Fixed-Reference Overlay Charts for Relative-Value Analysis
Summary
This indicator overlays the price history of two currencies or other assets on one chart so a trader can inspect their relative movement. The example describes viewing USDCHF alongside EURUSD and presents the tool as potentially useful when studying convergence, divergence, correlation, cointegration, or relative value.
The modification addresses a charting issue: the original indicator recalculates its center on every bar, which shifts past relative values as new bars arrive. The modified version keeps the initial reference fixed, so historical comparisons remain stable while current prices continue to update. A user-selected lookback bar sets that reference; reloading the indicator or changing its settings resets it. The author also says the modified version displays older history than the original. This is a description of an indicator’s behavior, not evidence that any pair relationship is stable or tradable. The overlay alone does not establish cointegration, identify entry or exit rules, or account for execution costs and risk.
Key ideas
- An overlay chart places two asset price series together to help inspect their relative movement.
- A fixed initial reference prevents historical values from shifting as each new bar arrives.
- The user chooses the historical bar used to establish the comparison point.
- Visual convergence or divergence alone does not prove a tradable relationship.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.