KT Currency Strength and Correlation

Currency strength and pair correlation in one indicator

KT Currency Strength and Correlation ranks the eight major currencies from strongest to weakest and shows, in a colored matrix, how closely ten currency pairs of your choice move together. Before you open a trade from your own strategy, you can check whether the two currencies of the pair are really moving apart, and whether the new trade adds risk to a trade you already hold.

What you see on the chart

Strength lines: a separate window below the price chart draws one colored line for each currency: USD, EUR, GBP, JPY, CHF, AUD, CAD and NZD. Each line is built from the seven major USD pairs, so every currency is measured against the whole basket and not against one other currency only.

Strength pyramid: a ladder in the same window lists the eight currencies in order, with the strongest currency at the top and the weakest currency at the bottom. It updates every time a new bar opens.

Correlation matrix: a panel on the price chart shows the correlation between every two of your ten pairs as a percentage, from +100% to -100%. The value is calculated from the closing prices of the last 50 completed bars on the timeframe you select in Correlation Analysis Time Frame. Green cells mark pairs that move in the same direction, orange and red cells mark pairs that move in opposite directions, and a darker color means a stronger relationship.

How traders use it

• Check the pair before you trade it. A buy on GBPJPY has more support when GBP is near the top of the pyramid and JPY is near the bottom. When the two currencies sit next to each other in the pyramid, neither currency is clearly stronger than the other.
• Choose between two similar setups. If your strategy gives a buy on both EURJPY and GBPJPY, the pyramid shows whether EUR or GBP is stronger, so you can take the pair with the stronger currency.
• Avoid doubling your risk. Two trades in the same direction on pairs with a strong positive correlation tend to win or lose together. The matrix shows this before you open the second trade, so you can skip it or reduce the position size.

Alerts

The indicator can alert you when a currency becomes the strongest or the weakest of the eight currencies. The check runs when a new bar opens, and the alert arrives as a pop-up, a sound, an email or a push notification to your phone. Each alert type can be switched on or off.

Settings you will use

Pair 1 to Pair 10 set the pairs in the matrix. The defaults are EURUSD, GBPUSD, AUDUSD, USDCHF, USDJPY, NZDUSD, USDCAD, EURJPY, GBPJPY and AUDJPY. The seven major USD pairs must be available from your broker, because the strength lines are built from them. If your broker adds a suffix to symbol names, such as EURUSDm, enter it in Broker Suffix (if any). The colors of the matrix and of each currency line can be changed, and Show Currency Strength Pyramid hides the ladder when you only want the lines.