A question about currency strength

Hi,
Lately I am interested in currency strength trading.
When looking at different threads I see 2 main approaches to this.
1. looking at currency strength meters or indicators.
2. Looking at the index of a currency and or comparing the strength of the currency on different pairs to judge its strength.

My question is about the second approach.

Lets say that I am trading a breakout or a trend strategy on the daily tf.
I want to use currency strength as confirmation for my entries or exits or continuation.
So first step, I am looking at the indices of the relevant currencies.

But how do I determine, by looking at the chart, if the currency is strong(er) or weak(er)?
By looking at the long term trend? looking at the medium trend?
looking at the last 2 candles and see if the price went up or down?
see if it is closer to 200 EMA than it was x candles before?

For example:
The following chart of EURX

There is this nice descending triangle but price is mostly ranging..So EUR is considered as getting weaker or remains the same?
But in the last 4 candles the price moved up so is EUR considered getting stronger?
And if this last candle closes much lower does it mean EUR is now weaker(compared with last x days).
Does this mean that I should consider the EUR as moving up or down (weak or strong) in this chart?
The same question applies when comparing pairs with same base currency.

Thank you very much!

Forex market is the largest financial market in the world. For a forex trader, the goal is to make more successful trades and profits and reduce losses. A successful trader does this by using tools that reduce the cost of trading and enhance performance, as well as information that will indicate which currency pairs are the optimal set to trade. One of such indicators used by traders is the relative strength of currencies. High interest rates help promote a strong currency, because foreign investors can get a higher return by investing in that country.

Using data works better in identifying strength or weakness in a currency than comparing the history of visual charts. What data do I mean? Use COT data, there are cheap video courses on COT data (Commitment of Traders) and in the categories focus on commercials. These are the best-informed traders, with the biggest wallets, and the first who make serious money. I don’t want to post a link to a website outside of FF but there are good video courses for an affordable price.

When it comes to grouping currencies calculate commercials net positions. With historical data it’s easy to see the current development in a currency. It’s easy to see if a currency strengthens or weakens. It works well for H4 entries or swing trading because these data are published weekly.

Hello,

That's where trading is tricky. You are trying to add some information that you know nothing about to get a confirmation. I remember in my first years of trading a was trying to add indicators for the confirmation. But after a long time I have found that it doesn't help me. At the end you are looking at the chart and your decisions are made by what you see on the chart. For some time I was using RSI. I was looking at a chart, price was dropping, RSI shows that pair is oversold, but on the chart I saw a clear downtrend. What should I do? I can't sell it because it's oversold, I can't buy it because I can see a clear downtrend on a chart. So I removed all the indicators. Adding them makes my trading more complicated. But there are people that using them and find value in it. There are millions ways trading, people using what they belief in.


I don't know. I would say that you will not find the exact answers to these questions.

For my style of trading there is enough information on your chart picture. And you draw these lines very well.


You can clearly see this nice descending triangle. The descending triangle is a bearish pattern.


Nobody knows. But trading while the price inside this triangle is hard.


If candle closes lower, then it means that instrument is now weaker. I don't understand how this information will help you. Today we see a huge red candle, tomorrow a green candle. What should we do with this?


You can clearly see this nice descending triangle. Price is in consolidation. But overall I would say that EUR is moving down. We can see lower highs, lower lows and a descending triangle.

Let's sum up.

On the chart we can clearly see price making lower highs and lower lows and a descending triangle. Everything is telling us that price is moving down. Red support line is very good. Price bounced from it on Mar 14, Apr 18, May, May 16. 4 times. I can see 2 options. Sell on a break below red line or buy when the price comes close to it.

Conclusion.


You see the strength of the currency for today, but everything can happen tomorrow... Trade what you see. I don't know how the strength of the currency will help you, if you are looking at the chart and see that the instrument is dropping.

That is very useful info!
After reading your reply, I started looking into COT data on this thread https://www.forexfactory.com/thread/...is-trade-ideas?
and also on youtube, just trying to understand the basic concept etc.
Thank you very much MrAnonymous!