FX Currency Strength Radar Manual

Transcription

1 C O D I N G T R A D E R. C O M FX Currency Strength Radar Manual Version 1.00

2 Table of Contents FX Currency Strength Radar... 1 What is FX Currency Strength Radar?... 2 Installation... 3 Configurations How to use FX Currency Strength Radar How are Strength / Weakness determined? Disclaimer / Disclosure... 18

3 FX Currency Strength Radar For a forex trader, it is important to understand the inherent difference between currencies and other financial instruments. Most financial instruments such as stocks, bonds or commodities represent only the price of a single underlying entity. Changes in the price of that instrument are affected only by the perceived value of the underlying entity. Currencies are different. Currency pairs represent the value of one currency in relation to another. A change in the currency rate reflects a change in value of either or both of the underlying currencies. As forex traders, knowing the relative value of each individual currency is vital in deciding the most suitable pairs to trade. FX Currency Strength Radar compares the strength of all the major currencies and lists them in accordance to their strength/weakness. You no longer need to scan through all the charts to check on how each currency is doing against the other currencies. By itself, FX Currency Strength Radar does not provide buy/sell signals. However it tells you which are the best pairs to trade. When used in tandem with traditional technical analysis, it greatly increases your edge against other currency traders who solely rely on technical analysis tools which were initially designed for single entity instruments in mind! 1

4 What is FX Currency Strength Radar? FX Currency Strength Radar is an institutional quality yet user friendly FX signal application which gives you the most up-to-date strength/weakness of all major currencies (not pairs) over 6 timeframes. Relative Strength Analysis System FX Currency Strength Radar makes use of a cutting edge relative strength analysis system, showing you the strength/weakness of individual currencies as compared to all other major currencies in 6 different timeframes. Momentum Detection Feature Advance momentum detection feature is built into the system, filtering currencies by their current momentum, giving you advance signals on currencies which are breaking out. User-Friendly Interface Utilizing an easy-to-read dashboard style interface, the application provides you with a one glance overview of the currency market, cutting short the analysis process for you. To learn more about our Relative Strength Analysis System / other FX Radar series applications, please visit For technical support / enquiries, our technical support team at support@codingtrader.com In short, FX Currency Strength Radar is the ideal tool for retail traders who do not have the time to actively analyze the market. 2

5 Installation Download the exe installer (FX_CurrencyStrength_Radar.exe) from the website. Double-click the file to start the installation process. FIGURE 1 FX Currency Strength Radar Installer opened 3

6 Click Next to display the Disclaimer. FIGURE 2 FX Currency StrengthRadar Disclaimer 4

7 Click Next to display the License Agreement: You must accept the License Agreement and click Next to continue. FIGURE 3 FX Currency Strength Radar License Agreement 5

8 Select the MetaTrader 4 installation that FX Currency Strength Radar should be installed into and click Next. FIGURE 4 Choose MT4 Directory 6

9 Confirm that the installation options are correct and click Start. FIGURE 5 Confirm installation option 7

10 Confirm that the installation options are correct and click Next. FIGURE 6 Installation completed The FX Currency Strength Radar is automatically installed into your c:\program files\mt4 installation\ where mt4 installation is your MetaTrader 4 broker installation folder. That s it. You have successfully installed FX Currency Strength Radar! 8

11 After applying the template file Fx_currencystrength_radar, your MetaTrader 4 window should look like this. FIGURE 7 Chart after applying Fx_currencystrength_radar template 9

12 Configurations If you are not viewing all the timeframes provided in FX Currency Strength Radar, you have the option to turn them off. Right-click on the chart and select Indicators List. FIGURE 8 Chart Indicator List Double click on FX_CurrencyStrength_Radar to open its configurations page. FIGURE 9 FX Currency Strength Radar Configurations 10

13 Select false for the timeframes that you do not wish to view. You can set the refresh rate of FX Currency Strength Radar too. Its default value is set at 5 min. If you are not monitoring at that timeframe, you may set it to a higher value. (Value is in minute) FIGURE 10 FX Currency Strength Radar Configurations refreshperiod 11

