Currency Strength Meter
Successful trading with currency strength
Currency Strength Meter helps you identify the strongest/weakest currency for different trading setups. Thanks to the ability to display this data as a chart, you can not only determine the current strength, but also see if it is decreasing or increasing, as well as identify current market trends.
Data in real time
Works perfectly as a filter
Additional tool for your trading
What is a Currency Strength Meter and how do you use it?
Currency strength is the value of a currency in terms of how much it can buy in goods, services, or other currencies. It is influenced by many factors, such as the supply and demand in the forex market, the interest rate set by the central bank, the economic performance and inflation of the country, and the trade balance with other countries.
The currency strength meter is helpful for traders who want to see which currencies are performing well and which are lagging. It can also show the direction and speed of the price movement for each currency. Traders can spot trading opportunities by comparing the strength of different currencies and looking for divergences or rate changes using a currency strength meter. This information can be useful for traders who want to make informed decisions about which Forex pair to buy or sell.
CSM can be useful for forex traders who want to stay up to date with the latest market conditions and make informed decisions about their trades. By keeping an eye on the indicator, traders can quickly identify trading opportunities. It gives you valuable insight into the Forex market. You'll know which currencies are strong and which pairs are best to trade at that time, so you can make your decisions based on real-time data and without guesswork.
Why do you need a Currency Strength Meter?
We trade the Forex market every day and use strength data to support our decisions. Before we explain how this tool works, let us try to explain what a strength meter is in the context of Forex trading.
The basic trading idea behind the indicator is "buy a strong currency and sell a weak one". Let us say you have the idea to sell EUR. But does that necessarily mean that you have to sell EURUSD? And what happens if the USD is also weak at that time? The price probably will not move significantly. So instead of going long the USD by default, you can use a strength indicator and pick the stronger currency and sell that pair. Then sell in a much stronger downtrend.
Knowing how the strength indicators change and how they affect currencies will help you improve your trading results. To get the results you expect, it is important to combine the Forex Strength Indicator with other indicators and chart analysis tools.
CSM helps you choose the right pair for trading
Sometimes choosing the right pairs can be quite easy. You just need to decide which currencies you want to buy or to sell, then choose the ones that are stronger than the others. Other times, however, you may not know which pairs are strong enough to use for trading.
The problem with this is that there is already some movement to have a strong or weak currency. After this movement, there is no guarantee that this movement will continue or that a correction will follow.
The typical use of the currency strength meter can be illustrated by this example. Suppose we want to buy EUR and take the above picture as market conditions.
If we choose the weakest currency at this moment, it must be the USD. But there is something interesting: the USD is the weakest currency, but it is rising, and rising fast. So maybe there is a trend and choosing the USD can lead to a worse result if we buy against GBP as the quote currency. The GBP is not the weakest currency, but it is going down.
Can we use currency strength as a timing or main entry signal?
The direct answer should be No. But then again, you can be very creative and discover a new way to use the indicator. The main reason why currency strength of currencies cannot be the main signal is that it has no predictive value. It only shows what has happened in the market and is calculated based on historical data.
If there is a downtrend, one currency will rise and another will fall. But what does it mean? Will it continue to rise or will it fall. Both can happen. The main purpose is to filter the signals and help you choose the right instruments.
You may remember several cases when, for example, you wanted to sell the USD and buy the EURUSD and nothing happened, but with the GBPUSD there was a big movement in your direction. In such cases, you know that you did the right analysis but chose the wrong pair. In this case, you need such a strength meter to improve your profits.
Final suggestions for using the currency strength meter
The relative currency strength can be a filter, a confirmation signal or just a tool. It cannot be used on its own, but it can help you choose the right pair and improve your trading results. Also, it is important to choose the right time period. If you trade intraday, you can look at the 24-hour chart, but if you track long-term movements, you should look at the weekly chart.
Frequently Asked Questions(FAQ)
Currency strength is a measure of the relative strength of an individual currency. Strength is determined by how well it performs relative to other major currencies.
Strength indicator can be used to identify potential trading opportunities by showing current market conditions. Remember that it is just one tool in your trading toolbox and you should always do your own research and analysis before entering a trade position.
Absolute currency strength refers to the inherent value of a particular currency, independent of other currencies. It is a measure of the strength or weakness of the currency based on factors such as the strength of the issuing country's economy, political stability, and interest rates.
In contrast, the relative strength is a measure of the value of a base currency relative to others. It is a measure of how well a particular currency is performing compared to other currencies in the market. In general, absolute strength is a long-term measure, while relative strength can change rapidly in response to short-term events or market conditions.
Forex strength indicator is designed to show you the best pair. For the exact levels/entry positions you need to use the chart of the pair or other technical indicators.
Currency Strength Meter - Essential Trading Tool
Trading can be profitable, but it's important to know what you’re doing before diving in. One thing that could make the process easier is our currency strength meter that helps you identify which currencies are strongest and weakest.
Disadvantages of currency strength meters
Despite the advantages of using currency strength meters, it is not necessarily the best way to trade. Poorly designed currency strength meters can cause a number of problems.
Strategies for Successful Trading with a Forex Currency Strength Meter
Monitoring the relative strength of different currencies, evaluate the general conditions in the currency market and take into account the current economic trends.
Why we can't directly use the strength of currencies for trading
There are several reasons to believe that using the strength of currencies directly in trading is incorrect.