When compared with other asset class currency trading is unique and in a class of its own in the forex trading business. Trading currency in pairs offers very rewarding opportunities for traders who decide to engage in it. However, trading currency pairs requires peculiar skills to be able to measure the strength or weakness of different currencies. And that’s where Currency Strength Meter MT4 could be a huge difference-maker.
Trying to determine the strength of one currency and the weakness of another could be a huge challenge, especially when you also consider the intraday noise and multi-timeframe analysis. Traders who invest in currency pair trade can gauge the performance of various currencies by adopting currency strength meter MT4.
Currency strength meter, also known as the currency strength indicator is an MT4 custom-designed visual tool that is used to show the strength and weakness of the major currencies of the world.
The MT4 indicator records the readings from all forex pairs in the last 24 hours and logically analyze the calculations on each. It then collates together each of the correlated currency pair to an individual currency to find out the current strength of the currency.
Why Use Currency Strength Meter MT4?
There are numerous benefits that a trader can derive from using the currency strength meter MT4. Currency strength meter is user-friendly and quite easy to apply the tool. It is a vital tool as an indicator of short-term trading.
It can protect traders from unnecessary hedging and double exposure. At the same time, it is equally good to be used to determine the risk level when you enter a trade. Except you want to adopt a more complex currency strength indicator, you can avail yourself of the tool free of charge.
The following are noteworthy:
A Handy Indicator for Short Term Trading: Currency strength MT4 is invaluable to traders because it presents an accurate impression of the current strength of a currency. It is a tool for professional forex traders who adopt it as an indicator for short term trading because they help show traders the currencies that are gaining.
User-Friendly: it has gained ground among new entrants who have no prior trading experience in the forex business because of its user-friendliness.
Free of Charge: As mentioned earlier, the majority of currency strength indicators are available at no cost, and they are both simple to use and effective. However, the more sophisticated currency strength indicator that provides an additional function, such as analyzing complex data to deliver accurate trading signals, comes at a price.
The MetaTrader 4 and MetaTrader 5, which are the most popular trading platforms in the world, provides free currency strength meter plugins that traders can easily download and use. To access the plugin, you have to start by creating an online brokerage account, downloading the trading platform on your computer before you can then proceed to download indicator packages, which consist of multiple indicators.
When you have successfully downloaded the indicator packages, which include the currency strength meter, you will be able to view and compare the strength and weakness of several pairs of currency.
Protects Traders from Double Exposure: because high correlation assets move in a similar direction, you run the risk of overtrading if you enter multiple trades on highly associated pairs. This could lead to loss of money if the movement of the market is not in your favor. You will be in danger of double exposure if you trade currency pairs such as AUD/JPY, EUR/JPY, and AUD/CHF if these pairs are highly correlated.
From this scenario, you will gain double exposure to JPY and AUD, which will result in a massive loss for you if the market moves against the direction you predicted. The function of the Forex currency strength indicator is to display a graphic presentation showing you at a glance, the currencies that are highly correlated, thereby protecting you from double exposure to weak currencies.
Having presented the huge benefits of using currency strength meters, you will be surprised to know about the downside of it. When currency strength meter is not perfectly coded, it can present some concerns.
A poorly coded currency strength indicator may cause freezing, give wrong signals, memory leakage, can stutter, and the CPU constantly working at 100%.
If you are using the meter in conjunction with other trusted filters like MACD, RSI and moving averages if they malfunction the trader may end up losing trading capital for relying on the wrong signals out of trust.
Currency Strength Trading Strategy
Applying the currency strength meter to enhance your trades is a piece of beauty. However, it is essential to note that currency correlations are constantly fluctuating. You cannot rely on a currency’s previous achievement as a pointer to envisage its correlations in the future. Some advanced traders prefer to use the wave trend oscillator.
However, as a knowledgeable FX trader, you can use this valuable information to develop an effective FX trading strategy and ensure that your trading portfolio is not exposed to so much risk.
Here are some principles that you will find quite handy while adopting the currency strength meter:
Avoid Entering Trades that Cancel Out Each Other: do not trade two pairs of currency that are moving in opposite market directions. Once you lose on one of these trades will certainly nullify your profits on the other.
Avoid trading two currencies that are strong or weak simultaneously. For instance, based on the Currency Strength Meter’s indications at a particular time shows that USD is green and JPY is also green which indicates that they are both strong, it is not advisable to trade USDJPY. Whether you trade them on the long or short term since they are going in the same direction, they will conflict with each other.
When Currency Strength Meter is used in conjunction with price action trading, it becomes a robust forex trading strategy to achieve high profit and win in your trading.
Minimize Risks: trading two pairs of currencies with positive correlation, help you minimize your risks.
Minimize Losses: similarly, you can reduce your losses by hedging two pairs of currencies that are perfectly negatively correlated. When one pair of currencies you are trading loses value, the pair that is in negative correlation to will certainly gain.
By adopting this strategy, while you will not be eliminating losses, you will be sure to minimize your losses.
Conclusion On Currency Strength Meter MT4
The Currency Strength Meter MT4 is an invaluable tool for traders who trade currency pairs. Whether used as a standalone tool or with other tools, its ability to protect the trader from losses makes it quite appealing. Many traders have referred to as a secret weapon of successful currency traders.
For traders wishing to trade currency pair with profit while worrying less about the conflicting trend of the market, currency strength MT4 is recommended. And if you still want more tools for help, you must consider scrolling through the site via this link and find loads of tools and indicators to help yourself. So keep reading our best signals for forex blog!