Relative Currency Strength from Averaged Pair Returns
Summary
The indicator estimates relative strength for eight major currencies by measuring percentage changes across available currency pairs over a configurable lookback, then averaging each currency's signed contribution. A pair's base currency receives the pair return while its quote currency receives the opposite value. The resulting scores are ranked from strongest to weakest, with bar lengths scaled to the largest absolute score and color indicating positive or negative change.
The calculation timeframe and lookback can be set independently of the chart timeframe. Updates can run on each new chart bar or on every tick. Missing broker crosses are skipped, so scores for affected currencies use fewer observations; the document notes this can influence accuracy. The indicator reads prices and displays rankings but does not place or manage trades. It supplies no test of whether the rankings predict future returns or support a profitable trading strategy.
Key ideas
- Each available pair contributes its percentage change positively to the base currency and negatively to the quote currency.
- Currency scores average contributions across the available pairs and are ranked by strength.
- The calculation timeframe, lookback length, and update timing are configurable.
- Missing broker crosses reduce the observations used for affected currencies, and no predictive performance evidence is given.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.