Currency Strength Meters and Trend Alignments: Finding Profitable Opportunities
This is where you are looking to align with the right trends in order to make a smart decision in the currency markets.
A thing like a currency strength meter can be very useful in spotting which currencies are moving like you’d like them to.
With this tool wise use you can combine it with a good strategy to gain a better chance of success.
So, What Is a Currency Strength Meter?
We track currency strength meters of this currency vs other currencies on the Market using Scroll & Swipe & Sort.
It tells you which currencies are doing well and which are not.
As an example, the system works by comparing the price movement or changing prices of currencies of a particular pair.
Suppose the Euro is doing better than the US dollar the meter will similarly be so.
The benefit of this tool is that it allows analysis of several currencies at the same time. Instead of looking at just one currency pair, here you get articles on market strategies.
What to Know about Trend Alignments
When a currency pair goes in the same direction as the entire market trend, this is known as trend alignment.
So trends are key, as they can show you to where a currency is heading.
For example, say your meter picks out that a currency is getting stronger, and your strategy relies on that trend, then you would want to trade pairs of that currency that are going in that same direction.
Your trade is more likely to be a success because you’re aligning with the market momentum.
Combining Currency Strength Meters and Trend
Now, here’s the good part: When you’re combining that power of a currency strength meter with your method for noticing trends, you’re better equipped.
Look for Alignment
And first, check the meter to see which currencies are strong or weak. Then, check if those currencies are in a clear trend.
Such a view helps you identify pairs that are likely to continue their movement.
Trend Confirmation
Put simply, if one currency is strengthening for whatever reason on the currency strength meter and the market trend for that currency is sideways or weak, it’s best to wait.
Check those pairs where the currency strength and market trend match in the same direction.
Avoid Counter-Trend Moves
If a currency looks good, not a good resume, but when the trend lines in its favour, it is generally a reversal as opposed to a continuation.
These situations can be risky and there are probably no profitable opportunities.
Watch for Shifts
The currency strength is changed quickly. Watch the meter carefully to see if there are some changes that should signal the market’s change too. Acting quickly but calmly is always good.
How to Find Trend Alignments Using the Meter
To maximize the use of a currency strength meter, you must get to know key patterns. Here’s how you can make better use of this tool:
Look for Consistency
If a currency is trending by a few percentage points upwards for several hours or days it’s more likely that trend will continue.
It could also mean that a currency has been down way too long, suggesting a longer term trend.
Check the Time Frames
You get different perspectives according to different time frames.
If you’re interested in getting more immediate information, like on a 5- or 15-minute chart; whereas, if you want to see a larger trend, then 4-hour or daily charts may work better for you.
Watch for Divergence
If you know a currency pair is weakening but the trend for that pair is still moving up it’s a thing you have to pay close attention to.
But it’s not always easy to decipher it as an early signal that the trend is about to shift.
This is where you may be interacting with a divergence, where the price rises but the strength meter is indicating weakness.
One of the things about divergence, however, is that it’s usually a sign that the trend is coming to an end. It can be the case that the market is reversing ready but it’s not always the case.
But although the pair’s strength is weakening, they could continue to move upward for some time. It’s because of this that it is important to watch the situation closely.
Conclusion
A currency strength meter can be an excellent tool for identifying which currencies are strong or weak, or when used in combination with a good understanding of trends, can be an excellent tool to help you make better decisions.
If you will align the strength of currencies to pinch the current market trend, you are increasing your probability to make winning moves.
You should always be patient, don’t chase the market, use multiple tools to confirm your analysis.
