Introduction to the Forex "Ranking & Rating list" and the "Currency Score"
16 November 2014, 18:32
0
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After using TA charts for some time on Forex just like with
stocks it became very clear that there is a benefit with Forex not
present when trading with stocks. This should be made visible and
materialized in some way. This is how I came to the decision
to
create the "Forex Ranking and Rating list" and the "Forex Currency
Score".
Let me explain this in more detail. When using in the traditional way a currency pair will be looked into in multiple charts of that pair and also with different pairs with the currency in it as a reference point. However, that currency is connected to 7 other currencies and all of those are interconnected with each other.
Example:
If we then extrapolate this example into the major currencies it goes like this: There are 8 major currencies and 28 pairs. Suppose that the above example would be used for all these pairs it would have the following result: 28 pairs with each 2 currencies will be compared with 7 other currencies. These are 28 x 2 currencies in closed circles of 8 currencies.
In practice this will not be done but when looking at a pair and trying to see if a currency is strong it will be compared with several other pairs. Suppose that in a week 7 charts are being analyzed and each compared with 3 other pairs then this makes already a total of 28. It may very well be that a certain chart is used twice because a certain interesting pair has to be compared after a previous pair also requested that certain chart for comparison purposes. It is hard to remember all the charts on the top of your head so opening the chart is then the best way.
The way the "Forex Ranking and Rating list" and the "Forex Currency Score" model works is as follows: all the 28 pairs are checked at once and then this information is being stored and this way all the charts can be compared with each other. This is done in a semi automated way. The charts are being analyzed by human, me in this case, and the calculation for the models is then done automated.
To make it clearer what we are dealing with just think about e.g. the relation of the GBP/CAD with the EUR/USD? Which charts would then have to be researched? It is something that would not immediately be researched because the direct link does not to seem to be there. However, these currencies are interconnected because each currency is connected to 7 others which are similar for each currency. All currencies are interconnected and have an influence on each other.
Although the explanation may seem simple and clear there is always risk involved. I added a disclaimer to my blog for this purpose. If you would like to use this article then mention the source by providing the URL FxTaTrader.com or the direct link to this article.
DISCLAIMER: The articles are my personal opinion, not recommendations, FX trading is risky and not suitable for everyone.The content is for educational purposes only and is aimed solely for the use by ‘experienced’ traders in the FOREX market as the contents are intended to be understood by professional users who are fully aware of the inherent risks in forex trading. The content is for 'Forex Trading Journal' purpose only. Nothing should be construed as recommendation to purchase any financial instruments. The choice and risk is always yours. Thank you.
- I did not find anywhere anything similar, including on the Internet. It however is something I needed in order to get a clearer view of the whole market.
- It is a common practice among technical analysts using the larger time frames when making a trading decision on a short time frame chart.
- It is also common practice among technical analysts that confirmation of strength/weakness in a currency can be achieved by looking at more than one chart with the currency in that pair.
Let me explain this in more detail. When using in the traditional way a currency pair will be looked into in multiple charts of that pair and also with different pairs with the currency in it as a reference point. However, that currency is connected to 7 other currencies and all of those are interconnected with each other.
Example:
- For the EUR/GBP it is possible to look at .e.g. the EUR/USD and the GBP/USD to see if the view on the EUR/GBP is supported by these other currency pairs.
- A GBP/USD can also be looked into by looking at a GBP/AUD and see if the view on the GBP is there similar to the USD and the EUR.
- A EUR/USD can also be looked into by looking at a
EUR/AUD and see if the view on the EUR is there similar to the USD and
the GBP.
If we then extrapolate this example into the major currencies it goes like this: There are 8 major currencies and 28 pairs. Suppose that the above example would be used for all these pairs it would have the following result: 28 pairs with each 2 currencies will be compared with 7 other currencies. These are 28 x 2 currencies in closed circles of 8 currencies.
In practice this will not be done but when looking at a pair and trying to see if a currency is strong it will be compared with several other pairs. Suppose that in a week 7 charts are being analyzed and each compared with 3 other pairs then this makes already a total of 28. It may very well be that a certain chart is used twice because a certain interesting pair has to be compared after a previous pair also requested that certain chart for comparison purposes. It is hard to remember all the charts on the top of your head so opening the chart is then the best way.
The way the "Forex Ranking and Rating list" and the "Forex Currency Score" model works is as follows: all the 28 pairs are checked at once and then this information is being stored and this way all the charts can be compared with each other. This is done in a semi automated way. The charts are being analyzed by human, me in this case, and the calculation for the models is then done automated.
To make it clearer what we are dealing with just think about e.g. the relation of the GBP/CAD with the EUR/USD? Which charts would then have to be researched? It is something that would not immediately be researched because the direct link does not to seem to be there. However, these currencies are interconnected because each currency is connected to 7 others which are similar for each currency. All currencies are interconnected and have an influence on each other.
- The "Forex Currency Score" solves the above mentioned issue for each currency.
- The "Forex Ranking and Rating list" does this for each pair.
_______________________________________________________
Although the explanation may seem simple and clear there is always risk involved. I added a disclaimer to my blog for this purpose. If you would like to use this article then mention the source by providing the URL FxTaTrader.com or the direct link to this article.
_______________________________________________________
DISCLAIMER: The articles are my personal opinion, not recommendations, FX trading is risky and not suitable for everyone.The content is for educational purposes only and is aimed solely for the use by ‘experienced’ traders in the FOREX market as the contents are intended to be understood by professional users who are fully aware of the inherent risks in forex trading. The content is for 'Forex Trading Journal' purpose only. Nothing should be construed as recommendation to purchase any financial instruments. The choice and risk is always yours. Thank you.
