🔵 As a forex trader, some of us stick to a pair or two, some of us trade several, and some just scan all of them for the exact setup that they trade in their strategy. Regardless, it’s a forex trader’s duty to have an awareness of how each currency is performing. If GBPJPY is going to rise, it will most likely be due to a combination of the pound gaining strength and the yen getting weaker.
Have you ever had the same setup on several EUR pairs, but the one you traded didn’t perform as well as others? It’s most likely because you chose the pair out of the bunch that wasn’t diverging in strength.
Before I analyze anything, I assess the strength of each currency first, then I select the best matchups to increase my probability by default.
Common techniques I’ve seen traders use to filter pairs:
Currency strength indicator
Currency heatwave mobile app
Looking at DXY, EXY, BXY, CXY, etc.
Manually scanning each pair to get a feel for each currency strength
None of these are right or wrong, but there is another method that I use, and I will share it in this post.
The issues I faced: I use to manually scan each currency pair, but it was too exhausting, by the time I started analyzing charts, my brainpower was weakened. As for the indicator & heatwave, I never personally liked them because I felt like they were too slow, I was always a step behind the big moves. The issue with looking at DXY vs. BXY is the BXY has too much weight related to the dollar, if you look at it you’ll probably see it moves just like GBPUSD.
Solution: We need a way to not only analyze each currency but make sure they are equally weighted. I created custom formulas on tradingview to help me read currency strengths faster, and more accurately.
How To Do It: If you open a chart on tradingivew, and you go to the top left of your chart where you can search an asset. Not only can you search assets but you can create formulas here, you should be able to see the math symbols.
So if we want to create a formula to find the USD strength this is what we can type in:
*Note: Use the same broker for all of them when you add them to the formula, and make sure they are consistent. The USD is the first one listed on all of them, we need this consistency because we are comparing everything to the USD. At the end of the formula, I divide it by 7 because that will divide the entire formula and show us the average.
When you press enter you will now see a chart displayed on your screen, this is displaying how the USD is performing across the board.
I have done this for all the top 8 currencies, I have also created one for XAU versus the top 8 so I can see its performance as well.
Now let’s say you are a harmonic style trader. This is how you can use it to find the higher probability harmonics (you can do this for other signals too)
Example #1: GBPNZD
Here’s what the formulas say:
Based on this, they are both strong, so there should be some range behavior. Let’s see how GBPNZD actually behaved:
Example #2: GBPNZD
Let’s say you are a trend trader, here’s what the formula said:
Based on this, GBPNZD should rise with strength because of the divergence.
How I use this: I use these formulas to find when trends or sentiment switches are occurring. I spend probably 65% of my time analyzing on these 8 charts. It allows you to be one step ahead of everyone else, and to increase your probability. I’ve used it on 5-minute charts, H1, H4, Daily, and Weekly. I’ve had no issues with it for over two years.
Of course, I’m not saying throw away the DXY or anything like that, this is simply another tool you can put in your box. I hope you found this valuable, feel free to backtest or tweak it to your liking, if you watched my Sunday outlooks, I go through this process before the week begins, then I do it before each of my trading sessions during the week.
Let’s Elevate, Gio
P.S. Every week I share a market outlook, educational content and trade ideas, right here on tradingview. Make sure to follow so you don’t miss them!
Comment your thoughts below, or if you need help setting it up!
Also, if you want to sharpen your psychology check this post I shared monday ->
Try this easier way to know which currency is strong or which one is weak ; there's an application on play store named "Myfxhelper", download it
Its useful n easy to watch "market trend" , "currency strength" in any time frame ( shows it on a simple ways like percentage or histogram )
try this and share your experience here ,good luck
Wow, what a great idea. Never new Tradingview is capable of such. I think this is exactly what is needed to gauge the strength of one currency over the other. Agree about DXY and etc.. Thanks for sharing
elevatedinvestor
⋅
@Daigest, No problem, I've been using this for about 2+ years, it works with any strategy, I just analyze each of them for buy/sell signals, then it helps me filter & pair up, if you have any questions about setting it up let me know. Saves tons of time, it's much easier then checking 25+ pairs
Gr8kilian
⋅
Very help So if the strength of GBP is increasing compared to that of the other pairs and when you compare the strength of a different currency like JPy to the other pairs and it’s decreasing So if I want to trade GBPJPY I should be a buy trade ? Am I correct?
Its useful n easy to watch "market trend" , "currency strength" in any time frame ( shows it on a simple ways like percentage or histogram )
try this and share your experience here ,good luck