How to Use Currency Strength Meter

We know forex trading is all about research and analytics. Therefore, having accurate, reflective, and spontaneous data is key to making the right decisions at the right time.

Among all the tools used by forex traders, a currency strength meter (CSM) is one of the favorites, especially in forex day trading. So, let’s talk about what a meter is, why it is such a good thing to have in your toolbox, and where or how you can find the meters you need.

What Is a Currency Strength Meter

First of all, what exactly is a currency strength meter?

A CSM is a technical indicator illustrating the relative strength of currencies. Most meters will show you a comparative overview of the currencies you’re tracking, then allow you to look at graphs and numbers for more in-depth analysis.

The meter usually adapts a percentage system and shows you a range of currency pairs from strong to weak. In return, it helps you to pick your currency pair candidate you may want to trade with.

The Benefits of Using a Meter

While the meters can’t tell you when to enter a trade, they do provide other helpful information. For example, you can use the meters to identify a trade’s direction, which is beneficial for both pullback traders and momentum traders.

On the other hand, these meters can be easily applied and are usually free. Compared to other tools, a CSM is a cost-effective tool to filter currency correlations.

The meters can also alert you of high-risk trades. For example, you shouldn’t open opposite trades where only one currency is showing a strong trend but the other one doesn’t signal anything.

Finding the Right Tool

With the right tool, you’re more likely to become a successful forex trader. That’s why using a meter that matches your way of thinking is so critical.

There are various currency strength meters available online. Most trading platforms come with a built-in meter that allows you to pick your target currency pairs. There are also third-party services, both free and paid, that will serve the same purpose.

A few popular meters available are:

• Macro currency strength meters
• Currency Quake’s meter
• Live charts Currency Strength Meter
• FX Blue

How to Create Your Own Meters

If you can’t find an online tool that suits your needs, you can also build your own currency strength meters. The process is simple.

You begin with building a list of currency pairs you want to track. Usually, you’d choose major currency pairs as they are traded at high volume.

Then, calculate the change percentage over a set period. Usually, day traders use the change over the past 15-weeks for major pairs. Finally, rank these currency paris from the strongest to the weakest based on your calculations.

You can add as many currency pairs as you see fit to find more trading opportunities.

Conclusion

In conclusion, a currency strength meter helps you make informed and optimized decisions. While the meter doesn’t tell you when to enter a trade, it does provide insights that will remove any ambiguities in the market.

Therefore, add a trusted currency strength meter to your toolkit so you can identify the most competitive currencies to trade with.

Source: https://smartlagos.org/