stevehopwoodforex.com • Currency strength (like Hanover)

Author:

jlcgarcia [ Sun Apr 21, 2013 9:43 am ]

Post subject:

Re: Currency strength (like Hanover)

garyfritz wrote:Steve asked me to open a new thread on this...

This morning I posted a "currency strength" indicator that displays the relative strength of each currency, similar to the Hanover indicator we all know. But it sounds like mine is much simpler.

I was experimenting with it a bit, and I came up with something that looks very promising. I don't have the expertise to build it into an EA -- nor do I have the time, I was supposed to be working today, not playing with Empty4 -- so I'll toss it into the ring here and let Steve &etc look at it.

The initial indicator I wrote seemed to work well, but it was pretty noisy:

CurrStrength.gif
So I added a smoothing pass that runs the index values through an EMA:

CurrStrengthSmoo.gif
That made it a lot easier to read, and it would be a lot easier to use it for signals in an EA.

I started looking at the direction of the currency indices. In the chart below I have the CAD (orange) and JPY (purple) indices on the indicator, and CADJPY on the chart above it.

The vertical lines are a very rough attempt to mark signals generated by this logic:
* If the lines move in opposite directions, go long (green line) if CAD line is increasing, short (red line) if CAD line is decreasing.
* If the lines move in the same direction, go flat. (white line)

CurrStrengthSigs.gif
In a quick hand check, it appeared to do a very nice job catching the moves. But that relies on me reading the chart, and of course I'm not as particular as an EA.

Look interesting?

The indi with the smoothing is attached. I know how that saps your will to live, Steve but the important part is fairly straightforward. Just copy AUDUSD, USDCAD, USDCHF, EURUSD, GBPUSD, USDJPY, USDNZD into arrays, then calculate the index values:
Code: Select all
USD = MathPow(UsdChf[i]*UsdJpy[i]*UsdCad[i]/EurUsd[i]/GbpUsd[i]/AudUsd[i],1./7.);
AUDval[i] = USD*AudUsd[i];
CADval[i] = USD/UsdCad[i];
CHFval[i] = USD/UsdChf[i];
EURval[i] = USD*EurUsd[i];
GBPval[i] = USD*GbpUsd[i];
JPYval[i] = USD/UsdJpy[i];
NZDval[i] = USD*NzdUsd[i];
USDval[i] = USD;
Then calculate an EMA of each of the XXXval arrays, and the relative (noisy) index value for XXX is (XXXval - XXXEMA) / XXXEMA. Smooth that again with another EMA and you have the smoothed results above. (Smooth it *again* and you could use it for a signal line -- the index is going up if it's above its signal line & vice versa. That's not in the attached indicator.) The core logic starts at line 176 and it's fairly straightforward -- it just looks bad because I'm doing everything 8 times.

Warning: the indi seems to work fine on M1 - H4, but for some reason it goes wonky on D1 and above. I don't know why but I suspect it has to do with nefarious mysteriousness in the way Empty4 loads up the data history.

Gary

Hi,

for some time ago I have been searching for a better indicator that replaces the !xMeter indicator in my Evolution program.

After reading this thread, I think that I have founded it here thanks to garyfritz.

Next week I will begin to experiment with this indicator, its values, and the way to replace the !xMeter indicator with this one.

Regards

José Luis

Author:	gg53 [ Wed Jul 04, 2012 6:11 pm ]
Post subject:	Re: Currency strength
Wouldn't it be more accurate if we multiply each cxurrency by its relative weight according to its market share? Total currencies weights should equal 1. The USD market share is about 0.4 (~40%), EUR 0.2 (~20%), etc. Gadi

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Currency strength (like Hanover) https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=503	Page 10 of 11

Author:	garyfritz [ Sat Jun 16, 2012 9:33 pm ]
Post subject:	Re: Currency strength (like Hanover)
This indicator has two different parts: a currency-index calculation, which does NOT use any MAs, and a series of 3 MAs to smooth and process the raw index values. If you don't like the MAs, just set all the xxxLen inputs to 1, and you will get the raw index values. Each currency's index has a different range, and they all make very small changes within that range. I used the MAs to map them all into the same range (centered around zero), but you could do it a different way. E.g. you could see where the current value falls between the highest & lowest values of the last N bars. I might have to give that a try.

