Simple and power full indicator used by all finance institutions !! - page 5
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Having done a little research I have found out that
USDX = 50.14348112 × EUR/USD^(-0.576) × USD/JPY^(0.136) × GBP/USD^(-0.119) × USD/CAD^(0.091) × USD/SEK^(0.042) × USD/CHF^(0.036)
and
https://www.mql5.com/en/code/9224
calculates this.
To get it to work you must make sure that the currency pairs are open so that the data is available for it to work. Not all brokers offer trading in all these pairs.
Have not read all the previous posts sorry if I misled the first time.
I am personally skeptical of an index that uses weights established in 1973. Also, notice how the Dollar Index calculation includes some pairs where USD is the base currency and others where it is not? The Dollar Index is snake oil if you ask me, although I like the basic idea.
I would feel better with something like this:
USDX = 5 / (EURUSD + (1/USDJPY) + GBPUSD + (1/USDCAD) + AUDUSD)
This is the unweighted harmonic mean of the 5 most actively traded crosses of USD. If it is not clear to you why I have divided 1 by some pairs and not others, read up on what a harmonic mean is. (hint: 1/EURUSD = USDEUR)
Or, maybe I like the geometric mean used in the conventional Dollar Index calculation, but without the weights:
USDX = ((1/EURUSD) * USDJPY * (1/GBPUSD) * USDCAD * (1/AUDUSD))^(1/5)
I have changed the set of currency pairs a bit, and I have made sure to consistently use USD as the base currency throughout both of these calculations. I think either of these serves us better than the conventional Dollar Index.
...The Dollar Index is snake oil if you ask me, ...
I would feel better with something like this:
USDX = 5 / (EURUSD + (1/USDJPY) + GBPUSD + (1/USDCAD) + AUDUSD)
USDX = ((1/EURUSD) * USDJPY * (1/GBPUSD) * USDCAD * (1/AUDUSD))^(1/5)
Now we're cooking with oil, or snake's oil in this case ;)
But what style of cooking Singapore or Straight Chinese - Did the snake give us its permission the use of its oil and will snake oil fuel Jets????
I think the USD/CHF is fairly important - I have the strange (posibly) idea that money not in use in major trades gets stored in that currency - can't prove it though.
But what style of cooking Singapore or Straight Chinese - Did the snake give us its permission the use of its oil and will snake oil fuel Jets????
I think the USD/CHF is fairly important - I have the strange (posibly) idea that money not in use in major trades gets stored in that currency - can't prove it though.
Well then:
USDX = 6 / (EURUSD + (1/USDJPY) + GBPUSD + (1/USDCAD) + AUDUSD + (1/USDCHF))
or
USDX = ((1/EURUSD) * USDJPY * (1/GBPUSD) * USDCAD * (1/AUDUSD) * USDCHF)^(1/6)
Bada bing! ;)
I really prefer the first of these two equations, as the harmonic mean tends to apply to rates more so than the geometric mean.
Well then:
USDX = 6 / (EURUSD + (1/USDJPY) + GBPUSD + (1/USDCAD) + AUDUSD + (1/USDCHF))
or
USDX = ((1/EURUSD) * USDJPY * (1/GBPUSD) * USDCAD * (1/AUDUSD) * USDCHF)^(1/6)
Bada bing! ;)
I really prefer the first of these two equations, as the harmonic mean tends to apply to rates more so than the geometric mean.
Soirt of reminds me of the electric resistors in parallel formula
Sort of reminds me of the electric resistors in parallel formula
Good eye! That's exactly what it is (if you're referring to the harmonic mean, not the geometric.) It also applies to calculating average velocities constrained by distance instead of time. The harmonic mean is useful for calculating the average of rates and ratios. The conventional Dollar Index uses a geometric mean, which is normally applied to areas, volumes, and exponential growth.
I just don't like the Dollar Index. It uses seemingly arbitrary weights, it uses a geometric mean, and worst of all it mixes base currencies instead of consistently using USD for a base in each of it's components. Can anyone speak in it's defense?
For back testing one could create a file of numbers that contains the USDX and pull the appropriate index number from the file much the same way as the tester does for its single currency test.
Like fibonacci, it could well be a self fullfilling tool, everybody uses it so the market follows it, situation.