FX Index Curve Oscillator (FICO)

15 Jul

We can approximate the DXY with simple multiplication, rather than using geometric weighted averages; the values will be different, but the charts will look almost the same. Because we can make a "good enough" version of DXY, we can also extend this concept to the other major currencies:

• AUD - Yellow
  
• CAD - Red
  
• CHF - Orange
  
• EUR - Purple
  
• GBP - Green
  
• JPY - White
  
• NZD - Lime green
  
• USD - Blue
  

This indicator works by constructing an "index" for each currency, performing a lookback to figure out the rate of change, and then smoothing the values. These values are fed through an oscillator to normalize them between -1.00 and +1.00, before finally being smoothed again. Interestingly, using HMA to smooth them the second time will cause the values to leak past 1.00, which we can also use as a signal.

If you want to change the values, I find that the biggest difference comes from the lookback and oscillator settings; the MA/smoothing is probably good enough. The default settings are for doing forex trades on the daily chart. Other timeframes are possible, but I could not find any settings that work. It might also be possible to use a similar approach on other assets (crypto, metals, indexes, etc) but I have not tried yet.

In my own testing, what I found to be a good approach is to look for a currency to be above +1 and another to be below -1, and then look for color changes; ideally this will happen on the same bar/candle.

You can also consider two line crosses, breaking above or below 1, etc as other entry signals. I find that price will either move immediately, or take a candle or two to retrace and then start moving.

Happy trading!


Unfortunately, the indicator pane can get quite crowded; if you're testing for a single currency pair, you may want to disable some of the plotted lines: