Forex strengthmeters - the basics

[NVP]

good to see a few questions bouncing around ......meanwhile I will get my act together today and keep this basic thread rolling with more posts

I spent the last 2 weeks with my head in the clouds on some very very fancy variations and ideas on how to use strengthmeter based technology ........

but no matter how much I try to expand the envelope in my own world it still has to come back to the basics first which is why I love developing this new thread

N

 

[levonisyas]

nice to meet u again.
:clap:

hey all

I'm back .......

N

 

[hybrid]

hi NVP,

I have some questions if i may - that may promt you to explain some of the basics (the previous page leapt forward for many of us looking at the basics).

Is the Dollar line taken from the "Dollar index?" If so, then do all other currency lines work around their relationship to the dollar?

Regarding each currency line; Is it the going up or going down (direction) that's important.....or whether the currency is above or below the 0 line? Or both?
What is a good advisable MA period on a) a daily chart, and b) a 4h chart? also, is the indicator better for scalping or good for swing trading too?

I read on the other thread "the 0 line means nothing," and that it is a "snap back to 0 game" -could you elaborate please on this?

In your words how would you explain if a pair is widening (divergance), and If a pair is narrowing (convergance)? What is going on in basic terms?

Thanks in advance,

Hyb

 

[NVP]

heres the recent 1 hour setting on the E/U .........slim pickings actually

I am not going to teach anyone how to trade S/R levels or breaches as exampled here........up to you .....this is not an exact science and I encourage people to build their own strategies and ideas

I hope that more advanced traders can already see that one can apply pretty much any standard set of indicators and techniques to Strengthmeters ......all you have to do is understand the transition of those tools onto currency indexes (which we havnt done here yet)

so here we are with 1 E/U trading system for use .....

we combine simple MA signal with a little price action ....

this is on a E/U.............I know of at least 2 commercial systems that swop the E/U line for currency index lines (ie like my standard strengthmeter )..........and do exactly the same as above .....

so .......£10,000 please ?

N

here was the last lesson I posted ............remember this usd strengthmeter is merely showing the USD pairs and their relative strenghths based on the MA setting I place on the indicators below the E/U pairchart

I have been using the 500ma to show the potential of using Support/resistance breaches as signals and also the 50ma setting to show how you can use the position of the lines above or below the ZERO to signify if that pair is bearish (below ZERO) or bullish (above the ZERO)

read the thread again from the start o understand that the ZERO line on the indicator represents the actual MA line on the main pairchart when on the same setting .............this is what the ZERO line is on a Strenghmeter indicator ......it is the MA line on a standard pairchart streched out to simplify the distance between the ma vaue and current price of the instrument .....:smart:

N

 

[NVP]

just to repeat them

heres the E/U with a USD strengthmeter underneath (only Euro shown)

20ma setting ................See how the yellow 20ma line has been stretched and made the ZERO line in the indicator ?

the ZERO line tells you if the current instrument value is above or below the MA setting

above the Zero represents strength and bullish
below the Zero represents weakness and bearish

N

 

[NVP]

hi NVP,

I have some questions if i may - that may promt you to explain some of the basics (the previous page leapt forward for many of us looking at the basics).

Is the Dollar line taken from the "Dollar index?" If so, then do all other currency lines work around their relationship to the dollar?

A strengthmeter is a Generic tool that can work with any instruments and combinations .................in the examples I am using at present I am sticking to a USD Strengthmeter as you say ..................so if I was to drop all the lines onto the chart you would see all 7 of the major pairings against the USD ........I am only showing the E/U so that we can see the lines relationship to the MA setting being used .........I will move onto more lines once I have explained divergence and convergence and a copule of other things

Regarding each currency line; Is it the going up or going down (direction) that's important.....or whether the currency is above or below the 0 line? Or both?
What is a good advisable MA period on a) a daily chart, and b) a 4h chart? also, is the indicator better for scalping or good for swing trading too?

once you have set the MA .......if the line is above the Zero then the line is bullish and stronger than the MA ......if the line is below the Zero it is bearish and weaker than the MA ..............best signals are whene the line is diverging away from the Zero ......if it is coverging this indicates that momentum is falling

I read on the other thread "the 0 line means nothing," and that it is a "snap back to 0 game" -could you elaborate please on this?

ummmm..............the ZERO line represents the MA setting .......not sure in what context i used it above ?

In your words how would you explain if a pair is widening (divergance), and If a pair is narrowing (convergance)? What is going on in basic terms?

when you have increasing divergence in either direction the momentum of the instrument being measured is increasing verses the MA setting ....this is good and represents a trading opporunity

Thanks in advance,

Hyb

see above :smart:

 

[NVP]

I would really really recommend that people read up about the MACD indicator

it is very very good if used properly

the USD Strengthmeter I am currently using here is very very similar to a macd

heres the E/U with a MACD on the bottom with settings

fast 1
slow 20
average 1

see how similar they are ?

obviously as we move onto using more advanced strengthmeters this will be impossible as the MACD can only attach itself to the Chart being used .................but I urge people to study and read about the MACD as it is a very nice tool

N

 

[hybrid]

thanks so much NVP. i asked the 0 Q as i thought maybe the early MA explanation in this thread was going to lead somewhere different and that was 'just a basis.'

