# HOW TO DETERMINE THE STRENGTH OF A CURRENCY

One way to determine the strength of a currency is to add 2 moving averages to the charts, one set to 5 and one set to 12. If both the 5 MA and the 12 MA is pointing upwards, that means +1 and vice versa if both of the MA:s are pointing downwards. If they are pointing against each other, different direction or are flat lined, thats equals 0 as we are most likely in a consolidation.
On the chart above we have determined the daily strength of EUR. Today EUR is moderate or "0".
When we have determined the strength of all major pairs: EUR, USD, GBP, JPY, CAD, NZD, AUD and CHF you will have a clear view of what pairs are strong respective weak. We don't want to be trading pairs that have for example: EUR -5 and CAD -6, because these pairs are both weak and won't move very much, very likely to be in a consolidation. We want to combine the strongest against the weakest and vice versa, example if EUR is +5 and USD is -6, we are then looking for opportunities to go long on EUR/USD .

Remember to use all your knowledge while trading, daily currency strength is a great tool to pick out the best pairs to trade for the day.

Today EUR is 0 and USD is +7, so we are looking of opportunities to go short on EUR/USD and if we take a look at the EUR/USD chart, we can see that we are two legs down, (the market usually moves no more - almost never more than 3 legs before if have to refresh itself. Also if the second leg is bigger than the first, we can expect a third leg. If the third leg is bigger than the second leg, we can expect a test, then market have to refresh itself before it can continue down further) the second leg is pretty much the same size as the first leg, so we can expect a 3d leg to come in, or at least a test. However, we can't enter the trade at the current price so we wait until it pulls back to our expected area of entry and leave a wick indicating its struggling at this area, we then go down to the 240 TF (/ 60 TF) to see if we can count the legs of the pullback and get an ideal entry.

Here is a checklist on how to trade PRICE ACTION with daily currency strength.

1) Check market strength.

2) Look for fresh moves (V Formations).

3) Identify structure priority (Legs).

4) Look for ideal S/R.

5) Estimate R:R.

6) Watch only the view chart pullback until or near the S/R (and leave a wick/tail).

7) Go down one timeframe to see if the legs are visible.

8) Enter trade accordingly to plan of action.