In this article we will present a currency strength strategy for forex trade entries and another strategy for market analysis, both strategies work at helping forex traders to make more substantially more pips. These two strategies will improve any trader’s understanding of the current market condition, along with more much more profitable trade entries, trade after trade.
Currency Strength Strategy For Current Market Momentum
Measuring the current market momentum in real time is one currency strength strategy. This strategy can be used to assist greatly with trade entry management in real time.
In the example below the US Dollar USD is weak on all pairs in real time. This drove significant movement for traders on this day in the main trading session. All seven of the USD pairs we follow with the Forexearlywarning trading system. There was also some minor New Zealand Dollar NZD and Canadian Dollar strength in the market. So the NZD/USD moved strong to the upside, and it makes perfect sense. Since the NZD/USD was also in an uptrend on the larger time frames, it should continue higher on the D1 time frame to the 0.6800 resistance area. So you have a strong entry point and additional potential for more pips riding the trend.
Also, the USD/CAD dropped on the US Dollar USD weakness and is currently at one support level, so in this case a trader may choose to scale out lots and reduce position size. The EUR/USD also moved up strong on this day and broke out of it’s trading range, now this pair has additional upside on the D1 time frame as well. So you can also plan more trade entries going forward on the pairs that are trending.
A phenomenal and profitable day of trading for any day trader or trend trader on only one group of pairs, with strong movements. The real time currency strength indicator in this strategy you see below is The Forex Heatmap®, which is our accurate currency strength meter that provides live buy and sell signals for 28 pairs, including the US Dollar USD pairs and seven other currencies. The heatmap is showing that the USD/CAD moved 1.76% on this day, which is over 200 pips of movement on just one pair.
Another Example of Intraday Currency Strength
This is another example of how to use intra day currency strength for strong trade entries. Look at the example below. On this day the British Pound GBP was weak on all pairs, and the Japanese Yen JPY was strong on all pairs. This caused a strong sell off on the GBP/JPY. This pair sold off over 300 pips in one trading session, also, the major trend on this pair is down on the larger time frames, so more pips are possible as this pair continues lower on the major trend. Trading with the trend and using strong entry points is the best way for forex traders to profit from market movements.
Strong signals like this happen routinely on the forexmarket if you incorporate these tools into your trading. We track 8 currencies at Forexearlywarning, but since so many traders use technical indicators on 1 or 2 pairs, they always miss the movements on pairs like the GBP/JPY pips. Using easy to interpret visual tools like The Forex Heatmap®, which monitor the strength of the currencies and money flows in real time, you can trade like a pro. Incorprating the heatmap into your currency strength strategy for trading is a must.
Using Currency Strength for Overall Market Analysis
Another great succency strength strategy is to analyze individual currencies as they appear with market trends. Currency traders who like our real time currency strength tools can also have a big advantage if they use a currency strength strategy for total market analysis every day. Always knowing the overall condition of the market, based on trends will raise the bar even higher and complete your overall currency strength trading system. Analyzing the market time frames to determine the strongest versus weakest currency takes time but it well worth it, and your reward will be to capture more pips.
You can set up some simple exponential moving averages for all of the JPY pairs, USD pairs, NZD pairs, etc. to start. Then drill down the charts daily using multiple time frame analysis by individual currency. For example if all of the JPY pairs are in up trends, then you know the JPY is weak. Then, if you analyze the AUD pairs and the AUD looks strong, you know to check the AUD/JPY for a potential strong movement or trade entry. You can then monitor this pair with price alerts. Use similar procedures for the 8 currencies and 28 pairs in our trading system.
On the Forexearlywarning website, we show you how to set up the trend indicators, and how to analyze the market by individual currency. We have a great tool for market analysis, it is our forex market analysis spreadsheet. After you fill ou the spreadsheet you will know where all of the market momentum is, based on the trends of the market and individual currency analysis. This way you will not only be trading in the direction of the daily market momentum, but also with the trend.
In this article we have presented two valid currency strength strategy methods. We urge all forex traders to use these two strategies every day and their trades and pip totals will improve dramatically, while incorporating up to 28 pairs into their trading program.