Currency Strength Inspector

The Currency Strength Inspector (CSI) is an indicator for MT5 that measures and displays in an intuitive way the relative strength of individual currencies.

It evaluates the performance of the major forex currencies (namely AUD, CAD, CHF, EUR, GBP, JPY, NZD, and USD) by examining their behavior against all the others' in the same basket. This helps traders to have a global view of the  market and its underlying "sentiment", as well as to identify strong and weak currencies for potential trade opportunities.

Optionally, it can evaluate the strength of precious metals (against USD, EUR, and AUD) and cryptocurrencies (against USD), considering them as a whole instrument. That is particularly useful to understand the current risk appetite of big institutional investors.

Finally, it can also provide measurements of the combined strength of most forex pairs, helping in detecting persistent trends and in determining market directions. To this purpose, an intuitive "heat map" of these pairs is displayed so as to allow the trader to detect the strongest and weakest currencies at a glance. Additionally, a mouse click on any symbol in the heat-map makes it open on the current chart for further inspections. 

Used alongside other technical and fundamental analysis tools, this indicator enhances market insight, minimizes risk, and improves trade timing for traders.

Main Input Parameters

• Type of instrument

the type of assets being inspected.

CURRENCIES: the strengths of all major currencies listed above are visualized in the indicator window with the selected XXX color, unless the corresponding flag parameter Show XXX is set to false.

CRYPTOS: only the overall, averaged, strength line of all the available crypto-currencies, against USD, is visualized (colored with the USD color) as a "CRYUSD" symbol. If positive, it means that cryptos behavior is generally bullish, implying that the market sentiment is getting more "optimistic" and confident, because most investors are buying cryptos (notoriously very volatile and riskier).  If negative, cryptos movement is mostly bearish, meaning that sellers prevail on buyers and the sentiment is of mistrust and of lower risk appetite. 

METALS: only the overall, averaged, strength of all the available precious metals (gold, silver, platinum,...) are visualized against USD, EUR and AUD (colored with the colors selected for these currencies), as "MTLUSD", "MTLEUR", "MTLAUD" symbols, respectively. Positive strength values indicate a general bullish trend for most metals, while negative values is associated to an overall bearish tendency (against the given currency).

• Period

The period used in the various moving averages involved in the estimate the currency strengths. The longer it is, the less the short-time fluctuations are important, but slower the reactivity of the indicator. When referring to a bullish or bearish trend, this is meant as such right over this time period. 

• Show heat map

If true, a table is shown in the main chart (only for CURRENCIES type) displaying all the forex pairs of two major currencies, with a color that indicates their relative strength. The redder they are the weaker they are (the more negative is the strength), suggesting short positions for them. On the contrary, the greener they are, the stronger they are (the more positive is their strength), the more likely a long position would succeed. They can be clicked to be immediately opened on the current chart.

• Show symbol on chart

If true and for CURRENCIES type, the combined strength line of the symbol on the main chart is also shown in the indicator window, but only if this symbol is a pair of two major currencies.

Suggested usage

For the indicator to work best, first of all the user should ensure to select all the forex pairs (both major and minor, including the "exotic" ones), plus all the precious metals and cryptocurrencies, available in the terminal.

That can be done by clicking View on the Terminal menu bar, then clicking on Symbols in the menu list to open the Symbols window. Then, in the Specification list tab, all types of Forex symbols should be selected (they could be listed as "Major, Minor, Exotic,..."), and all symbols in them should be enabled (by double clicking on their icon) so that they are displayed in the terminal and accessible to the indicator. Likewise, all Metals symbols (e.g. XAUUSD, XAUAUD, XAGEUR,...) and Cryptocurrencies (BTCUSD, ETHUSD,...) should be enabled too.

In practice, what we see when we look at a strength line of a given currency is the average of all the price behaviors of all the symbols that include that currency, either as a "base" currency (i.e. at the left-hand side of a symbol, e.g. USDSEK for USD) or as a "profit" currency (at the right-hand side, e.g. EURUSD for USD). This "global average" gives us a good statistical indication of the overall, underlying intrinsic  currency strength. That is why it is important to have as more symbols as possible shown in the terminal.

Then, the greenest symbols in the heat-map panel will be good candidates for long positions, because they have a strong base currency and a weak profit currency. Conversely, the reddest symbols will be more suitable for trading short. One can click on anyone of these symbols to quickly open it in the current chart (ensuring that the Show symbol on chart parameter is set to true). Then, a positive strength line diverging towards higher and higher values would suggest a long position. Similarly, a negative strength line diverging towards more and more negative values suggests short trades.

Another strategy could be that of inspecting symbols that are "gray" on the heat-map, because their strength is crossing the zero value. This could indicate the beginning of a bullish or bearish trend for them, depending on whether the strength line is crossing the zero level from negative to positive or vice versa.

Feel free to ask questions and to send suggestions, comments, bugs reports. They will be really appreciated.

Trade safe!