Have you ever heard the term currency strength chart? When you start FX trading, you hear the word currency strength. This time, I will explain in detail what currency strength means and how to use it for trading. Forex trading uses analysis to predict rate direction. There is a unique chart in the currency strength and weakness that will be explained from now on.
Currency strength, as the name suggests, represents the strength and weakness of a currency. A currency pair is made up of two currencies. Strong or weak in a currency means being bought or sold, which is closely related to Forex trading in currency pairs. The trend of a currency pair is generated by the strength of the currency. Strong or weak in a currency means that it is bought or sold, and is closely related to exchanges, stocks, and virtual currencies that trade in currency pairs.
What is a currency strength chart?
What is a currency strength chart? A chart showing the relative strength and weakness of the above currencies. As shown in the Youtube video below, it is a chart that shows the relative strength of each currency pair. This makes it clear at a glance the strength and weakness of the currency at the moment. While looking at this chart, you will decide which currency pair to trade. In other words, you will compare the charts of the target currency pair. Just like in a league match, each currency is examined in a round-robin manner.
Trading method that takes advantage of currency strength
There is a trading method that takes advantage of currency strength, but it is better to think that this can only be used for scalping. Currency strength is directly linked to exchange rate fluctuations. Using this relationship, the basic method is to sell weak currencies and sell strong currencies.
If the strength of the currency is strong, the trend market is formed, and if the strength of the currency is weak, the price movement is small and the range market is formed. Therefore, it is suitable for instantaneous trading such as scalping. Settlement is done while the strength relationship is maintained. Of course, you need to be careful about statements such as economic indicators and dignitaries. Therefore, it is necessary to have the ability to capture momentary large price movements. Scalping is a big loss if you do it poorly.
day trading, swing trading
On the other hand, there are day trading and swing trading, but this does not mean that strength charts can be used unconditionally. The relative strength of currency strength and weakness often makes a big reversal soon. A single political decision, economic indicator, or even a statement by a key figure can quickly reverse the dynamics of a currency pair. Therefore, this chart is not very suitable for long-term trading.
Whether you can win with currency strength or weakness depends on your trading method
As mentioned above, it is not uncommon for the currency strength chart to suddenly reverse strength at a certain timing. Therefore, this chart is easier to use for short-term trades, and it becomes meaningless charts for long-term trades. In other words, it depends on how you do it. If you blindly trust only this chart and trade, it is very likely that you will be hurt.