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Intra day currency strength/weakness...

  • #1
  • First Post: Jun 17, 2011 2:36am Jun 17, 2011 2:36am
I have been searching for the best way to identify strong or weak currencies each day. Pairing a weak currency with a strong one is obviously an ideal way to select pairs when looking for trades however i have still not found an efficient and consistent way to do this. I have been looking at trader 101's basket method with some great success. Sometimes though, the basket is jumbled up and market direction is hard to gauge. I have also been watching a few different currency strength meters from the relative strength basket thread. The problem is the signals seem to come too late and often times when a currency looks to be strong, it is actually overbought and ready to retrace so you end up being on the wrong side of the trade. I have had some success also using fundamentals. For example, because of the Greek debt problems, the Euro has been dropping across the board and because the CHF has been viewed as a safe currency, selling eurchf over the past few weeks has been very profitable. Still though, i wonder how other members of our forum select weak/strong currencies to trade intra day? Ideally, im looking to find a perfect pair, and exploit its inherent weakness or strength for that day by scalping on the lower timeframes. Any ideas? Any advice? How do you select pairs to trade each day and what type of results are you achieving?
  • #2
  • Jun 17, 2011 3:17am Jun 17, 2011 3:17am
Heya A-game,

Quoting A-game
I have been searching for the best way to identify strong or weak currencies each day. Pairing a weak currency with a strong one is obviously an ideal way to select pairs when looking for trades however i have still not found an efficient and consistent way to do this.
It has only been recently that I started actively taking an interest in pair selection, and now trade several of the crosses, instead of extracting dominant themes on the corresponding major. I find there is indeed merit to pair analysis, and it can only help enhance one's proabilities of success.

Quote
I have been looking at trader 101's basket method with some great success. Sometimes though, the basket is jumbled up and market direction is hard to gauge. I have also been watching a few different currency strength meters from the relative strength basket thread. The problem is the signals seem to come too late and often times when a currency looks to be strong, it is actually overbought and ready to retrace so you end up being on the wrong side of the trade.
I am ignorant of the basket method, but in relation to your overbought comment, what are you basing it on? The currency pair is overbought in relation to what? I hope it's not to do with a conventional oscillator..slap one on to XAU/USD Daily and you'll see what I mean. Perhaps thinking about this quandry may help you to position yourself on the correct side of such trades.

Quote
I have had some success also using fundamentals. For example, because of the Greek debt problems, the Euro has been dropping across the board and because the CHF has been viewed as a safe currency, selling eurchf over the past few weeks has been very profitable.
Looks like you're better at this than I thought?

Quote
Still though, i wonder how other members of our forum select weak/strong currencies to trade intra day? Ideally, im looking to find a perfect pair, and exploit its inherent weakness or strength for that day by scalping on the lower timeframes. Any ideas? Any advice? How do you select pairs to trade each day and what type of results are you achieving?
Look at what you did with your analysis for EUR/CHF. You assigned factors that have played out over the past few weeks, which produced movement in the pairing of that magnitude. If you want to do this intra day, it simply boils down to that same line of thinking, but assigning factors that will play out intra-day.

Regards,
xXTrizzleXx
  • #3
  • Jun 17, 2011 3:59am Jun 17, 2011 3:59am
I stick with one pairing only, then I get familar with the characteristics of that pairing and can trade it quite easily.
For eg, I only trade AUD/JPY, I am so familiar with this pairing that I take pips every single day.
  • #4
  • Jun 17, 2011 4:13am Jun 17, 2011 4:13am
Hi Trizzle and thanks for the reply. Attached is an image of the FXCORRELATOR indicator. I have marked the areas of importance. Yen appears strong whilst Euro appears weak, so selling EUR-JPY seems like a good idea so long as price action confirms. Immediately after, price takes a backward step and possibly would have stopped out the position. That is why i said overbought/oversold. In this case at the proposed time of entry, it would seem that EUR-JPY was oversold hence the opposing move.


"Look at what you did with your analysis for EUR/CHF. You assigned factors that have played out over the past few weeks, which produced movement in the pairing of that magnitude. If you want to do this intra day, it simply boils down to that same line of thinking, but assigning factors that will play out intra-day. "

I suppose thats what im looking for. Finding out which fundamentals will effect specific currencies in the short term. Perhaps i just need to become a better fundamental trader? Lets see if anyone else has any ideas.
Attached Image (click to enlarge)
Click to Enlarge Name: correlation.JPG Size: 99 KB
  • #5
  • Jun 17, 2011 4:18am Jun 17, 2011 4:18am
Quoting Meg
I stick with one pairing only, then I get familar with the characteristics of that pairing and can trade it quite easily.
For eg, I only trade AUD/JPY, I am so familiar with this pairing that I take pips every single day.


