Ok new experiment here. Thanks to CarlP for inspiring our work. Carl asked if there was a good way to measure the relative strengths of currencies. We offered to code up an indicator - now up for download on our website. This has a code on it which is (account#+3)*7. For any mathematicians out there, this is of course an intentionally a shabby piece of cryptography. Anyone worth their salt could crack it - reason we picked it was we wanted the indicator to be available to the bpips community and especially Carl for the inspiration.
Sidebar: better cryptography needs to reverse the addition and multiplication and use seriously large primes. Anyway, we digress…
So what’s the point of this post? Well, we posted the logic for the indicator which is the relative movements of jpy eur gbp chf aud usd. Once we had done that we noticed the obvious- crosses on the indicator typically show long term (eg 1-5 day) trends in the pair.
So when the gold line for aud crosses upwards vs the blue line for eur, it is a buy. Flipping back it seems pretty good! And the pip count looks pretty sexy.
Next step - we’re building an Ea based on this logic that would then exit the trade once the gapping slows (better 100% of something than 0% of nothing, right?) or would apply a trailing SL starting at the last level that would invalidate the entry.
That will allow us to backtest and post the results. Meanwhile the indicator is already available for download… Let us know if you find it useful or how to improve.
Clint
It may well be no better in its technical details. But for me it is better since I built it hence I know all the details. I’m institutionally skeptical of things others have built and claimed. And I thought that sharing the development journey with the community may teach some people something.
Oh and the fact that it is free beats one of the places you cite; have not checked out your other reference.
Anyway, all innovation is really just reconstitution. Darwin’s grandfather thought of evolution just Darwin ended up getting the fame - deserved since everyone ignored Erasmus. Darwins formulation of identical ideas was just so much more compelling.
Colours:
Red: land of rising sun
Pink: cool Brittania (think Victorian British Army colours)
Blue: Euroland
Green(back): Uncle Sam
Yellow: land of Oz / gold (iron) brick road, etc
White: CHF - neutral!
Nice trade signal here. Of course we’ve picked one where it is crystal clear. Enter 2-3 bars after cross. EUR steadily aced everything. We would have gone long EUR 10am on the 17th, held with trailing stop. The strategy we’re going to test would have entered a second trade based on the jaws opening up again between EUR and USD on 18 Jan around 2100. As noted above, lots of options for use of this baby all need some testing, but just to whet the appetite.
The picture also shows an interesting CHF/AUD cross (long CHF, 18 Jan, 1500) - anyone who wants to check this puppy out would see about 800 pips in it.
Here’s the basic strategy:
Pick a pair
Fx1-fx2 should be negative on bar n
Fx1-fx2 positive on bar 1, such that the latter divided by (n-1) beats a parameter k
Go long fx1 short fx2
Trail stop on any dynamic curve you like eg MA21 or when the above ‘k pattern’ reverses (or to lock in early, more conservative, when k flattens to 0 or some low positive value)
That’s going to be the EA up next. Now some here don’t like Eas, that’s fine, but can trade the strategy manually off the indicator.
Can augment with candle patterns for entries if you like, but the above is the most plain vanilla.
V1.04 of the Ea is finished. Will post results shortly.
90% win rate for EURUSD 2006-present with following settings
3 bar test on eur strength relative to usd (ie eur has been strengthening on average bs usd for 24 hrs and in last 3 hours eur strength has overcome usd strength using indicator)
SL 200 pips, TP 50 pips
With 20% at risk which is aggressive but given 90% win rate feasible return is ~200% annually.
Will post the results. Next - the Ea really needs a trailing stop and profit protection since the RR ratio could do with sharpening. Also I’ve made it multicurrency but have not tested much outside of EURUSD. But it does seem to work as a strategy on audusd and usdjpy based on initial tests.
Hi Sir
I’m new here…looking for currency strength indicator … searched this website and not find anything …would u plz share the link to this indicator …i’m interested in …thanks in advance
Using currency strength indicator for trading is good way of trading. But we should do some technical analysis in addition to using this. In this we can get double confirmation.
