Multicurrency Strength Oscillator

The Multicurrency Strength Oscillator (MSO) is an indicator for MT5 that represents a substantial evolution of the widely known J. Welles Wilder's RSI. It shows a greater statistical significance and can provide more reliable indications (also with alerts and notifications) about the overbought/oversold conditions of both minor and major forex pairs. This is obtained by measuring individually, and then combining, the relative strength of all the major currencies (AUD, CAD, CHF, EUR, GBP, JPY, NZD, and USD) that constitute them.

By identifying the weakest, the strongest and the "neutral" among these currencies, it gives a valuable help in predicting trend reversal or in detecting persistent trends for the corresponding symbols, as well as in giving a global view of the market and its underlying "sentiment".

To this purpose, an intuitive heat-map of the pairs is displayed so as to allow the trader to detect the strongest and weakest symbol at a glance. Additionally, a mouse click on any symbol in the heat-map makes it open on the current chart for further inspections.

Finally, it can also evaluate the strength of precious metals (against most of majors) and cryptocurrencies (against USD), considering them as a whole instrument. That is particularly useful to understand the current risk appetite of big institutional investors.

Used alongside other technical and fundamental analysis tools, this indicator enhances market insight, minimizes risk, and improves trade timing for traders.

Visualization and Main Input Parameters

As a default, only the strengths of the major currencies that are combined in the chart symbol, are visualized in the indicator window. However, if the "Show" button is pressed, also the strength lines of all the others are visualized (with the selected XXX color and unless the corresponding flag parameter Show XXX is set to false). They are listed from left to right in order of strength and each currency label can be clicked to selectively hide/show its line in the window.

The strength line of the "currency" labeled as CRY represents the overall, averaged, strength of all the available crypto-currencies, against USD. If it is strong (label on the right side, high line values), it means that cryptos behavior is generally bullish, implying that the market sentiment is more "optimistic" and confident, because most investors are buying cryptos (notoriously very volatile and riskier). If weak (label on the left side, low line values), cryptos movement is mostly bearish, meaning that sellers prevail on buyers and the sentiment is of mistrust and of lower risk appetite.

The line of the MET "currency" represents the overall, and averaged, strength of all the available precious metals (gold, silver, platinum,...). Strong values indicate a general bullish trend for most metals (less optimistic sentiment), while weak values is associated to an overall bearish tendency (more optimistic sentiment).

• Period

The period used in the estimate of the currency strengths. The longer it is, the weaker the oscillations around the "neutral" (50) value (as in the usual RSI indicator).

• MA Period

The period used in the moving average of the strength lines (= 1 to disable average). The longer it is, the less the short-time fluctuations are important, but slower the reactivity of the indicator.

• Overbought level

The overbought level (between 50 and 100). The oversold will be set to 100 minus this level. Since the visualized lines are the result of averaging multiple RSI over the various currencies, the overbought and oversold limits should be lower then in the normal, single, RSI.

• Show heat-map

If true, a window table is shown in the main chart displaying all the 28 forex pairs of two major currencies, with a color that indicates their relative strength. This is computed as the ratio between the strength of the base currency (on the left of the symbol) and that of the profit currency (on the right of the symbol). The redder they are the weaker (the more "oversold") the pairs are. On the contrary, the greener they are, the stronger (the more "overbought") they are. They can be clicked to be immediately opened on the current chart.

If the pair symbol is enclosed between angle brackets "<...>", then one of its combined currencies is overbought and the other one is oversold. Thus, it is more likely going to revert the trend. Optionally, an alert can be emitted to warn about these symbols' condition.

• Show symbol on chart

If true, the combined strength line of the symbol on the main chart is also shown in the indicator window, but only if this symbol is a pair of two major currencies (including MET and CRY).

• Enable Alert/Push/Email Notifications

If true, an alert (and/or a notification) is issued if there is a symbol enclosed in "<...>", i.e. if its currencies are one above the Overbought and the other one below the oversold level. Note: an alert/notification is issued only at a new bar coming (not at indicator (re)starting).

• Starting/Ending time for alert (hour)

Usually around the broker's server midnight, there can be a very large spread increase that could generate false signals (especially in timeframes shorter than H4). These two hourly limits can then be adjusted so as to avoid being alerted at that time (e.g., starting: 1, ending: 23). Ignored for timeframes longer than H12

• Currency pairs (comma-separated)

The list of forex symbol names to be loaded/used.

• Currency name prefix/suffix

The prefix and suffix to be pre- and post-poned to the forex symbol names (if any).

• Metal/Cryptocurrency names (comma-separated)

The list of precious metals and cryptocurrencies to be grouped into MET and CRY symbols respectively.

Suggested usage

First of all, for the indicator to work best, the user should ensure to select all the forex pairs (both major and minor), plus all the precious metals and cryptocurrencies, available in the terminal.

That can be done by clicking <View> on the Terminal menu bar, then clicking on <Symbols> in the menu list to open the "Symbols" window. Then, in the <Specification> list tab, all types of Forex symbols should be selected (they could be listed as "Major, Minor, Exotic,..."), and all symbols in them should be enabled (by double clicking on their icon) so that they are displayed in the terminal and accessible to the indicator. Likewise, all <Metals> symbols (e.g. XAUUSD, XAUAUD, XAGEUR,...) and <Cryptocurrencies> (BTCUSD, ETHUSD,...) should be enabled too.

In practice, what we see when we look at a strength line of a given currency is the average of all the RSI behaviors of all the symbols that include that currency, either as a "base" currency (i.e. at the left-hand side of a symbol, e.g. USDSEK for USD) or as a "profit" currency (at the right-hand side, e.g. EURUSD for USD). This "global average" gives us a good statistical indication of the overall, underlying, intrinsic currency strength. That is why it is important to have as more symbols as possible shown in the terminal. Then, the strength of a forex pair is calculated as half the ratio between the two composing currencies strengths.

When a symbol is in the overbought/oversold condition (enclosed in angle bracket in the heat-map), then the probability of a trend exhaustion gets relatively high. Moreover, a substantial and rapid reversal occurs when the lines of force of both competing currencies simultaneously reverse their trend. Otherwise, a sideways, lateral, behavior of the symbol is very likely to occur.

Another strategy could be to inspect symbols that are "gray" on the heat-map (because their strength is crossing the "neutral" 50 value) and their normal RSI indicator is approaching the overbought or oversold condition. This could indicate a trend continuation, because a drastic reversal is unlikely to occur.

Feel free to ask questions and to send suggestions, comments, bugs reports. They will be really appreciated.

Trade safe!