Forex currency strength and weakness

Recommendation for Best Results

I recommend you PRINT THIS OUT and DEVOUR it immediately. Become comfortable using it by paper trading with it first. That way you'll actually be able to USE the information to profit with. Keep it by your computer for easy reference while trading and see how it affects your decisions and your bottom line.

I'd love to hear your experience as you apply the information. Feel free to shoot me an email anytime.

Imagine that for each currency pair, you already know:

� When trends are most likely to occur

� The best days to trade

� The most active trading days

� The best hours to trade

� The most active trading hours of the day

� How far price is likely to move during a trend

� How much of that move you can reasonably expect to capture

� How long a trend is likely to last.

Even though the Forex is open twenty-four hours a day, there are times when the market for a given currency pair is highly active, other times when it is moderately active, and times when there is no activity at all. While you can make money whether the market is moving up or down, it’s

extremely difficult to make a profit when the market is moving sideways. And since the market for a particular currency may spend 60% to 75% of its time moving sideways, it is very important to know WHEN the trending

activity is most likely to occur. It’s also easy to enter the market at the tail end of a trend and not know, except in hindsight, that the end was so near. After all, the

indicators were telling you the trend was still going strong—so if you don’t know that this particular pair makes seven-bar moves, you go ahead and enter on the sixth bar of the trend. Two bars later, your trade is heading south in a hurry. It’s critical to know how many bars a trend is

likely to last before there is a retracement or consolidation period, given the day of the week and the hour of the day the trend first began.

Exiting too late is another common experience many traders share.

NOTE.

No matter the time frame you are trading on always take a look at the 4 hour time frame because it is what controls the daily price movement in the lower time frames such as the 1 hour, 30mins, 15mins etc.

What are the best times to trade a given currency pair?

1. Monday through Thursday are the optimal trading days

2. Thursday is GBP/USD’s most active day

3. The best hours to trade GBP/USD are between 6:00 AM and 6:00 PM

4. 10:00 AM to 2:00 PM is the most active trading time

5. 74% of trends run between 6 and 17 bars in length before a retracement

6. The median length of a GBP/USD trend is 11 bars before a retracement

7. Trends length varies with the day of the week and the hour of the day the trend begins.

8. 75% of price moves are between 50 and 150 pips; 43% are between 100 and 150 pips

9. We can expect to capture between 94 and 125 of the overall pips in a trend, depending on the trading day.

THIS ALSO IMPLIES FOR OTHER PAIRS WITH GBP, THEY ARE MOVE AT THE SAME TIME OF THE DAY, THEIR TREDING MOVE STARTS AT THE SAME TIME.

TRADING STRATEGY USING THE FXMETER

As currency traders, our mission is to make money trading the difference in strength between currencies. The ForexGrail will show you which currencies are trending over time by displaying weakness or strength in line form.

Your trading decision should have 3 parts to it.

1. Pick a pair of currencies that are moving toward strength or weakness using the currency strength meter. Watch the lines form for at least a half hour prior to beginning.

2.. Find an entry place using the 50 period simple moving average crossing with price line plus six pips.

3.. Determine your exit by using the assistance of the 7 period simple moving average.

PRICE LINE ONLY. ( No candles or bars)

15 MINUTE CHART

50 SMA (Simple moving average on close price) All charts will have the ability to place a line called a “simple moving average”. Later you may want to fine tune with other settings but for now, use the simple close price line and color it blue.

7 SMA ( Simple moving average on close price) The simple moving average smoothes out the price history line so we can see the average prices during whatever period you select.

Various currency setups happen several times a day on various pairs. Not all crossings have potential. You must have confirmed strength meter readings to go with this simple entry system of 2 moving averages. Find a few potential strong and weak candidates. Keep your eye on them for an hour or more. You will begin for feel the various trends developing. Don’t stare at charts all day. Just keep the meter going while you go about your business. When the conditions begin to show themselves you will be read. Some days the setups are seen more often than others. Most mornings I usually see two or three.

All trading involves risk. You may lose several trades in a row sometimes so you need enough money to ride it out. No system is capable of 10 out of 10 wins consistently. It is you who will make any system work.

Although this system is easy to follow, there are going to be lots of demons like emotion and lack of patience. You must be strong. Make the determination now, before going any further.

Enter at least 6 pips after the crossing of the 50 line and price. This makes sure it’s not just noise. The 50 is showing direction and the 7 will be marking an exit.

You need to get used to making trades with your platform in demo or simulator mode. Absolutely, positively, do not start using real money until you have proven to yourself, and most importantly, the others in your life that may be affected, that the system works and you have clearly assessed and discussed the risks involved.

NOTE VERY IMPORTANT

Do not jump every time you see red and blue. These should alert you to a developing trend only. They could change. You must watch what the currencies are doing for a time to get a fix on their true strength or weakness. You are looking at the meter to provide you with some clues and save time watching all the pairs. How will you know if the strength is developing or the weakness is real? Aha.

Give your trade some time to work.

