Currency Relative Strength

I’ve finished a new website feature tonight that displays currency strength graphs based on parameters you choose.  You can specify how you want relative strength to be calculated, either the simple moving average, exponential moving average, or TRIX with a period between 2 and 14 days. 

The whole idea was inspired by a trading model at http://www.mkl.sp.ru/charts.html. He no longer keeps his calculations updated so I decided to try to perform them myself.  Below is a quote from his site that explains this whole idea best:

Using momentum data derived from relative-strength studies of a basket of currencies, it is possible to calculate an average “exchange rate” involving any two currency families and plot its rising and falling action on a graph. If the rate is rising, the odds favor a long trade in the pair. If the rate is falling, the odds favor a short trade. This is valuable information to have, but by digging deeper into the data we can learn even more. 

You can click the link to the left, "Currency Strength" or browse to http://www.forexproject.com/staticfiles/forex_relative_strength.php 

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Forex Blog Week 8

Entering week 8, I have learned much.  The most knowledge has come from my everyday trading experiences.  There is just no substitute for this.  There is also no substitute to trading a real account with real money.  Demo accounts are o.k. to test your setup ideas, but other than that, there is no possible way that a demo account can prepare you for the real thing.  The main reason is because when you trade a demo account, there is no emotion.  Emotion is what moves this market and if you aren’t experiencing this emotion, your not learning.  To start your education, get a mini-account, trade single lots, and less volatile currency pairs.

Going into this week, I’m focusing on what has made prior weeks successful.  I’m focusing on support/resistance setups with the thought that the forex market will continue with its range trading environment.   In the meantime, I will continue to experiment with my relative strength calculations to prove their usefulness.  Last night, I completed a TRIX version of my relative strength charts.  TRIX is a triple exponential moving average of my Relative Strength values.  This provides a smoothing factor and perhaps more of a leading indicator.

You can view my 8 EMA Relative Strength Currency chart at: http://www.forexproject.com/staticfiles/ema_rs.php

The 8 EMA TRIX Relative Strength Currency chart is at http://www.forexproject.com/staticfiles/trix.php

The pairs I’m looking at possible setups for Sunday/Monday:

CHF/JPY (180-min)
USD/CHF (180-min)
EUR/USD (180-min)
GBP/USD (60-min)
EUR/CHF (180-min)
GBP/JPY (240-min)
NZD/USD (Daily)

I also forgot to mention that this week I am moving my default lot size from 1 to 2.  This will double my gains but also double my losses. 

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