Hi all,
For the last few weeks I’ve been trading based on the strength and weakness of a pair. Now when I say pair, that means I take the strongest “currency” [U]and pair it with[/U] the weakest “currency”. I came across the method when I was checking the charts on DailyFX.com’s website and read an article How to Create a “Trading Edge”: Know the Strong and the Weak Currencies | DailyFX. Upon further searching on the matter, I also found this article The Forex Heatmap ™ Educational Blog: Parallel and Inverse Analysis of the Spot Forex. I don’t use that indicator, but the logic is interesting.
So I too created an Excel spreadsheet using 28 pairs, made by the 8 major currencies, and followed his method to calculate each currency’s strength except he used a 200SMA on a 4Hour chart, and I decided to use a 120 SMS on a 30min chart. I know, this is the subjective part because there are so many combinations one can use which will give different results so how effective can it be? Well I don’t have an answer unfortunately, but I decided that I like the 30 min chart and the 120 SMA seemed appropriate enough.
Since my prime trading time falls in the Asian session, I update my spreadsheet as close to that session’s opening as possible. My strength scale falls between 0 and 7, so I match the currencies that have the most “ABOVES” with the ones that have the most “BELOWS”. For example the last trade I took suggested that GBP & CAD were the weakest (had the most “BELOWS”), and USD was the strongest (the most “ABOVES”). So I monitored 2 pairs looking for an entry…GBPUSD for a sell, and USDCAD for a buy.
Richard Krivo suggests looking for a technical reason, such as a break of support or resistance, to enter the trade in the direction of the trend. For me that comes in the form of a candlestick pattern such as an engulfing or pin bar. However, the volume on those bars has to be higher than the last few bars. This seems to act as a filter to avoid fake patterns unless perhaps it’s exhausted it’s trend.
When i get a valid signal, I then check the stop placement before entering. Ideally I’d like a 15-20 pip stop and if I can get that I will enter the trade. If not then hopefully price will retrace a bit and I’ll wait for that to happen before entering. I also like to check if there are any major S&R zones close by to worry about.
Lastly when in a trade, what I do is move my stop to breakeven when I get 20 pips in profit and close out half and let it run until I wake up, which is usually near the end of the London session. This morning I woke up to an 80 pip winner. however so far that is not the norm because I usually close out before then from lack of confidence.
In a little while I’ll run the numbers again and see what it says (it only takes 15mins to do) …be back in a couple of hours 
ty for pointing it out!
It sounds like you’re trading a basket of correlated pairs or at least ones that have one common driver…the USD. Not using a stop is like saying if you wait long enough they’ll all go into profit eventually. I traded that way for awhile, and it bit me…lol…it’s a bit risky, but it works for some I suppose.