I have tried this as well Meg but that is the reason i am looking to identify specific pairs each day. EU may be range bound for several days yielding very few pips, whilst other more exotic currencies may be experiencing great trend moves in which we could profit. There are 60 odd pairs to trade and narrowing down the pairs with the highest potential for movement will surely help the probability of positions taken, assuming our analysis is correct lol. The question is how?
  • #6
  • Jun 17, 2011 4:26am Jun 17, 2011 4:26am
Maybe using the previous days volume could be a good indication on volatility? Or previous days range? That is certainly something worth looking at.
  • #7
  • Jun 17, 2011 4:30am Jun 17, 2011 4:30am
Just stick to one pair
If you use several pairs you will be messed up in the head soon
  • #8
  • Jun 17, 2011 8:34am Jun 17, 2011 8:34am
Quoting A-game
I have tried this as well Meg but that is the reason i am looking to identify specific pairs each day. EU may be range bound for several days yielding very few pips, whilst other more exotic currencies may be experiencing great trend moves in which we could profit. There are 60 odd pairs to trade and narrowing down the pairs with the highest potential for movement will surely help the probability of positions taken, assuming our analysis is correct lol. The question is how?
If you're an intraday trader you shouldn't be worrying about E/U being range bound, even so it will usually give a daily range of at least 100 points. As an intraday trader you should be able to catch the intraday swings which can provide 2 or 3 times the daily range. So I would recommend the same as Meg and Slovforex - concentrate on one pair and become an expert on its character and its support and resistance levels.
I've got my pips - go get yours!
  • #9
  • Jun 17, 2011 8:59am Jun 17, 2011 8:59am
I understand what you are saying and you have all made valid points but i am not speaking of when EU is in a 100 pip range, im also speaking of when that range becomes choppy and volatile. Whipsaws back and forth are bad for every traders health and when there are other pairs to trade why not identify them and make pips from trending pairs? Even if EU is in a 200 pip range, if another can be identified with a higher probability of breaking out why not trade it and take 400-500 pips? The earlier example i provided on EURCHF was perfect. Whilst EU dropped a great many points over the past couple of weeks, it didnt even come close to the way EURCHF dropped. EU was actually trending back and forth. So you see, what i am trying to do is target such currencies and exploit them.
  • #10
  • Jun 17, 2011 9:17am Jun 17, 2011 9:17am
As a trader.. I say pick the strongest pairs.. DUH!.. usually I go with second pair if I feel there is a spread discount (go with second best pair rather than pay 4 pip spread when I can get 1 pip spread)

point being.. were traders.. not EUR/USD only traders... we are traders.. we F**KING TRADE.. I dont want to get stuck owning my own gas station when every car goes electric.. I don't want to trade eur/usd if both currencies are gaining strength (unless I'm a range trader maybe)
  • #11
  • Jun 17, 2011 9:18am Jun 17, 2011 9:18am
Currency Strength..
Attached Image (click to enlarge)
Click to Enlarge Name: Currency Strength.jpg Size: 342 KB
  • #12
  • Jun 17, 2011 9:19am Jun 17, 2011 9:19am
Top 4 boxes..(red boxes) Euro strength
next 4... GBP
next 4... JPY
next 4... CHF

the 4 boxes on the left..(blue box) USD



You have 10 seconds to identify the strongest pair... go!
  • #13
  • Jun 17, 2011 9:23am Jun 17, 2011 9:23am
Quoting newyear498
Top 4 boxes..(reds) left to right Euro strength
next 4... GBP
next 4... JPY
next 4... CHF

the 4 boxes on the left..(blue box) USD



You have 10 seconds to identify the strongest pair... go!
I should mention you can adjust time frame as you see fit.. I'm looking for intraday trends personally
  • #14
  • Jun 17, 2011 9:32am Jun 17, 2011 9:32am
Quoting A-game
I understand what you are saying and you have all made valid points but i am not speaking of when EU is in a 100 pip range, im also speaking of when that range becomes choppy and volatile. Whipsaws back and forth are bad for every traders health and when there are other pairs to trade why not identify them and make pips from trending pairs? Even if EU is in a 200 pip range, if another can be identified with a higher probability of breaking out why not trade it and take 400-500 pips? The earlier example i provided on EURCHF was perfect. Whilst EU...
The basic flaw with indicators as we all know is that they are lagging, and that style of trading with those "heavy" indicators on an intraday level will chop you to pieces...longer term it will work out, cause not all currencies move @ the same time but they are all related. to me It does not not really matter greatly because if the banks reach their target, they will reverse that pair faster that you and me can click our mouse button. "I just take my pound of flesh and leave the rest."
  • #15
  • Jun 17, 2011 10:04am Jun 17, 2011 10:04am
Intrigued but confused. Thanks for dropping in newyear i was beginning to think i was the only one on this side of the tracks haha. My guess would be EUR-CHF to the upside? Reason being, all the Euro crosses are trending up, and the CHF appears to dropping which makes for a nice push up on the EUR-CHF?
  • #16
  • Jun 17, 2011 10:21am Jun 17, 2011 10:21am
Quoting A-game
Intrigued but confused. Thanks for dropping in newyear i was beginning to think i was the only one on this side of the tracks haha. My guess would be EUR-CHF to the upside? Reason being, all the Euro crosses are trending up, and the CHF appears to dropping which makes for a nice push up on the EUR-CHF?
Make sure you look at it properly.. regarding the CHF

