How to Trade with the Forex Strength Meter

The Forex Strength Meter is an algorithm-based technical indicator that helps traders determine the strength of an individual currency. It is usually used on MT4, MT5, or any other platform that supports custom indicators, but a Currency Strength Meter app can also be found on the web.
The indicator’s job is to let the trader know which currency is performing well at a given time and which one is not. This then helps traders to create strategies by taking this information and applying it to the charts on their MT4 screens.
Let’s say that the USD is rated as a strong currency at this moment, and the EUR is rated as weak. It would be in a trader’s best interest to pair these currencies and just start buying, right?
The answer is both Yes and No, simply because it’s all about the chart and how realistic a buy trade would be in a specific situation.
If the market is currently correcting from a massive spike not too long ago there is no Forex strength meter guide that could help traders navigate through the volatility.
The most suggested way of using the FX strength meter from professionals is as an additional confirmation. First, the strength and weaknesses are determined, and only then it can be considered as a good trade depending on the chart.
In this guide, you will learn how to use the strength meter, how to download it, and how it generally works in a market as volatile as Forex.

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How does the currency strength meter work?

Before we start explaining how the currency strength meter (CSM) works, let’s try to explain what a currency strength meter is in the context of Forex trading. CSM currency strength meter is a technical indicator rather than an external software that is used to analyze and predict future market prices. However, it can be both, as already mentioned in the introduction. You can find and download an app that measures the strengths of given currencies, or you can use algorithms and integrate the indicator with your trading platform. For instance, the currency strength indicator MT4 can be opened using the MetaTrader 4 platform. Determining the strength of currency prices can help traders make more informed decisions. 

Now let’s find out how the CSM currency strength meter works and how it can help traders to make better decisions before placing an order. The process consists of 4 steps:

  • Determine base currency
  • Pair given currency with all available currencies
  • Calculate strength relative to each paired currency
  • Calculate the average score
The main idea in how to use the Forex strength meter is to view it as a “filter”. This indicator helps us understand what made a pair move. For example, let’s say that NZD/USD is uptrending. The CSM will help us understand if the reason behind is USD's decline or NZD's strength. The currency strength meter indicator takes given currencies, measures their performance in relation to a basket of major currencies, and displays results.
Forex strength meter guide
Another critical thing to consider is that the strength meter of a specific currency is always determined through the timeframes you have set for it. For example, the strength of the USD may be really high in the daily timeframe, while very low if you open the indicator for the 5-minute timeframe.

Forex meter indicators help traders increase the accuracy of their predictions. For instance, If one currency is making sharp moves and is trending, while another currency is ranging, it might be wise to avoid placing orders against the trending one. What's more, Forex meters help fundamental traders locate active currencies and investigate their behavior.

How to measure the strength

Most CSM indicators come with their own measuring system. In most cases, it will be a 0-10 strength measurement. The closer the rating is to 10, the stronger the currency is. Remember that this number can go below 1 as well. In addition, position traders and longer timeframe traders such as swing traders are using daily currency strength meter, while intraday traders are using live currency strength meters. 

Mistakes to avoid when using CSM

The biggest mistake that most beginners make when using CSM is that they only rely on using CSM and nothing else. In order for this indicator to bring you the desired outcome, it is vital that you pair your trading with additional trading tools. Forex meters only show which currency is in action in a given currency pair and which currency is dull in a given timeframe.
The next mistake is to not calculate the strength of a currency in contrast to major currency pairs. You see, in order for the USD to be strong, it needs to be strong against the EUR, GBP, CHF, JPY, and other major currencies. The euro and US Dollar are the world's two biggest reserve currencies, and the EUR/USD pair is the most traded one. The currency pair performance can highly influence the valuation of other pairs that include these currencies as either base or quote currencies.
The third and final mistake is using only short time frames. In order to use the Forex strength meter for trading, it’s preferred to use it with longer timeframes. This includes a couple of weeks or months timeframes. Only then will the strength of the currency be accurate. Remember, there is always some kind of news that could sow panic in the market, thus causing a major, but temporary disruption. This can seriously damage a currency’s strength in a shorter time frame. For this very reason, technical traders avoid placing orders during news announcements

How to trade FX with Currency Strength meter - Key takeaways

The currency strength meter is an indicator that is usually the first tool that traders use when they start their analysis. The meters measure the strength of given currencies in relation to a basket of major currencies. 

The usage depends on the timeframe. Position traders are using daily currency strength meters, while intraday traders are using live currency strength meters. Remember to always look at what state the market is in at the moment, if it is recovering from a huge spike, the CSM’s data may not be useful. CSM helps traders avoid trading against currencies that are strongly trending. 

Trading with Forex strength meters can easily be disrupted by some form of even in the market that brings massive change. This can be a news piece or some kind of economic issue. Spikes and plunges always make the CSM less accurate.

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FAQ on Forex strength meter

How do I download the Currency strength meter?

You can download the currency strength meter on the MetaQuotes marketplace if you are primarily using MT4. Usually, the indicator is completely free and can be downloaded instantly. But if you are looking for more features on your indicator, you can always take a look at paid CSMs which could have something extra to them. It’s best to make sure that you need those extra features.

How do I install the CSM?

Once your currency strength meter download is complete, they can be found in your downloads, or they might be already installed on your MT4. If it is in your download folder, then here are the following steps you need to make to install it.
  1. Find where your trading software is installed
  2. Copy the CSM file
  3. Paste it in the “Indicators” folder within your trading software folder
Once all of this is done, you can simply run the trading software and find the CSM available in your indicators list.

How many currencies can I track with the CSM?

The free Currency strength meter supports all the major currencies such as the USD, EUR, GBP, JPY, NZD, AUD, etc. However, it’s often possible to find a Forex currency strength meter online that has more exotic currencies such as the TRY, NOK, RUB, and others.
One thing to note here is that the CSM indicator is usually most accurate with major currencies rather than exotics.

Can I get the currency strength meter MT5 indicator online?

In the guide above, we focused on how you can download and install the currency strength meter MT4 indicator from the web, however, it should be noted that MetaTrader 4 is not the only platform that supports the CSM indicator. 

In fact, the currency strength meter is also available on loads of other platforms, including MetaTrader 5. And it can be downloaded the same way you do with MT4: 
  • Go ahead and search for the “currency strength indicator for MT5” 
  • You'll find a download file from any trusted source and download it
  • Once downloaded, you can unpack the archive/drag the actual file in the MT5 directory and restart MT5
And just like that, you can have an accurate currency strength meter on your MetaTrader 5 software.

What is the best currency strength meter indicator?

The best currency meter indicator depends on the strategy you use and the asset you trade. Long-term traders generally use daily strength meters, while intraday trades use live meters. The best currency strength meter indicators are the ones that can be run on your trading platforms. Running strength meter indicators separately can bring lagging experience and lead to unsuccessful trades, especially for high-frequency traders.

How to use currency strength meter?

Currency strength meters are just giving you vital information. It's your job to digest that information and determine which currency in a given pair is moving the whole pair. If a base currency is uptrending in relation to other major currencies, in other words, the meter shows the strength of the currency, it is unwise to place an order against the uptrending currency and vice versa. In general, traders try to avoid trading against strong, trending currencies. Trading against trends is also an option, however, it requires more skills and experience.
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