A Forex correlation matrix will show you at a glance which currencies have a high degree of correlation. This allows for you to avoid making trades that are not necessary and you can therefore avoid double exposure.
Our site continuously monitors forex data and determines its strength. You can refresh the page to view any changes.
Currency Strength Meter Supreme Edition (free currency strength meter plugin) is only available to Admirals account traders. It includes an indicator package, with 16 new indicators. The Forex correlation matrix allows you compare currency pairs in realtime.
Pros recommend that you use a Forex Strength Meter as an additional confirmation.
Correlation between different currency pair can also indicate the level of risk for trade strategy. If EUR/USD/GBPUSD are negatively correlated pairs, then it can signal double risk in the same position if the weakest currency is involved.
The basic idea behind the strength meter is that it acts as a "filter" to help you make decisions. It is essential to know whether the US dollar is strengthening and weakening.
Traders can avoid unnecessary hedging when the correlation strength between different pairs are known in advance. You know which direction these pairs are going in if they have a negative correlation, such as EUR/USD vs USD/CHF. If you were to open long trades on each pair, you'd likely win on one, but lose on another.
Depending on the Forex trading style you choose, you might need to look at different time frames. For intraday traders, you will require more recent data. You will need monthly data if you are a long-term trader.
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You should also remember that the timeframes for a currency's strength are always important. EUR is an example of this. It can be solid in the current timeframe, but it is not the strongest on the monthly analysis.
Assets that show high correlation move in one direction. Because you're basically trading the same pair more than once, it's not wise to open multiple positions that have high correlation. This could make it very difficult to reopen your positions if the market turns against. Forex traders who take long positions in the AUDCHF/AUDJPY and EURJPY can be exposed to double risk if they are highly correlated.
There are many options for how you can use the currency strength indicator in your trading. They all depend on what your trading style is.
Deeper analysis reveals that these positions have double exposure to JPY (AUD) and JPY (JPY), which could be detrimental for trade if the movement goes in the opposite direction to the trader’s expectations.
If you trade in the trend direction, choose the pair with the strongest or weakest currency to get the strongest trend. You can trade in a range of currencies by selecting currencies that have a slight strength difference.