Finding the Strongest and Weakest Pairs in Seconds

By DailyFx | Updated August 12, 2014 AAA

DailyFX.com -

Talking Points:

  • StrongWeak App calculates what are the strongest and weakest currencies
  • We can combine the strongest and the weakest currencies into a single pair
  • We can use the Slow Stochastic to find trades in the direction of strength

The FXCM App store is a great website for custom indicators and strategies and I often send links to many of my students inside my Forex Fast-Track webinar series. The most downloaded app on the website is called the StrongWeak app. This standalone program analyzes the most popular currencies and is able to tell us, within seconds, which currency is the strongest and which currency is the weakest across multiple time frames.

Today we take a look at using this application as a powerful filter to look for trading ideas while using the Slow Stochastic indicator for our entries.

Downloading and Using StrongWeak

The StrongWeak app can be downloaded here. We can download and install the application just like any other program on a Windows PC. Once we open up the installed app, we then enter our registration key, and the tool will begin its analysis of the market. StrongWeak focuses on 8 currencies, EUR, GBP, USD, JPY, CHF, CAD, AUD, and the NZD, across 4 times frames: M15, H1, H4, and D1.

In the background, each currency is stacked up against every other currency by recording the number of pips gained or lost against one another, for each time frame. For example, if the EUR/USD climbed 20 pips, and the EUR/CHF went down 5 pips; EUR would have an aggregate strength of +15 pips (+20, -5). This happens to each currency against all of the other currencies to create an aggregate score for each one.

We can see the results at the time this article was written below for all currencies. Because we want to use the StrongWeak today as a trade filter, we are going to look at the long term data (the D1 time frame). The strongest currency has proven to be the EUR and the weakest to be the CAD. Combining these currencies together means we should look for long EURCAD positions; exploiting the strength of the EUR against the weakness of the CAD.

Learn Forex: The StrongWeak App Aggregate Scores.

Finding the Strongest and Weakest Pairs in Seconds

(Created using FXCM's StrongWeak App)

Using Slow Stochastic on a Shorter Time Frame

We next want to turn our attention to the charts. With the EURCAD as our focus, we want to drill down to a smaller time frame and find an intraday entry in a bullish direction (the same direction as the D1 StrongWeak. The Slow Stochastic indicator with the settings (15,5,5) can do a great job at marking temporary extremes called "OverBought" and "OverSold" levels. Ideally we want a Slow Stochastic cross while both lines are below 20. This gives us an OverSold reading (meaning the pair is poised for a reversal) while the lines crossing means a move higher is a possibility.

Learn Forex: Slow Stochastic on the EURCAD

Finding the Strongest and Weakest Pairs in Seconds

(Created using FXCM's Marketscope 2.0 Charting Package)

The chart above shows our entry as the Slow Stochastic crosses on this M15 chart. Our exit strategy can then use sound Money Management rules regarding when to exit the trade and how large of a trade size to set.

Harder, Better, Faster, StrongWeak

The StrongWeak app really opens the door to some powerful filtering on several time frames. The above was just a small example of the utility that can come from it. Having the ability to instantly know the strongest and the weakest currencies allows us to give attention to the pairs where attention is due. If you would like to test this technique risk-free, download a Free Forex Demo account today with free charts and real-time pricing data.

Good trading!

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