The Absolute currency strength (ACS) is a technical indicator used in the technical analysis

Technical analysis

In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...

 of forex market.It is intended to chart the current and historical gain or loss of a currency based on the closing prices of a recent trading period.It's based on mathematical decorrelation

Decorrelation

Decorrelation is a general term for any process that is used to reduce autocorrelation within a signal, or cross-correlation within a set of signals, while preserving other aspects of the signal. A frequently used method of decorrelation is the use of a matched linear filter to reduce the...

 of 28 cross currency pairs.It shows absolute strength momentum of selected major currency

Currency pair

A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency or quote currency and the currency that is quoted in relation is called the base...

.(EUR,GBP,AUD,NZD,USD,CAD,CHF,JPY)

The ACS is typically used on a 15*period timeframe,calculated as a percentage gain or loss.This indicator is not measured on a scale like Relative currency strength

Relative currency strength

The Relative currency strength is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period.It's based on Relative Strength Index and...

.
Shorter or longer timeframes are used for alternately shorter or longer outlooks.Extreme high and low percentage values occur less
frequently but indicate stronger momentum of currency.

ACS is in most cases used as support indicator for Relative currency strength

Relative currency strength

The Relative currency strength is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period.It's based on Relative Strength Index and...

 indicator.But it can be used by it self for currency trading.
You can use Absolute currency strength for pattern trading as well.Combination of RCS and ACS indicators gives you entry and exit signals for currency trading.

Basic idea

Indicator basic idea is "buy strong currency and sell weak currency".
If is X/Y currency pair in uptrend,it shows you if it's due to X strength or Y weakness.
On this signals you can choose the most worth pair to trade.

Advantageous for trading strategies

• Support indicator for technical analysis
  Technical analysis
  In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
  
   as combination with Relative currency strength
  Relative currency strength
  The Relative currency strength is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period.It's based on Relative Strength Index and...
  
  
• information indicator to realize which currencies are being demanded, this is ideal indicator for trend follow traders
• help for scalpers looking for strength trend (trader can see both absolute and relative strength)
• instrument for correlation/spread traders to see reactions of each currencies on moves in correlated instruments (for example CAD/OIL or AUD/GOLD)

See also

• Relative currency strength
  Relative currency strength
  The Relative currency strength is a technical indicator used in the technical analysis of forex market. It is intended to chart the current and historical strength or weakness of a currency based on the closing prices of a recent trading period.It's based on Relative Strength Index and...
  
  
• Currency strength
  Currency strength
  Currency strength expresses the value of currency. For economists, it is often calculated as purchasing power, while for financial traders, it can be described as an indicator, reflecting many factors related to the currency; for example, fundamental data, overall economic performance or interest...
  
  
• Currency pair
  Currency pair
  A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency or quote currency and the currency that is quoted in relation is called the base...
  
  
• Relative Strength Index
  Relative strength index
  The Relative Strength Index is a technical indicator used in the technical analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period...
  
  
• Forex
• Technical analysis
  Technical analysis
  In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
  
  

External links

• How to trade with RCS and ACS indicators