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Currency Strength Analysis

  • #1
  • First Post: Jun 18, 2011 9:55am Jun 18, 2011 9:55am
  •  Ure
  • | Joined Jul 2009 | Status: Let the trade come to you | 21 Posts
Hi,

When you trade a pair of currencies, it is always helpful to compare the two part of it with other currencies within the other main pairs. E.g. if you see a technical reason to short the GBP/CHF, it puts more odds in you favour if you notice that at this time, the GBP is amongst the weakest currencies out there and the CHF is amongst the strongest.

I know that doing this comparison is quite boring and time consuming, but if you never tried it before, do it and see its result by yourself.

The way I do this analysis, if I would trade GBP/CHF, is that I look at the charts of 7 pairs of GBP and 7 pairs of CHF of the TF I'd like to trade with the 200 SMA. These are 13 pairs, not 14, because GBP/CHF belongs to both groups). Then I note down 1 for a currency if it resides on the strong side of the SMA, and -1 for a currency if it resides on the weak side of it.

E.g. EUR/GBP is currently above the 200 SMA, so I give 1 to EUR and -1 to GBP. If it was below, I'd give -1 to EUR and 1 to GBP. If it was GBP/EUR instead, it would have been currently below the 200 SMA, and I would have given 1 to EUR and -1 to GBP. Simple and common sense.

After that, I do the simple math. The current result is -7 for GBP and 7 for CHF, as per the attached sheet.

My request is, could anyone customise an indicator which can do this analysis and save us this work? The variable, as I imagine, would be

1.the 8 main currencies as on the sheet
2.the TF
3.the position against the 200 SMA, and the numbers, 1 & -1

Have a nice trading week coming ahead,

Ure
Attached File(s)
File Type: xls Strength Analysis.xls   26 KB | 581 downloads
  • #2
  • Jun 18, 2011 10:13am Jun 18, 2011 10:13am
Try this one.
Attached File(s)
File Type: ex4 CCFp.ex4   19 KB | 647 downloads
I AM WHAT I AM, AND THATS ALL THAT I AM
  • #3
  • Jun 19, 2011 4:28pm Jun 19, 2011 4:28pm
Quoting Goldflight
Try this one.
Ure,
if you're going to try the (excellent) indicator posted by Goldflight you should know how this and other similar indicators function. Here are two articles that give some insight:
Theoretical Basis of Building Cluster Indicators for FOREX
Practical Application of Cluster Indicators in FOREX

You can also download the original indicators from the above links (there's more than one).
If you don't risk, you don't ever have to lose.
  • #4
  • Jun 20, 2011 9:15am Jun 20, 2011 9:15am
  •  Ure
  • | Joined Jul 2009 | Status: Let the trade come to you | 21 Posts
Quoting Goldflight
Try this one.
Thank you for this other idea, although I'm still not quite sure how to use this one.

Quoting bug
Ure,
if you're going to try the (excellent) indicator posted by Goldflight you should know how this and other similar indicators function. Here are two articles that give some insight:
Theoretical Basis of Building Cluster Indicators for FOREX
Practical Application of Cluster Indicators in FOREX

You can also download the original indicators from the above links (there's more than one).
I've gone through these articles and found them quite confusing when they talk about the practicle applications.

But any idea why they say 24 pairs for the 8 currencies instead of 28?

Because, when you're combining each currency with each of the other ones, you're pairing the first one with each of the other 7, and then the second one with each of the remaining 6 (as it had already been paird with the first one), and so on. So you get 7 + 6 + 5 + 4 + 3 + 2 + 1 = 28

Any idea?

Ure
  • #5
  • Jun 20, 2011 5:14pm Jun 20, 2011 5:14pm
Quoting Ure
I've gone through these articles and found them quite confusing when they talk about the practicle applications.
No sane person is going to hand out an edge for free. I put those links up so people could get an idea of what went into these indicators and what they do (some are for trending purposes, others for signals). There is no right or wrong way of using them. I have incorporated these indicator into my trend analysis and they work very well. I agree with you that the way the author of said indicators chooses to apply them is both confusing and impractical, but that is not what's important here. The important thing here is to understand what the author wanted to do when he coded those indicators. Once you know that, you can start working on your own way of applying them. It takes a lot of testing to arrive at anything remotely reliable, but I think time spent of 'relative strength' indicators is well worth the effort.