14 How to use FX Currency Strength Radar First let us go through the components in FX Currency Strength Radar dashboard interface and what they meant. FIGURE 11 FX Trend Radar Dashboard interface The Timeframes are listed in the left vertical column. Currencies (not pairs) are ranked according to their strength/weakness. The weakest currency on the left and the strongest currency on the right. The weakness/strength of the currencies is further differentiated by their tones. Dark Red: very weak. Pale Red: relatively weak. Gray: neutral 12

15 Light Green: relatively strong Dark Green: Very strong A Currency Score is given to each currency in a particular timeframe. The highest (strongest) score is +14 and the lowest (weakest) score is -14. There are 8 major currencies in total and each currency is compared against the other 7 currencies. Scores are added for a currency/timeframe if it is stronger than another currency and subtracted when vice versa. NOTE: FX Currency Strength Radar is NOT an indicator giving signals to buy and sell. It is only intended to help you identify strength and weakness in currencies and shorten your trading analysis process. You should base your entries using other methods such as price breakout or retracement. So what if a currency is strong or weak? 1. Pairing the strongest and weakest currencies Buying strength and selling weakness is an age old adage in trading. If we know that a currency is strong against a basket of other currencies, we know that overall market sentiment is towards that currency is strong and people are buying it. Assume the following scenario: Weakest: CHF, JPY, NZD, USD, CAD, AUD, GBP, EUR : Strongest If you are a trend follower, you will be looking to buy EUR against the weakest currency, CHF. You should be long EURCHF. You will not want to long EUR with another strong currency GBP as the relative difference in value between the 2 currencies is small and the probability of this trade is lower. Even if it turns out that EURGBP rises, the profit margin will most likely be small. 2. Trading Range Bound currencies Currencies in the middle of the ranking list are usually drifting along with no clear direction at the moment. They are best for range trading strategies. In this case, we will long USDCAD (4 th and 5 th of the ranking list) if it is near support and sell USDCAD if it is nearing resistance. 13

16 3. Confirmation with other technical analysis methods When used in tandem with other technical analysis methods or signal indicators, the signals generated are more powerful and have a much higher probability of success! E.g. when EURUSD is rising, should we long it? If your other signals indicate a long entry and EUR is strong while USD is weak in the ranking, this is a very high probability trade. However if EUR and USD are close in ranking, it will be better to forgo the trade. 14

17 How are Strength / Weakness determined? FX Currency Strength Radar scans through all 8 major currencies and each currency is compared against the other 7 major currencies. Scores are added for a currency if it is stronger than another currency and subtracted when vice versa. The overall score of the currency against the basket of currencies determines its strength/weakness. The relative strength of a currency against another currency is based on the 1) overall price trend and 2) the momentum of price movement between the 2 currencies. 1. Overall price trend If a currency is trending up against another currency, it is relatively stronger than the other currency. Overall price trends are determined by moving averages in most instances. However moving averages are lagging price indicators (Indicators that produce signals after the price events have occurred). We have modified traditionally used moving averages method and came up with our own adaptive version of it to increase the response of moving averages to predict trends. For the pair EURUSD below, FX Currency Strength Radar will detect it as a rising trend base on our adaptive moving averages algorithm, and EUR is considered stronger than USD. FIGURE 12 EURUSD moving averages 15

18 2. Momentum of price movement A currency which is gaining momentum against another currency is relatively stronger than the other currency. We do not want to get into a trade where the momentum of the move is waning. That is a low probability trade. FX Currency Strength Radar checks on the current price movement to determine momentum of the individual currencies. Figure 13a shows increasing momentum and Figure 13b shows waning momentum FIGURE 13A Increasing momentum 16

19 FIGURE 13B Waning momentum 17

20 Disclaimer / Disclosure Forex trading on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade forex, you should carefully consider your investment objectives, level of experience, and risk appetite. You must be aware of the risks of investing in forex and be willing to accept them in order to trade in these markets. Trading involves substantial risk of loss and is not suitable for all investors. CodingTrader.com has taken measures to ensure the accuracy and timeliness of the information in the application, however, does not guarantee its accuracy and timeliness, and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information, inability to access the information, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this application. This application is neither a solicitation nor an offer to buy or sell currencies. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. 18