Currency Strength Meter

The currency strength meter helps you identify the strongest/weakest currency to use in different trading setups. It uses the crosse between all major currencies to calculate their values for the last 24 hours. The option to display this data as a chart helps you not only to see the current currency strength, but also whether it is decreasing or increasing. You can use the "Refresh" button to get the latest data.

Why do you need a currency strength meter?

We trade in the foreign exchange market every day and use currency strength data to support our trading decisions.

Before we explain how the meter works, let us try to explain what a currency strength in the context of Forex trading. Understanding how currency strength changes and how these changes affect the value of currency pairs can help you improve your forex trading results. In order for this indicator to give you the results you want, it is important that you combine Forex strength meter with other indicators and chart analysis. The basic trading idea behind the indicator is "buy a strong currency and sell a weak currency".

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 for the USD by default, you can use a currency strength meter and pick the strongest currency and sell that pair. Then sell in a much stronger downtrend.

Choosing the right pair to trade with the help of the currency strength meter

Sometimes choosing the right pair can be quite simple. You get the currency you want to buy or sell, then choose the strongest or weakest currency and trade that pair. In other situations, you can simply choose the strongest currency against the weakest currency.

The problem with this is that there is already a certain 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 simple example. Suppose we want to buy EUR and take the above picture as an example. If we choose the weakest currency at this moment, it must be 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 this currency can lead to a worse result if we buy against the GBP. It is not the weakest currency, but it is going down.

Can we use currency strength for timing or main entry signal?

The direct answer should be no. But on the other hand, you can be very creative and discover a new way to use the indicator. The main reason why this indicator cannot be the main signal is that it has no predictive value. It only shows what happened in the market.

If there is a downtrend, one currency will rise and another will fall. But what does that mean? Will it continue to go up or will it go down. 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 move in your direction. In such cases you know that you did the right analysis, but you chose the wrong pair. In this case, you need such a strength meter to improve your profits.

Conclusion

The currency strength meter can be a filter, a confirmation signal, or just a helper. It cannot be used alone, but it can help you choose the right currency pair and improve your trading results. Also, it is important to choose the right time period - if you trade intraday, you can watch the 24-hour chart, but if you track long-term movements, you need to watch the weekly chart.