing is correct or not. I can't get advice anywhere except this FF thread.

But all the pairs won't trend all the times. With every session it rarely trade max 5 pairs. Some days with ranging market it won't take any orders. I am using CS as the key info for marking a trend for trading. But max my orders passed without fail. Because i quit with small profit target (I was trying to pick top to bottom profit but it was ending with big loss. And i change my idea take little profit and get out of the session before it loose trend. Now i am getting more opportunity to trade). some times my orders picked at top or bottom where i am facing problem. Now i added RSI to decide weather take a trade or not. Still R&D is going.

And I am having one interesting question in my mind

How do you calculate the CS of USDCNH in my broker list CNH only associate with USD only. And this pair often goes selling. How do we decide CNH is strong?