In this article we will present a currency strength strategy for currency trade entries, chart setup, and another strategy for overall market analysis. All three strategies are effective at helping currency traders to understand what currencies and pairs are strong or weak and are moving with good momentum. These strategies will also improve any trader’s understanding of the current market condition. The strategies work very well for the 8 most liquid currencies and 28 pairs total.
Currency Strength Strategy For Current Market Momentum
If you are a currency day trader or you just want better entry points into the trends of the market, knowing where the curent momentum in the market is right now is a must. Measuring the current market momentum in real time is one currency strength strategy that can be applied to all trade entries.
In the example below the Swiss Franc CHF is strong on all pairs in real time. This drove significant movement for traders on this day in the main trading session. These are seven of the CHF pairs we follow with the Forexearlywarning trading system. There was also some minor US Dollar USD weakness in the market. So the USD/CHF moved strong to the downside, and it makes perfect sense. So you have a strong entry point and additional potential for more pips riding the D1 time frame down trend on this pair.
Also, the GBP/CHF dropped on the CHF strength and is currently at one support level, so in this case a trader may choose to scale out lots and reduce position size. 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 intraday movements. The real time currency strength indicator in this strategy 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/CHF moved 1.12% on this day, which is around 105 pips of movement on just one pair in one trading session.
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 slightly weak, but the Japanese Yen JPY strenght dominated this currency. This caused a strong sell off on the GBP/JPY. This pair sold off over 150 pips in one both tradingsessions combines over a 15 hour period.
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 forex market 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, even though this is a great pair for trading. 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.
Currency Strength Chart Setup
Traders can supercharge their trading with the proper chart setup. We have a powerful chart setup for currency traders that matches our individual currency strength approach. Look at how the chart setup on the USD pairs matches the live heatmap indicator. This is a powerful way to see the pips every day.
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Your trade entries will improve dramatically with a chart setup like this and you can learn how to set this up using the metatrader profiles. This chart setup works for 8 currencies and 28 pairs to see the currency strength very clearly.
Using Currency Strength for Overall Market Analysis
Another great currency strength strategy for 8 currencies 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 out the spreadsheet you will know where all of the market momentum is, based on the trends of the market and individual currency analysis on the higher time frames. This way you will not only be trading in the direction of the daily market momentum, but also with the trend.
In this example all of the trends on the H4, D1 or W1 time frame are pointed in the direction of USD weakness. The forex market analysis spreadsheet can be filled out daily for 8 currencies and 28 pairs. It can be helpful for planning trades in the direction of the major trends.
In this article we have presented three valid currency strength strategy methods. We urge all forex traders to use these strategies every day and their positive trades and pip totals will improve dramatically, while incorporating up to 28 pairs into their trading program.