Currency Strength in Forex Trading

Currency strength represents the strength or the value of a currency. Different currencies have different strengths and the currency strengths keeps on changing time to time with the economical changes in the country. In the FX market, traders love to have strong currencies with them all the time. US dollar is the strongest of all currencies. US dollar has been the center of the FX market as well as the center of the business world. So ultimately, all the traders love to trade in currency pairs having US dollar either as base or quote currency. This is the reason that more than 85% of the trades in the FX market contain US dollar.

Forex Currency Strength (Image Reference)

In the FX market, traders usually keeps on monitoring the strengths and weaknesses of various currencies and then trade accordingly. Traders try to sell out weak currencies and keep with strong currencies all the times, as weak currencies carry a lot of risk. Currency strength is used as an important indicator by the Forex traders to choose which currencies to hold and which are not. There are many companies that offer currency strength measuring indicators. Many online trading platforms already have built in currency strength monitors which continuously keep on monitoring the market. The currencies are measured from many prospective by a currency strength indicator including: purchasing power, interest rates offered, future price movements, the strength of currency with respect to other currencies (normally US dollar) and others.

As US dollar is considered as the center of the FX market, currency strength indicators monitor the strength of currencies with reference to US dollar or in some cases with other strong currencies like Euro. The idea, in any case, is to get hands on the strongest currencies to multiply profits.