Hello All,
Does anyone know the difference between a currency strength meter and a currency heat map? Thank you
Hard to answer. It really depends on the formulas used for these calculations. Please note that the websites you visit to obtain these reports may utilize different formulas.
A more advantageous approach would be to perform these calculations independently. With basic Microsoft Excel skills and a willingness to document the concepts, you can gain a complete understanding of the formulas employed and the resulting outcomes.
Go to MarketMilk at the top of the screen - that gives an explanation. Here is the link to heat map
I just cannot understand the difference between the two. They seem to do the same thing to me. Both displays the strongest and weakest currencies.
Babypips explanation of a heat map is: The currency heat map displays a visual overview of the forex market’s price action by organizing data from 28 currency pairs into color-coded results. The strongest currencies for each specific timeframe are marked green, while the weakest are marked red.
Currency Strength Mater: Our free currency strength meter helps you identify which currencies are strong and which currencies are weak. All 8 major currencies are monitored in real-time and the calculations are based on 28 currency pairs to determine the overall strength of each currency.
Is the difference just the use of different formula calculations and that they visually look different but ultimately do the same thing?
Hi , to be honest I think you’re over thinking it.
Don’t get bogged down trying to understand the formula.
The key is to pick one, (I would say a strength meter but it doesn’t really matter) and then make sure you can understand why a particular currency is where it is.
Start your day asking yourself: why is this currency at the top?
Why is this currency at the bottom?
And technicals isn’t the reason, you must be able to fundamentaly explain why.
I hope that helps. Best wishes
The Currency Strength Meter measures the percent change based on a selected timeframe.
For example, if the time interval is set to “1D” and “Real Time”, it’s measuring the percent change between today’s current price and yesterday’s close price.
The Currency Heat Map provides a visual way to see if the price is trading outside the prior bar’s open, high, low, or close.
For example, if you look at "1D’ on the heat map. and it’s dark green (“very bullish”), this means that the current daily candle (or bar) is trading above the previous candle’s high.
The heat map also allows you to see this across multiple time frames at a glance. For example, if JPY is showing dark green for “1D”, “1W”, and “1M”, this means that the price is trading above the previous daily, weekly, and monthly candles. This scenario would imply very bullish price action since previous highs tend to act as resistance.
A full explanation is found here.
Each tool provides a different way to look at “strength” or “weakness”.
Thanks everyone for your explanations and advice.
Like all indicators, it’s best to ditch these as well. If you learn to read a chart, you won’t need them as a crutch. For example, take a look at this chart of the USDCHF:
Which way is it heading? The obvious answer is up, and you didn’t need a heat map or strength indicator to tell you that.
How bout a little tougher one:
Here, price has moved toward the top of a wide trading range, which tells me it’s probably safe to go short soon. Again, a heat map or strength indicator would be worthless here.
Gauging the strengths of the major currencies against each other is a useful exercise, but make sure the assessment period is aligned with your strategy’s decision and holding time-frame.
There is no advantage in knowing which is the strongest currency over the last 60 days if you will only be holding for 30 minutes. And vice versa obviously.
As with any inputs into trading decisions, these must be vital. If they are not vital, ignore.
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a currency strength meter provides numerical data on currency strength, while a currency heat map offers a visual representation of relative currency strength through color-coded grids. Shout out to my G chatgpt
you’re really very mistaken about that, John: technicals are not only the main reason, but actually the only reason - on the strength meter, the technical parameter being demonstrated is the currency’s percentage change and on the heat map the technical parameter displayed is a function of where the current price is with reference just to the previous bar/candle (each according to the timeframe used, of course)
both, as you see, are actually purely technically derived parameters
(of course, like all other technically derived parameters, the reasons for those technicals being produced by price movements relate to the ways fundamentals have recently moved prices, but that’s very different indeed, and obviously at least one stage more remote: please forgive me if i sound argumentative, but technicals very definitely ARE the reason for one currency being at the bottom and another at the top!!)
Hi, thank you, i understand your point…a currency strength meter is determined by a technical calculation.
What I’m trying to get across is that the reason a currency is a the top or bottom is caused purely by fundementals. Take today for example, on a 1hr currency strength meter, the USD will be at the bottom. That is caused by Fridays NFP headline number being below expectations, and this week the dollar has continued to weaken in expectation of a soft CPI print tomorrow.
And what I’m trying to suggest is that a trade shouldn’t be taken purely based on a currencies position on a strength meter. An understanding of the reason why it’s at the bottom is needed to have confidence the weakness can continue.
I hope that makes sense. Thank you for replying, best wishes 
Love the transparency!