 

[NVP]

so before I have to leave heres a nice little system ..............

set the MACD to

fast 1
slow 20
average 9

trade when the bar closes above or below the Zero line (after being on the other side) and then run the trade until the bar closes back inside the dotted line

what you are doing is running the momentum until the momentum slows and an average of the momentum catches up with it

if you want to re-enter if the bar punches back outside the dotted line is up to you as momentum resumes in same direction .....both trades are shown on the picture below ......

this is not strictly aligned to what I am teaching here but I couldnt resist dropping in a MACD system that is pretty robust

any instrument .....any TF ...............you can also vary the SLOW ma and the average if you want :smart:

later all duty calls elesewhere

N

 

[hybrid]

Is anyone else having a problem with it in MT4 Version 4 Build 509? (Appearing blank below the chart). (Windows 7 64bit).

 

[James Austin]

yes

Is anyone else having a problem with it in MT4 Version 4 Build 509? (Appearing blank below the chart). (Windows 7 64bit).

 

[Jedster2001]

Is anyone else having a problem with it in MT4 Version 4 Build 509? (Appearing blank below the chart). (Windows 7 64bit).

and

yes

You don't have enough data in your MT4 platform. I say it that way because, it is not related to the chart that the indicator is on. In fact, a lot of the time, NVP displays the indicator on the Dow chart.

So, you need to ensure you have sufficient data for ALL the major pairs, regardless of the chart you are viewing the indicator on.

You can do that by going to the history centre and downloading data for all the major pairs, or, pull up each chart individually, and then scroll back in time manually, so that the chart fills up with history.

J

 

[NVP]

thanks J .............

 

[James Austin]

i have enough data, the indi has quite a few bugs.......did you write it?

and



You don't have enough data in your MT4 platform. I say it that way because, it is not related to the chart that the indicator is on. In fact, a lot of the time, NVP displays the indicator on the Dow chart.

So, you need to ensure you have sufficient data for ALL the major pairs, regardless of the chart you are viewing the indicator on.

You can do that by going to the history centre and downloading data for all the major pairs, or, pull up each chart individually, and then scroll back in time manually, so that the chart fills up with history.

J

 

[NVP]

ok i will try to keep this moving later ...............before I step up to showing the currency Strengthmeter in the Indexed forms I use it I was going to cover the following by still using the USD Strengthmeter I have been using with just the E/U on the page

Divergence trading signals
Convergence Trading signals
Basic entry criteria
Basic Exit Criteria

let me know if anything else needed before me move on.......Remember most of this is still generic and can be used on any Instrument ........I am showing the basics of MA analysis and trading

N

 

[NVP]

i have enough data, the indi has quite a few bugs.......did you write it?

Hi James

the basic indicator has a lot of history and rewrites...........Jedster has vetted it many a time now so I leave him to comment .........I think its your history that causing issues .......weve had over 1700 downloads of this and similar versions just on T2W alone .....so would have received more questions by now ...?

N

 

[Jedster2001]

i have enough data, the indi has quite a few bugs.......did you write it?

Ok, I'm wrong. It is nothing to do with the quality of data you have.

No I didn't write this indicator. I do however, understand exactly how it works, and what might cause it to not work correctly.

I'm sorry I couldn't be more help to you.

J

 

[James Austin]

when you can see the indi on months April, May, Aug, Sept, Oct,
but not on months June + July (not exact dates, but they illustrate my point),
this indicates the data is not insufficient

the indi has bugs

 

[James Austin]

if you look at the chart posted here, you will see that the indi/data is there,
it's just that it has been compressed

this is related to how the indi contracts and expands as meter values change with scrolling

 

[Jedster2001]

when you can see the indi on months April, May, Aug, Sept, Oct,
but not on months June + July (not exact dates, but they illustrate my point),
this indicates the data is not insufficient

the indi has bugs

The code is very simple. I do know of a flaw (because of the over-simplicity) which causes the type of issue you are seeing and this is caused by missing or poor quality data. You only need to read a few posts further back to see a similar post. This missing or poor quality data often goes unseen since it occurs with a currency pair that is seldom used by that user.

if you look at the chart posted, you will see that the indi/data is there,
it's just that it has been compressed

this is related to how the indi contracts and expands as meter values change with scrolling

Scrolling and rescaling (or contraction and expansion as you describe) is controlled by MT4. It is an automated function of the platform and is not under control of the indicator writer. However, the reason why you suddenly see one set of values jump very high (and hence the indicator is rescaled in order to show it) is going to be caused by a problem with the data. If you look at the calculations in the code, there can be no other explanation, because the indicator is not doing anything else.

J