Imagine that you have 8 major currencies and you want to choose in which currency pair to invest. This means that you will need to calculate it yourself or use a currency strenght meter Now the question is how to make that measurment . There are many formulas , but you have to use the formula which will do the calculations so you can use them. The currency strenght can be calculated using a starting point in the past and comparing it to the current situation. There is no way to do it without such point because if it is not present you will have only the current prices. The prices by themself doesnt represent how the currency strenght is changing compred to the other instruments.
If we take for example eurusd , and it is going up , what does that mean? Is the eur becoming more expensive , or just the dollar is getting cheaper? Or both? So to do that you need not only to get one price for a pair , but to compare that values to the other major currencies. If we take all the majors which are 8 we need also to take all the crosses between them . They are 28. When we take all that crosses and we make calculations , we will need a starting point. Which is a good starting point? There is no universal answer. Lets say we are just speculating intraday. Then do we care what is going on a monghly scalse or years ago. We care about what is going on 10-20 hours ago. If we plan to use the data long term , then we dont care about the last 24 hours and we need the currency strenght for a much ,longer period.
So to choose the right moment we will need to know how we are going to use the currency strenght data. We can carefully choose the starting point and if we want we can change it and make longer or shorter inverval. The big questiion still is how to use that data properly. Most of the information is visible without using that meter. How using such a currency meter will change the things and give more information. The key is in the correlation . We all know that using a trend is risky. You don't know when the trend will start , and you don't know when it will end. But if the market is in range you know exactly what to do. You know where to enter, and where to exit. So choosing the currency with the bigger value will mean that it is in trend. It may be in the start , in the middle or at the end. So the best thing is to choose 2 currencies that are in the middle , and use a range strategy on them.