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Currency strength and weakness comparison

  • #1
  • First Post: Edited 12:56pm Dec 2, 2011 9:29am | Edited 12:56pm
Just thought I would open up this topic for discussion.

It seems to me that this method of picking trades would be the best way to find a profitable opportunity, for the following reasons -

1. The very principle of making a profit in the forex market is to Buy a strong currency against a weak one, so technically speaking, if the currency you are buying is not stronger than the one it is paired with, you aren't going to make a profit.

2. Observing individual currency strength and weakness allows you to pin point pairs which have the most potential for trending and alerts you to those pairs which will most likely get stuck in a range.

3. This method gives you the ability to clearly identify future opportunities. For example: You observe that the EUR is flat for a day or two, you also observe the USD going long. This tells you to keep your eyes on the EUR for a potential breakdown, which would give you a nice shorting opportunity on the EURUSD pair.

This approached has worked well for me and lends alot of clarity to intraday analysis. Keeps me from getting surprised by a big move, as I will usually be waiting for it.

What do you guys and gals think? Please discuss.

-fighter
  • #2
  • Dec 2, 2011 8:54pm Dec 2, 2011 8:54pm
I fully agree with your statements. I have yet to find a simple free currency strength indicator that gives strength over weakness is there a website anywhere that tells you?
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  • #3
  • Dec 3, 2011 11:48am Dec 3, 2011 11:48am
Pipanator -

I used to use a software called Acuity workstation to do my strength and weakness analysis as it had some pretty cool tools for that, but in the end it wasn't worth the money IMO.

Now I use a free MT4 demo account from SIGTrader which has currency indices for all the major currencies. I basically check the trend on a single currency like the EUR and then check the trend on another to see if they are moving in opposite directions. Once I find a pair of currencies with clear directional bias, I know that I will have a smooth market to trade in.

For example, this week the EUR was weak and the USD was weak... so that is incompatible, which is why we had such horrible chop the whole week. However the AUD was pretty strong, so I traded AUDUSD and it was pretty smooth sailing.

That's my approach anyway. I would love to hear what other people are doing.

-fighter
  • #4
  • Dec 3, 2011 12:01pm Dec 3, 2011 12:01pm
Quoting fighterdude
Just thought I would open up this topic for discussion.

It seems to me that this method of picking trades would be the best way to find a profitable opportunity, for the following reasons -

1. The very principle of making a profit in the forex market is to Buy a strong currency against a weak one, so technically speaking, if the currency you are buying is not stronger than the one it is paired with, you aren't going to make a profit.

2. Observing individual currency strength and weakness allows you to pin point pairs which have the most potential...


Can't you see the same thing simply by looking at the pair?

Currency strengths are as subject to abruptly change as the pair itself is.
  • #5
  • Dec 3, 2011 1:37pm Dec 3, 2011 1:37pm
Quoting billbss
Can't you see the same thing simply by looking at the pair?

Currency strengths are as subject to abruptly change as the pair itself is.
This is what I thought at first as well. But, I've observed single currencies weakening a couple of hours before it has an impact on a particular pair.

For example on Wednesday November 30th, SIGTrader's USD index shows the USD weakening significantly two hours before the New York Open which is when the Lowering of $ swap rates was announced. At the same time, the EUR index was falling slightly as well. As soon as the EUR index started to gain strength, a trader could have taken a long position on EURUSD and would have been well positioned before the big move up.

Unfortunately I didn't get any of it as I slept in a little too long that morning(PST time zone).

Anyway, this is just my experience with it. It seems to work pretty well.

-fighter
  • #6
  • Dec 3, 2011 1:47pm Dec 3, 2011 1:47pm
Quoting fighterdude
This is what I thought at first as well. But, I've observed single currencies weakening a couple of hours before it has an impact on a particular pair.

For example on Wednesday November 30th, SIGTrader's USD index shows the USD weakening significantly two hours before the New York Open which is when the Lowering of $ swap rates was announced. At the same time, the EUR index was falling slightly as well. As soon as the EUR index started to gain strength, a trader could have taken a long position on EURUSD and would have been well positioned before...

If it works for you, stay with it.

I've played with several different currency strength systems and have never been able to make them profitable.
  • #7
  • Last Post: Jul 8, 2013 9:32am Jul 8, 2013 9:32am
Yea I have been demo trading with a strength MA currency index indicator trying to figure out how to use it to profit. I would be interested to see how the SigTrader's index looks like compared to mine.
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