Build Your Trading Plan Around the Strongest Currencies
There is a very simple formula for identifying the strongest and weakest currencies, writes Tyler Yell of DailyFX.com. Once you've done that you can follow a checklist for finding favorable entries in the direction of the predominant trend.
Trading in favor of the strongest currency and selling the weakest is the bread-and-butter trade for trend followers and swing traders alike. The only difference is that trend traders hold the trades for much longer and swing traders often have defined risk:reward entries. Trend followers purposely trade these currency mismatches because they tend to trend longer than many people expect.
To help you visualize what a strong-weak match-up looks on a chart, here is a trend at the hands of a notable strong currency unevenly trading against the weakest currency.
CAD/JPY Houses the Strongest and Weakest Currencies to Trend Traders' Delight
To see for yourself what the current strongest and weakest currency pairs are, you need to perform a strong and weak analysis. Once you've done that, you can add fractals and the CCI to your chart to find entries or look for breakouts.
Strong-Weak Analysis Breakdown
Place a large moving average on a major currency pair, preferably on an hourly chart or larger.