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What are Forex Strength Meters?

Forex Strength Meters Explained

Forex strength meters are tools used by traders to show you how strong or weak currencies are or could be in the future. The best forex strength meters use economic data to create their value making it a leading indicator, the lagging forex strength meters compare price and are lagging in nature.

Understanding forex strength meters is important as a trader so you know which ones to choose, why some are bad and how to properly use them.

Definition and Examples of Forex Strength Meters

Forex strength meters are used by traders to identify relative strength or weakness over a given time. The best forex strength meters also forecast potential future value. This is important for traders to understand as it allows the trader to identify whether they should be bullish or bearish on a forex currency pair.

Logikfx Macro Currency Strength Meter
Logikfx Macro Currency Strength Meter

Currency strength meters that are freely available online use price in their calculations, this creates a lagging outlook of relative strength or weakness. For example, the Logikfx macro currency strength meter is calculated by analysing economic reports to calculate value. Professional traders are well known to follow a macro investing approach, the macro currency strength meter aids those traders to incorporate fundamentals.

Forex Strength Meter Examples

Forex strength meters In the example below, we can see that the EUR forex strength is -27 which is weak and CHF at +36 which is strong. This creates a bearish bias for EUR/CHF.

EUR/CHF Forex Strength Meter (before)
EUR/CHF Forex Strength Meter (before)

Afterwards, you can see that the forex strength meter was right and that EUR/CHF was actually reversing into a downtrend.

EUR/CHF Forex Strength Meter (after)
EUR/CHF Forex Strength Meter (after)

Forex currency strength is really important for market filtration tools, if you were looking for long positions you would have been stopped out. In this case, the trader was only looking for short positions, increasing the probabilities of their trades.

  • Alternate name: Currency Strength Meter

  • Acronym: Forex CSM

How Forex Strength Meters Work

Forex strength meters work by gauging the strength or weakness of currencies, one of the main problems with how forex strength meters work is that most only consider the price of the currency to determine the strength. If a forex strength meter doesn't include fundamental variables in its formula then the forecasting ability is weak as only using price is backwards looking.

NOTICE: The Logikfx macro forex strength meter is the only meter to use live fundamental data and economic indicators in the formula.

For example, to calculate the strength of USD, the Logikfx currency strength meter would consider the most influential leading, coincident and lagging economic indicators (e.g. building permits, purchasing managers index and surveys).

Logikfx forex strength meter
Logikfx forex strength meter

The currency strength meter at Logikfx shows the strength from left to right of the displayed currencies. In this example, we can see that EUR has been increasing in strength from May to July and the USD has been weakening in the same period.

The aim of a trader is to combine a strong currency with a weak currency. In this case, EUR/USD might start to show interesting bullish opportunities. The reason to combine a strong and weak currency is to maximise potential volatility.

Forex strength meters work as a great market filtration tool, to filter out market noise. In the EUR/USD example above, it allows traders to focus on bullish positions as the strength meter shows potential bullish movements.

Forex strength meters vs Logikfx Macro currency strength meter

  • The main pros of using a forex strength meter is to get a view of what happened in the past.

  • Forex strength meters and the Logikfx macro currency strength meter are free to use.

  • The Logikfx macro currency strength meter is forward looking by using economic data in the indicator.

Forex Strength Meter Fees

Forex Strength Meters are either free or paid. The free forex strength meters are available to use online at no cost however, these will have very little worth due to using lagging exchange rate price data.

The Macro currency strength meter pricing starts from £129 per month which in comparison to data sources like Bloomberg Terminal is a fraction of the cost for fundamental data.

Are Forex Strength Meters Worth it?

Forex strength meters are worth it for traders with two goals:

  1. They want an understanding of what has happened in the past.

  2. They want to know future value and an understanding of what could happen in the future.

If you're wanting an understanding of what's happened in the past then the free forex strength meters are a useful tool to tell you if currencies are currently strong or weak. The Macro Currency Strength Meter is useful for traders wanting an idea of the future.

TOP TIP: Forex traders find the currency strength meter and other Logikfx technology useful see our reviews.

How to Get Forex Strength Meters

The quickest and easiest way to get the Logikfx Macro Currency strength meter is to test it yourself online. The only requirement you need is a web browser like Google Chrome, Safari or Microsoft Edge to get started.

The Logikfx macro currency strength meter is an online web tool used by traders across the world, proving fundamental insights.

Select the currencies you want to view on the boxes on the right and the strength will display for the past 7 weeks.

Alternatively, there are other forex strength meters which are also free to use on most web browsers or by downloading them on trading platforms like MT4 or TradingView.

What It Means for Individual Traders

Forex strength meters are an important tool for individual traders to use. Institutional traders analyse economic data which individual traders fail to do. Forex strength meter that include economic data in its calculations are a bonus as this saves traders time doing manual analysis.

Key Takeaways

  • Forex strength meters are tools used to gauge currency strength or weakness during a given period.

  • Great forex strength meters show potential future value.

  • Bad forex strength meters only include price as part of their calculations.

  • Good forex strength meters include fundamental data.

  • Forex strength meters are great market filtration tools.

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