“currency index graph”


I guess the fastest way to say it is that the US line is a lot like the US$ index that you see all the time (even though the USDX is weighted too heavily on the Euro to get a real idea of price action). It seems to be some other version based on the FPA strength calculator.

Next, the other lines are the same principle but just for each other currency.
The logical way to trade it is based on the idea that strong currencies have to eventually stop strengthening, and weak (major) currencies have to stop weakening eventually.
This would mean look at your charts and the shape of the index tool curve to find a good opportunity to short a strong currency with a long weak currency.
Since the lines seem to gravitate toward '100' in the middle, it looks like a percentage gain/loss system.

...or if you believe Pharaoh's April 1st post, it just reflects the relative values of Zinc, Aluminum, Titanium, Chocolate, and interexchangable aquatic fowl and beer...
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This is from their website:

Currency index measures changes in the value of the currency by tracking the exchange rates of five of the most liquid currencies (USD, EUR, GBP, JPY, CHF). The value of index is composed on an equally-weighted basket method which allocates the currency against its major counterparties over a selected period of time.

Such a methodology is optimal for understanding the strength or weakness of global Forex currencies. As many global currencies are used as a reserve or save-heaven currency, the index tool allows you to access the overall efficiency of your money savings. The end value of the index reflects the average return that is gained or lost if your currency portfolio consists of one single currency. By using the currency index tool, you can easily anaylze and evaluate yearly, quarterly, monthly, weekly trends on the currency market.

The currency index includes the following input parameters:

* Start Date represents a beginning date from which calculations are to be started.
* Base Date represents a basic date which is used as equivalent for comparison. The value of index at the base date is always equal to 100%.
* Days Amount is a number of days which are shown on the chart from a start date.

How to use: select start date, base date and days amount and click "change" to proceed to calculations. Wait 5-10 seconds to get results.

I have a similar currency strength meter that I use on my blog you can take a look at it here: FOREX DAWN: Trading strong vs weak (+indicator) and click on strength meter in the article. I find it very useful in increasing my high probability trades, and avoid wasting time on flat pairs, it's really important that this primary element of trading be incorporated somewhere into your strategy on whatever timescale you trade.