I have up on the chart..

USD/CHF
EUR/CHF
GBP/CHF
and

CHF/JPY

in other words we want these charts to be down (indicating CHF strength)

USD/CHF
EUR/CHF
GBP/CHF

and

CHF/JPY needs to be up to indicate CHF strength


same is true for other parts of my correlations.. review again as I would disagree.. CHF in my screenshot is rather unbias.. or at the least.. NOT a main player at the time


However notice that the USD is losing strength across the board... and the EUR is gaining strength across the board.. so pairing weak and strong we could note the EUR/USD would give the strongest probability for an upward move

(plus its london/us overlap.. usually eur/usd is the best pair but NOT ALWAYS)


again just remember for the pairs TOP/BOTTOM .. its a compression method.. you get used to it fast trust me..
  • #17
  • Jun 17, 2011 10:40am Jun 17, 2011 10:40am
Ahhhh i missed the dollar pairs! (Its almost 2am here) Thats very creative im impressed. At first glance this seems like a wonderful idea however i wonder if it is only in hindsight that we may realise? This is very much like the FXCORRELATOR indicator and wonder after establishing strong and weak currencies, pairing them then looking for trades (on EU in your example) if we are not getting in too late? I take it you are trading this way already rather than proposing a new idea? I will definitely give this some screen time. Thank you and feel free to drop some more knowledge if you feel the need
  • #18
  • Jun 17, 2011 10:56am Jun 17, 2011 10:56am
Quoting A-game
Ahhhh i missed the dollar pairs! (Its almost 2am here) Thats very creative im impressed. At first glance this seems like a wonderful idea however i wonder if it is only in hindsight that we may realise? This is very much like the FXCORRELATOR indicator and wonder after establishing strong and weak currencies, pairing them then looking for trades (on EU in your example) if we are not getting in too late? I take it you are trading this way already rather than proposing a new idea? I will definitely give this some screen time. Thank you and feel free...
Some other things you can do is hedge.. or simply trade 1 currency in this way..

for example since we see the EUR is gaining strength and USD is losing strength..(in this example) you could also identify a second strong pair.. (instead of all 4 charts in agreement you see 3 charts agreeing)

then you can take a couple pairs.. so if we say for example.. the GBP is losing strength.. we can trade both the EUR/USD and the EUR/GBP long..

so if something happens with the USD we can have faith the GBP will continue to decrease in strength and offset the risk we take from trading one pair.. ultimately your main objective is to capitalize on the EUR gaining strength and avoid the USD deciding to be suborn if theres some news or etc..

the chart makes it easy to formulate a game plan quickly and monitor it nicely.. you can watch correlations of all the trends each pair has.. anticipate the fluctuations better.. its a nice tool IMHO
  • #19
  • Jun 18, 2011 3:39am Jun 18, 2011 3:39am
Quoting newyear498
point being.. were traders.. not EUR/USD only traders... we are traders.. we F**KING TRADE.. I dont want to get stuck owning my own gas station when every car goes electric.. I don't want to trade eur/usd if both currencies are gaining strength (unless I'm a range trader maybe)
Point taken, and as ever it has to be different strokes for different folks. I have tried taking what I thought was the easy route and jumping in on the pair that is moving the most but I couldn't make it work.

For me knowing that 1.4310 was key S&R and the 38 fib made me an awful lot of money yesterday, if I was looking at 10 or 12 pairs I doubt if I would have known where best to get in or what to shoot for.
I've got my pips - go get yours!
  • #20
  • Jun 18, 2011 5:28am Jun 18, 2011 5:28am
Watching anything more than 12 pairs even when using a daily method can become very monotonous and that is certainly not the direction i am going here. What i am attempting to do here is locate a single pair, perhaps two pairs with the highest probability of success. In doing this, i hope to establish not only directional bias, but also polar opposites. Extremely strong vs extremely weak.
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