Discussing the article: "Price Action Analysis Toolkit Development (Part 23): Currency Strength Meter"
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Check out the new article: Price Action Analysis Toolkit Development (Part 23): Currency Strength Meter.
Do you know what really drives a currency pair’s direction? It’s the strength of each individual currency. In this article, we’ll measure a currency’s strength by looping through every pair it appears in. That insight lets us predict how those pairs may move based on their relative strengths. Read on to learn more.
Imagine you are at a car race. Each vehicle is unique, and you can't simply guess which one is the fastest or slowest. Instead, you observe lap times, assess acceleration, test braking performance, and evaluate each model individually. Only after thoroughly analyzing each car on its own do you compare them to determine overall performance.
Currencies function similarly. This EA inspects every trading pair in which a currency appears. For example, for USD, it examines USDJPY, EURUSD, GBPUSD, USDCHF, and others. It measures how much each pair has moved over different timeframes, initially over M15, then H1, and finally H4. These lookback periods are specified by the parameters Lookback_M15, Lookback_H1, and Lookback_H4.
If the currency in question is the quote currency in a pair, the EA inverts that change to accurately reflect its strength. After calculating these movements across all relevant pairs, it averages the results into a single strength value for each currency. The EA updates these calculations every few seconds, as specified by the Update_Seconds parameter. It then redraws the dashboard to display the current strengths, logs which currencies are strong, weak, or neutral, and updates visual curves showing your account's equity and drawdown.
In this article, we will develop an MQL5 tool that measures currency strength by analyzing each symbol’s performance across multiple pairs. This approach enables you to identify the strongest and weakest currencies reliably, empowering you to trade with greater confidence.
Author: Christian Benjamin