The best approach to successfully trading any spot forex pair XXX/XXX and gold XAU/USD is strength/weakness for maximum potential and profit. This approach is fundamentally sound and works under all market conditions on the small and large time frames, even after important news drivers. The strength/weakness approach can be applied to the top 28 most liquid forex pairs plus XAU/USD for daytrading, swing trading, and position/trend trading.
Fundamental Basis
When you buy any currency pair you now own a simultaneous long/short position. It does not matter what pair you buy. So the maximum profit will be if the base currency strengthens or appreciates and the cross currency depreciates or weakens. On Buys even if the base currency strengthens and the cross currency is stable there will be a profit when you close out the trade. This simple but fundamentally sound approach can be leveraged by any trader into profitable trading, week after week. The profit potential of trading this way is higner than any other available method in an industry dominated by technical indicators, which completely ignore these fundamental facts.
When selling a currency pair you are looking for weakness/strength in the base/cross currency, just the opposite, to maximize profit potential.
Examples: If you buy the GBP/CHF pair: You are buying the GBP and selling the CHF (short position) to pay for it. For maximum profit you want the buy position to go up and the sell position to go down. Because you are using levage of 30, 50 or maybe 100:1 or more it is more like buying call options on the GBP and buying puts on the CHF simultaneously. Even if the GBP appreciates and the CHF holds steady there will be a profit when you close out. But if the GBP goes up and the CHF drops strong profits become possible on the trade. It works the same exact way for buying the EUR/USD or any other pair. Strength/weakness has immutable logic when buying any currency pair. Do just the opposite for sells. make sure the base currency is weak and the cross currency is strong.
We apply this method to the top 28 forex pairs comprised of the top 8 currencies USD, CAD, EUR, GBP, CHF, JPY, AUD and NZD pairs, plus gold XAU/USD. Any paired asset XXX/XXX with a base and cross currency. 29 pairs total.
How To Measure Strength/Weakness In A Currency Pair
There are two ways to measure strength or weakness in a currency. One way is by analyzing the trends within each individual currency and the other way is and another way is in real time.
Forex Strength Weakness Analysis
Forex Strength Weakness Spreadsheet
Using some simple trend indicators and our handy forex market analysis spreadsheet you can analyze the strength or weakness of the top 8 currencies to determine market direction. Look for consistent strength or weakness on each of the top 8 currencies.
Second Method:
The other way to analyze currency strenth or weakness is in real time. For this we have our live heatmap tool which tell you what pairs are moving the fastest up or down in real time in both trading sessions across 8 currencies and gold. All 9 assets are on one page so you can read it in about 45 seconds.
Real TIme Strength Weakness
Strong Price Movement
In this example the JPY is weak against all currencies. The GBP has slight strength so the GBP/JPY was the best pair to trade today. This is a 200 pip move across the Asian and Main session in one continuous move. Forex traders are not used to this type of move but they can convert to strength/weakness trading andsee strong moves like this regularly. This method is simple but has high upside potential.
On this trading day all of the JPY pairs moved up on JPY weakness. We have an excellent chart setup for viewing all of the JPY pairs on one screen using the metatrader profiles . You can use this chart setup for 8 currencies and gold XAU, then navigate to where the best trends and strength/weakness momentum is at, day after day. It is the best chart setup available for forex traders.
Trend Cycles
If a currency pair or gold is trending up you have a series if upcycles interrupted by consolidation or retracement periods. All of the upcycles are because the base currency is strong or the cross currency is weak, or both. So strength/weakness wins again. This is how trends form and manifest themselves with the continuous movements. This can easily be confirmed again with some very basic moving averages on any charting system.
Strength Weakness Trend Trading
Does Strength/Weakness Trading Really Work?
Yes it does and no backtesting is needed. Starting tomorrow monitor the top 28 forex pairs plus XAU/USD that have the biggest % movements every day. Then ask yourself why theese particulat pairs moved up or down so fast and so far. “Why did this happen ?”
You will find out that it is always the same reason, strength/weakness. Every day, day after day. After two or three weeks of doing this you will be completely convinced without anyone having to “sell” you the idea. It is always stength/weakness every time an under all market conditions, all time frames, even after forex news drivers.
If you compare strength/weakness trading to any other method you will be very surprised how this logical approach is literally 50x more productive than random chart setups or standard technical indicators, both of which completely wreck your trading. Once you adopt the strength/weakness logic you will be set for a lifetime of making pips. Every day strong/weak plus the best available trends will posture you to maximize your forex trading and give you the most upside potential.
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