One pair could indicate a strong movement while the other indicates a range. This would signal traders to avoid trading with correlated pairs going in the opposite direction. A trader might avoid longing GBP/USD if EUR/USD is experiencing a downtrend while GBP/USD may be ranging. This is because GBP/USD carries a greater downside risk than USD strength.
To become a successful trader it is important to understand which currency pairs will give you the highest probability of success. Our free currency strength meter is designed to give you a quick overview of the underlying movement of each individual currency in the Forex market.
It analyzes real time forex data every minute to determine the current strength. If you refresh the page, any changes will be visible.
For any ideas and suggestions related to the functionality of the currency strength meter, do not hesitate to contact us.
We can conclude that currency strength is determined by the high correlation between these pairs. The GBP (the common currency among the pairs) is therefore the most powerful currency in this instance.
Ultimately, it is down to you to decide how to use these tools. Most traders use the strength meter alongside an existing strategy as a way to trade in the same direction as the underlying strength of the markets.
The Admirals Forex correlation matrix below shows the correlations between these currency pairs:
It gives a snapshot of the currency's current strength, which helps make trading decisions or verify signals provided by other indicators.However, it is not more than a "feel" for the market, and we always use it with long-term indicators like MACD or SMA.
The meter collects data from each forex pair and calculates them. It then adds all of the related pairs to a currency, such as EUR/USD/GBP/USD, USD/JPY/USD, USD/JPY/USD, and USD/USD. Finally, it calculates the current strength.
If we know that the US Dollar is strong and the Japanese Yen is weak then it's obvious that going long on the USD/JPY Forex pair offers us the a low risk trading opportunity.
It can be used to quickly determine which currencies you may want to trade and which ones might be best avoided. If a currency suddenly becomes weaker or is very strong, it could be a trading opportunity. These deviations between currencies usually indicate momentum. Contrarily, when two currencies are weak, strong, average strength or weak, there can be a range or sideways movements. If you are not comfortable trading these pairs, it is best to avoid them.
These charts reveal the currency pairs that have made the biggest movements in price. Traders can use these charts to decide which Forex pairs offer them the best trading opportunities.
The GBP is used as the quote currency in the first pair. Long trades are expected to see the EUR strengthen against the GBP. In the second pair, GBP is considered the base currency. Long trades anticipate the GBP to strengthen in comparison to the USD. This means that a long EURGBP trade is one that expects GBP to weaken and a long GBPUSD trade is one that expects GBP strength.
To become a successful trader it is important to understand the relative strength of each currency. This indicator helps traders see which trading pairs are the strongest and which are the weakest on different time scales. With this information traders will have a great advantage on their operations. The Currency Strength Indicator is fully configurable and designed to optimise trading success.