Relative Strength Scoring System

14 Feb

Relative Strength Scoring System :


Important prerequisite :

1. This indicator can be loaded on any forex chart, i.e. a currency pair, but must not be loaded on any other asset due to certain market closures.
   
2. The chart timeframe must be less than or equal to the trading timeframe, which is the indicator's first parameter. A timeframe equal to that of the "Trading Timeframe" parameter is preferable.
   

Introduction :

This indicator measures the relative strength of a currency against all other currencies using spread formulas. It gives an indication of which currencies are bullish, neutral or bearish. The ultimate aim of this indicator is to find out which pair will generate a higher probability of gain than the others by pairing the most bullish pair with the most bearish pair.


Spread formulas :

To find the relative strength of a currency compared with others, we use the following spreads formulas :

USD = (FX:USDJPY/100+SAXO:USDEUR+FX:USDCHF+SAXO:USDGBP+FX:USDCAD+SAXO:USDAUD+FX_IDC:USDNZD)/7
JPY = (SAXO:JPYUSD/100+FX_IDC:JPYAUD/100+FX_IDC:JPYCAD/100+FX_IDC:JPYNZD/100+FX_IDC:JPYCHF/100+SAXO:JPYEUR/100+FX_IDC:JPYGBP/100)/7
CHF = (FX:CHFJPY/100+SAXO:CHFUSD+SAXO:CHFEUR+FX_IDC:CHFGBP+FX_IDC:CHFCAD+SAXO:CHFAUD+FX_IDC:CHFNZD)/7
EUR = (FX:EURJPY/100+FX:EURUSD+FX:EURCHF+FX:EURGBP+FX:EURCAD+FX:EURAUD+FX:EURNZD)/7
GBP = (FX:GBPJPY/100+FX:GBPUSD+FX:GBPCHF+SAXO:GBPEUR+FX:GBPCAD+FX:GBPAUD+FX:GBPNZD)/7
CAD = (FX:CADJPY/100+SAXO:CADUSD+FX:CADCHF+FX_IDC:CADGBP+SAXO:CADEUR+FX_IDC:CADAUD+FX_IDC:CADNZD)/7
AUD = (FX:AUDJPY/100+FX:AUDUSD+FX:AUDCHF+SAXO:AUDGBP+FX:AUDCAD+SAXO:AUDEUR+FX:AUDNZD)/7
NZD = (FX:NZDJPY/100+FX:NZDUSD+FX:NZDCHF+SAXO:NZDGBP+FX:NZDCAD+SAXO:NZDAUD+SAXO:NZDEUR)/7
CRYPTO = (BITSTAMP:BTCUSD+BITSTAMP:ETHUSD+BITSTAMP:LTCUSD+BITSTAMP:BCHUSD)/4


Timeframes :

As mentioned in the prerequisites, the chart timeframe must not be greater than the trading timeframe. The latter corresponds to the timeframe chosen by the trader to enter a position, and is the indicator's first parameter. Once this has been chosen, the algorithm selects the timeframes of the "Trend" and "Velocity" charts. Here's how it allocates them :

• Trading TF => ("Velocity TF", "Trend TF")
  
• "5min" => ("15min ", "60min")
  
• "15min" => ("60min ", "4h")
  
• "30min" => ("2h ", "8h")
  
• "60min" => ("4h ", "12h")
  
• "4h" => ("12h", "1D")
  
• "6h" => ("1D", "3D")
  
• "8h" => ("1D", "4D")
  
• "12h" => ("2D", "1W")
  
• "1D" => ("3D", "1W")
  

Trend Scoring System :

When the timeframe of the trend graph has been allocated, the algorithm will establish this graph's score using three criteria :

1. Trend chart pivot points: if the last two pivots, high and low, are increasing, the score is 1; if they are decreasing, the score is -1; else the score is 0.
   
2. SMA: if its slope is increasing with a candle strictly above the SMA value, the score is 1; if its slope is decreasing with a candle strictly below it, the score is -1; otherwise, it is 0.
   
3. MACD: if the MACD is positive, the score is 1, if it is negative, the score is -1; else it's 0.
   

We then sum the scores of these three criteria to find the trend score.


Velocity Scoring System :

In the same way, we analyze the score of the "velocity" graph with its corresponding timeframe using three criteria :

1. The EMA: if its slope is increasing with a candle strictly above the EMA value, the score is 1; if its slope is decreasing with a candle strictly below it, the score is -1; otherwise, it is 0.
   
2. The RSI: if the RSI's EMA has an increasing slope with an RSI strictly greater than the value of this EMA, the score is 1; and if the RSI's EMA has a decreasing slope with an RSI strictly less than this EMA, the score is -1; otherwise it is 0.
   
3. SAR parabolic: if the SAR is below the price, the score is 1; if it is above the price, the score is -1.
   

We then sum the scores of these three criteria to find the velocity score.


Relative Strength Scoring System :

Once the trend score and velocity score have been calculated, we determine the relative strength score of each currency using the following algorithm :

• If trend score >=2 and velocity score >=2, the currency is bullish.
  
• If trend score <=2 and velocity score <=2, currency is bearish
  
• If (trendScore>=2 or velocityScore>=2) and (trendScore=1 or velocityScore=1) the currency is not yet bullish
  
• If (trendScore<=2 or velocityScore<=2) and (trendScore=-1 or velocityScore=-1) the currency is not yet bearish.
  
• Otherwise the currency is neutral
  

Parameters :

• Trading Timeframe: the trading timeframe chosen by the trader for which he makes his position entry and exit decisions. Default is 1h
  
• Pivot Legs: Parameter used for the chart "Trend" setting the pivot strength to the right and left of high/low. Default is 2
  
• SMA Length: SMA length of the chart "Trend". Default is 20
  
• MACD Fast Length: Length of the MACD fast SMA calculated on the chart "Trend". Default is 12
  
• MACD Slow Length: Length of the MACD slow SMA calculated on the chart "Trend". Default is 26
  
• MACD Signal Length: Length of the MACD signal SMA calculated on the chart "Trend". Default is 9
  
• EMA Length: EMA length of the "Velocity" graph. Default is 13
  
• RSI Length: RSI length of the "Velocity" graph. Default is 14
  
• RSI EMA Length: Length of the RSI EMA. Default is 9
  
• Parabolic SAR Start: Start of the SAR parabola in the "Velocity" graph. Default is 0.02
  
• Parabolic SAR Increment: Increment of the SAR parabola in the "Velocity" graph. Default is 0.02
  
• Parabolic SAR Max: Maximum of the SAR parabola in the "Velocity" graph. Default is 0.2
  

Conclusion :

This indicator has been designed to determine the relative strength of the major currencies against each other. The aim is to know which pair to trade at the right time in order to maximize the probability of a successful trade. For example, if the USD is bullish and the NZD bearish, we'll short the NZDUSD pair.


Enjoy this indicator and don't forget to take the trade ;)

17 Feb

Nota Keluaran

Crypto Basket formula updated : removal of BCH in the equation because this crypto is not enough relevant for the trend of crypto market

24 Mac

Nota Keluaran

Spread Formula Updated