Don’t set ten pip stops with the broker. My hard stops are usually more than most people are comfortable (50-100) but make yours at least three times the amount you are going to use for a mental stop. Keep stops above 20 with your demo until you get a feel for where to place them. It takes a bit of ups and down for the trade to work. Take a safe piece of the move. 10 pip stops will kill you. They are too small. Remember, a broker makes money on filling orders. Either way. A stop is an order. Keep the stops high on your demo so they can show you what’s best for you when going live. I am always looking for the beginning of a trend. I don’t want to trade it yet, but I am always watching for

the ones that are beginning. Sometimes the lights turning

red and blue on the meter during the beginning of my

trading day may be showing peaks and not trends. I want to see steadily rising numbers for my strong choice. Just picking the highest number isn’t the idea. You want to watch the trends developing and moving towards weakness or strength, You are trading the spread between currencies. This means you want to see as great a difference between two currencies as possible at an increasing rate of change. That’s the profit. Don’t get attached to one special pair. Sure, if the signals are there fine, but look around.

Interpreting the Meter

“The charts you look at in Forex are not like stock charts at all. The price of a stock is fixed against ONE currency. Forex trading involves two variables (currencies) measured against each other. The difference between these two currencies is called the ‘spread’. Forex charts are ‘spread charts’. We (can only) make money buying one currency that is going up in value, using another currency that is going down in value.”

(Tom Yeomans)

Currency PAIRS vs. INDIVIDUAL Currency Strength and Weakness

As Forex traders, we tend to focus on currency pairs as a single entity rather than on the individual currencies that make up the pair. Moreover, this tendency is reinforced every time we look at a Forex price chart, because even though we are really seeing the difference in price between TWO currencies, the difference is displayed on a SINGLE graph commonly known as a spread chart.

Throughout the day all currencies are changing in value as perception, news, politics, and economics plays out in their respective countries. One currency may be going up in value due to a piece of great economic news, while another is losing its value from a political scandal indicating future uncertainty. This interplay is what we are seeing when looking at a Forex chart. However, using only one chart tells us only part of the story.

In order to trade the Forex market correctly, determining the strength or weakness of an individual currency is vital. In fact, currency strength is everything when trading foreign exchange prices.

As a Forex trader, your mission is to make money trading the difference in strength and weakness between currencies. Since the value of world currencies is always changing,

being able to electronically measure and weigh each currency as it interacts with others is the secret to trading Forex. And the Meter does just that. It will show you which currencies are trending over time by displaying the weakness or strength of each currency in relative to the others in line graph format.

So, is the upward move indicated by the blue arrow in the chart above an indication that EUR is stronger and CHF is weaker? To find out, let’s take a closer look at the Meter and how to interpret its numeric and graphic output.

The illustration below is a representation of the Meter with only the currencies comprising the EUR/CHF pair.

What we’re looking for is one of the currencies in the pair to reach a strength reading of 6.00 or higher and the other to have a weakness reading of 2.00 or lower

The numerical readout shows that CHF is at 6.80, and has been there for some time. EUR, on the other hand, is at 2.40—not quite where we want it to be. We can also see that the spread in terms of relative strength and weakness is quite wide. The main point is that EUR is extremely weak compared to CHF, and therefore a taking a long position would not be wise.

The Meter has calculated and weighed EUR’s performance over all currency pairs with which it is crossed and has determined that on a strength scale of one to ten (ten being the strongest) EUR is at a little over 2.00. The Meter has also compared CHF’s performance over all currency pairs with which it is crossed and has determined that its strength is at almost 7.00.

By doing so, it has performed a fundamental analysis, quantified it, and displayed it in a way delivers an INSTANT visual evaluation of each currency’s strength relative to the other’s.

Let’s look at the figure below, which represents the Meter’s output for this same pair a few hours later.

The blue arrow in the illustration above indicates the approximate point at which we first looked at the EUR/CHF spread chart.

The vertical white arrows demonstrate how the spread between the two currencies has been widening. The horizontal white arrows tell us that CHF has a strength rating of 6.80 and EUR has a strength rating of about 1.8.

The currency strength meter is simple in operation.

It looks at all pairs and uses various weighting calculations to find out how, relative to the others, a particular currency is doing. It measures individual currency strengths by making comparisons with how that currency interacts with others. Strength or weakness is not clear using one chart. In order for you to figure out if the currency is strong, you have to open other charts and see if it shows strength against other currencies.

The currency meter tells you at a glance which currencies are moving and which charts you should open to take a look at. The meter takes a free data feed from a typical interbank broker and shows us in real time which currency is most active. It moves all the time the market is moving. Sometimes very fast, and other times quite slowly. The meter allows us to narrow down a pair of currencies to trade.

To recap interpreting the Meter:

Look for a Meter reading of 6.00 or higher for the stronger currency.

Look for a Meter reading of 2.00 or lower for the weaker currency.

Look for sustained performance at those levels (around 30 minutes) to confirm trend direction .

Do not enter trades that are not within the above parameters

Trading Rules

• Use a 50-period SMA of the CLOSE as the Trend Line for overall trend direction

• Use a 7-period SMA of the OPEN as the Exit Line

• RULES:

o Enter when

�� Meter reads 6 or more for stronger currency

�� Meter reads 2 or less for weaker currency

�� Price Line crosses Trend Line plus or minus 6 pips in direction of stronger currency

o Risk no more than 2% of your equity on any single trade, and no more than 6% for all trades

o Stop Loss

�� Initial stop loss of at least 50 pips �� After 25 pips of profit move stop loss to +5 pips

o Exit when

�� Price Line crosses Exit Line plus or minus 6 pips

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