1. Overall price trend
If a currency is trending up against another currency, it is relatively stronger than the other currency. Overall price trends are determined by moving averages in most instances.
However moving averages are lagging price indicators (Indicators that produce signals after the price events have occurred). We have modified traditionally used moving averages method and came up with our own adaptive version of it to increase the response of moving averages to predict trends.
For the pair EURUSD below, FX Currency Strength Radar will detect it as a rising trend base on our adaptive moving averages algorithm, and EUR is considered stronger than USD.
2. Momentum of price movement
A currency which is gaining momentum against another currency is relatively stronger than the other currency.
We do not want to get into a trade where the momentum of the move is waning. That is a low probability trade. FX Currency Strength Radar checks on the current price movement to determine momentum of the individual currencies.
The 1st figure below shows increasing downward momentum and the 2nd figure shows decreasing upward momentum.
– How is Currency Strength determined?
FX CURRENCY STRENGTH RADAR