Quote
But any idea why they say 24 pairs for the 8 currencies instead of 28?
You noted that 4 pairs are missing from the list and you're right. I can't say for sure since I'm not the author (you can contact the author via MQL codebase or visit the Onix fx forum, which is in Russina), but he did mention the constraints placed on CPU by the indicator so I guess it just down to minimizing CPU usage. Another possibility is the lack of those 4 pairs on brokers' platforms at the time of the coding of the indicators. There are updated version of his indicators available on TSD, Onix and FF with different variations.
If you don't risk, you don't ever have to lose.
  • #6
  • Jun 20, 2011 8:29pm Jun 20, 2011 8:29pm
  •  Ure
  • | Joined Jul 2009 | Status: Let the trade come to you | 21 Posts
Quoting bug
You noted that 4 pairs are missing from the list and you're right. I can't say for sure since I'm not the author (you can contact the author via MQL codebase or visit the Onix fx forum, which is in Russina), but he did mention the constraints placed on CPU by the indicator so I guess it just down to minimizing CPU usage. Another possibility is the lack of those 4 pairs on brokers' platforms at the time of the coding of the indicators. There are updated version of his indicators available on TSD, Onix and FF with different variations.
I also noted few minutes before I read your reply that my demo account broker does not have E/N pair.

Do you know a version for CCFp which has all the 28 pairs in its code?

Ure
  • #7
  • Jun 21, 2011 3:53am Jun 21, 2011 3:53am
Quoting Ure
I also noted few minutes before I read your reply that my demo account broker does not have E/N pair.

Do you know a version for CCFp which has all the 28 pairs in its code?

Ure
All of the indicators work fine on my real and demo platforms so I haven't really kept tab of that. Perhaps you should get a demo account with another broker and see if it works there. Then later you can use the demo account to help you trade alongside your real account OR you can change your broker.
If you don't risk, you don't ever have to lose.
  • #8
  • Jun 21, 2011 8:19pm Jun 21, 2011 8:19pm
  •  Ure
  • | Joined Jul 2009 | Status: Let the trade come to you | 21 Posts
Quoting bug
All of the indicators work fine on my real and demo platforms so I haven't really kept tab of that. Perhaps you should get a demo account with another broker and see if it works there. Then later you can use the demo account to help you trade alongside your real account OR you can change your broker.
The indicator works fine as E/N is not in its formula in the first place, or maybe is in this particular version that bro Goldflight has provided. I don't know but it is working fine. I just like to make sure the indicator I use is taking into consideration all the involved pairs, and changing the broker of a demo account is not a big deal either.
  • #9
  • Jun 22, 2011 3:37am Jun 22, 2011 3:37am
Quoting Ure
The indicator works fine as E/N is not in its formula in the first place, or maybe is in this particular version that bro Goldflight has provided. I don't know but it is working fine. I just like to make sure the indicator I use is taking into consideration all the involved pairs, and changing the broker of a demo account is not a big deal either.
I understand. I use CFP and CCFp I downloaded from TSD (the ones on MQL has updating problems) and they work just fine for my purposes. On my live account I only trade two pairs, but I've demoed the CFP on 10+ pairs and it worked like it should. All in all, I haven't run into any problems so far if that's what you're asking.
If you don't risk, you don't ever have to lose.
  • #10
  • Last Post: Dec 15, 2015 11:40pm Dec 15, 2015 11:40pm
Quoting Ure
{quote} I also noted few minutes before I read your reply that my demo account broker does not have E/N pair. Do you know a version for CCFp which has all the 28 pairs in its code? Ure
Not sure if you're still reading this, but FerruFx already mentioned it before:

*** Not sure which version you are referring ... but the original uses AUDUSD, EURUSD, USDCHF, NZDUSD, GBPUSD, USDJPY, USDCAD for calculation. ***

So, there's no need to have broker that offers all the 28 pairs because CCFp only calls the major pairs only.

Updated CCFp and related indies are here. Check it if it suits your need.
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