Trading the strongest currencies against the weakest currencies is the biggest edge that exceptional Forex traders have over average Forex traders. Those type of trades provide the strongest trends.
There are no charts for the US Dollar on its own (or any other currency for that matter) – you have to compare the USD with something else to get a feel for the strength or weakness of the currency.
By looking at the EURUSD you can get a feel of whether the US Dollar is stronger or weaker than the EUR. This is a narrow view as the EUR itself could be very strong or very weak so you are only getting information on the EUR compared to the US Dollar.
What makes this comparison even more confusing is that different time periods will give you different perspectives. The EUR could be stronger than the Dollar on the monthly, 4hour, 15 minute charts and weaker on the weekly, daily, 1 hour, 30 minute, 5 minute and 1 minute charts. Pretty confusing isn’t it.
The Sheer volume of information
And that is only 1 cross, the EURUSD. Imagine trying to do it for the top 8 currencies crosses in all Time periods. You would have to look at 8 x 8 = 64 possible crosses. This amount can be halved as you don’t need to both the EURUSD and the USDEUR. But then you would have to look at 32 charts in each time period (Monthly, Weekly, Daily, 4 Hour, I Hour, 30 Minute, 15 minute, 5 minute and 1 minute charts) 32 x 7 = 224 constantly changing charts and readings.
Reduce confusion about which currencies to trade and in which direction and in which time-frame
Trade confidently using the best currencies and the the best direction. Reduce the guessing and taking chances. Know what’s going on in the market with all currencies at a glance. HAVE A 360 DEGREE VIEW
THE 360 DEGREE INDICATOR. It calculates the strength of a currency compared to all its crosses on all time periods at the same time in pips. It then presents all this information in table formats. These tables sit on your charts and updated in real time – you always know the exact relative strength of a currency compared to other currencies in different time periods ALL the time.
It is ideal to trade the strongest currency against the weakest currency. When the currency cross consists of a strong currency/weak currency you should BUY. When the currency cross consist of a weak currency/strong currency then you should SELL.
The basic relative strength readings over various periods ranging from 3 hours to 3 months as shown below. The figures in the blocks show by how many pips the currency has weakened or strengthened. The red blocks show weakened currencies and the green blocks show strengthened currencies:-
You will notice that relative strength is measured in time periods that are not in-line with chart timeframes. This way of measuring relative strength has evolved by user experience over the years and the time periods in place have been found to be informative. Relative strength using short term time frames( 1 minute, 5 minutes, 15 minutes, 1 hour etc.) have not been meaningful and often misleading. Relative strength trading is intended for longer term perspectives.
Examples of the kind of information you can get from this table are:
The JPY has overall strengthened compared to other currencies over all measurement times (sign of a sustained strong currency)
The CHF and the EUR, overall has weakened compared to other currencies over all measurement times, except for the 1 month period (sign of a sustained weak currency )
In the last day the CHF has lost 995 pips overall compared to other currencies whereas the CAD has gained 653 pips overall compared to other currencies. With the benefit of hindsight buying the CADCHF would have been the best trade to make.
You can also see trends in this table. The USD was strengthening in the short term whereas the EUR was weakening in the short term. Selling the EURUSD would have been a good move.
Except for the 6-hour view the AUD has been in a strengthening trend.