Author:	garyfritz [ Sun Jun 17, 2012 3:16 am ]
Post subject:	Re: Currency strength (like Hanover)
OK frankie, here's an indicator with ZERO MA's. This one operates very similarly to Paul's CSS indicators, and in fact I "borrowed" some code from his indicators. The major difference is that the TMA-slope-based calculation he uses produces a nice value by itself. This one doesn't. It calculates currency indexes like this: USDindex = ( (USDCADUSDCHFUSDJPY) / (AUDUSDEURUSDGBPUSD*NZDUSD) ) ^ (1/7). It multiplies the price if the currency is in the left half of the pair (USDxxx) and divides if it's in the right half (xxxUSD). The trouble with that calculation is that each currency index has a different range. In order to bring them all into a common usable range, I did a stochastic-like calculation: if it's at the top of its N-bar range, it's 100; if it's at the bottom, it's 0; and somewhere in the middle will be between 0 and 100. A LookBack value of 100 or so seems to work OK. The longer the lookback, the less noisy the plots, but the more the signals lag the market. This indicator is noisier than Paul's TMA-based indicator and I'm not at all sure it's useful. But for what it's worth, here it is. EURAUD.gif

Author:	garyfritz [ Wed Jul 04, 2012 6:23 pm ]
Post subject:	Re: Currency strength (like Hanover)
Doesn't make sense to me. If I'm long USDJPY, I don't care that USD comprises most of the currency volume. I only care about USD movement vs. JPY movement, and that's what this indicator shows. But I've dropped development on this indicator. Baluda came up with a better one that fits in with the NB10.2 indicators much better. See http://www.stevehopwoodforex.com/phpBB3 ... f=45&t=629

Author:	gg53 [ Wed Jul 04, 2012 7:14 pm ]
Post subject:	Re: Currency strength (like Hanover)
The strength indicator (any strength i8ndicator) - will look a bit different if it will take into account each currency "weight" in the market. USD up by 1% doesn't have the same effect as NZD up by 1%...

Author:	garyfritz [ Wed Jul 04, 2012 7:40 pm ]
Post subject:	Re: Currency strength (like Hanover)
In the market, no. But we don't trade "the market." We trade pairs. In NZDUSD, yes it does.

Author:	SteveHopwood [ Wed Jul 04, 2012 9:04 pm ]
Post subject:	Re: Currency strength (like Hanover)
gg53 wrote:The strength indicator (any strength i8ndicator) - will look a bit different if it will take into account each currency "weight" in the market. USD up by 1% doesn't have the same effect as NZD up by 1%... Retire gracefully here feller. Gary knows what he is talking about.

Author:	Fx93 [ Wed Oct 03, 2012 6:53 pm ]
Post subject:	Re: Currency strength (like Hanover)
Hi Gary, I found this rather cool top indicator which plots all the major USD pairs on the chart so that one may see the difference of moves. If you plot it on EURUSD and make it a line chart it is the same for every chart. The data is dependent on both the look back period and timeframe though. I was looking at it with your currency meter indicator. I was thinking you might like to give it a look. What I had in mind was to plot the differences between the lines and then to short the top line and buy the bottom line until they converge. Thus perhaps you could make a new bottom indicator from this one showing the exact differences. All_usd_pair.mq4 Here is a pic of what I am talking about on the 1M chart. Assuming the two pairs met our degree of difference standards, we could buy the blue line (USDCHF) and sell the green line (AUDUSD), then close the trades when they converge. The red lines show the entry and exit in the example. Edit: I just noticed the indicator doesn't plot the pairs exactly, using an 800 or 1200 works better, but it does kind of dampen the potential I saw in it. Update: This indicator does not accurately mimic the prices of all the currencies. A better way I can do this is in thinkorswim, where I can plot a pair chart of for example EUR/USD-USD/CHF and use various indicators to denote extremes, and will try that. Screen shot 2012-10-03 at 2.47.04 PM (2).png

Author:	garyfritz [ Sun Apr 21, 2013 1:15 pm ]
Post subject:	Re: Currency strength (like Hanover)
No, José Luis, I abandoned this indicator long ago. The approach I used would have worked very cleanly with every other trading platform I've ever used, but I could never get it to behave with Empty4's "unique" implementation. About that time Baluda came up with his Currency Slope Strength indicator, and I said "Great, that one works fine. Use that one instead." So unless you want to dig into the code and figure out how to make it work properly, I wouldn't waste any time on this.

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