Strength Analyzer for MT4
The FX AlgoTrader Strength Analyzer is an RSI (Relative Strength Index) aggregator. The indicator calculates an aggregate RSI reading for each major currency based on a basket of related underlying currency pairs. For details of how the aggregated baskets are made up please see section called 'Aggregation' below.
- RSI Averaging Period - Sets the averaging period for the RSI calculation (default value is 14).
- Moving Average Period for Pairs - Sets the moving average period for the moving average of the aggregated RSI traces (default value is 14).
- Calc Period - Sets the number of bars used for calculation (default is 250).
- Horizontal Position for FX Data Labels - Sets the horizontal position for the RSI labels in the indicator (default is 700).
- Show EUR - Show EUR trace in indicator display.
- Show GBP - Show GBP trace in indicator display.
- Show USD - Show USD trace in indicator display.
- Show CHF - Show CHF trace in indicator display.
- Show JPY - Show JPY trace in indicator display.
- Show CAD - Show CAD trace in indicator display.
- Show AUD - Show AUD trace in indicator display.
Aggregation basis (how the RSI data is calculated)
- EUR aggregate consists of: EURUSD, EURGBP, EURCHF, EURJPY, EURTRY, EURAUD, EURNZD, EURCAD, EURSEK, EURNOK, EURRUB, EURHUF, EURPLN, EURCZK.
- GBP aggregate consitst of: GBPUSD, GBPJPY, GBPAUD, GBPCHF, GBPCAD, GBPNZD, EURGBP.
- USD aggregate consists of: EURUSD, USDJPY, USDCHF, GBPUSD, AUDUSD, NZDUSD, USDCAD, USDTRY, USDZAR, USDSEK, USDNOK, USDSGD, USDRUB, USDPLN, USDHUF, USDCZK, USDZAR.
- CHF aggregate consists of: USDCHF, GBPCHF, EURCHF, CHFJPY, NZDCHF.
- JPY aggregate consists of: USDJPY, GBPJPY, EURJPY, TRYJPY, CADJPY, CHFJPY, NZDJPY, AUDJPY, ZARJPY, USDJPY.
- CAD aggregate consists of: EURCAD, CADJPY, AUDCAD, USDCAD, GBPCAD.
- AUD aggregate consists of: AUDUSD, AUDCAD, AUDJPY, AUDNZD, GBPAUD, EURAUD.
- NZD aggregate consists of: NZDUSD, GBPNZD, NZDCAD, AUDNZD, NZDJPY, NZDCHF.
How to use the Strength Analyzer
The tool allows traders to quickly establish which major currencies are overbought and which are oversold on any chart timeframe.
The Strength Analyzer gives us an accurate prediction of the impending change in trend.
What traders are ideally looking for are currencies, where there is an acute overbought or oversold situation, and the aggregated RSI traces are beginning to revert back to levels in the middle RSI range. For example: you have a very overbought EUR aggregate and an oversold USD aggregate. And the two RSI traces are beginning to move back towards typical levels. Then you could potentially have a good short (sell) EURUSD trading opportunity.
Similarly, where two RSI traces cross in the middle of the RSI range. You have a strengthening currency and also a weakening currency. Thus allowing the trader to construct a pair and potentially enter the market. In this case the trader would go with the trend. So if EUR was strengthening and USD was weakening the trader would tend to take a long (buy) EURUSD position on the basis the trend would stay intact.