Understanding the Power of CAD Indicator
The Power of CAD indicator provides insights into the relative strength of the Canadian Dollar (CAD).
This tool calculates its value based on the closing prices of seven currency pairs that include CAD, helping traders gauge its performance effectively.
One of the best ways to utilize this indicator is through mean reversion strategies, which can be a game-changer in your trading approach.
Let’s dive into how to set it up using the CAD and another currency, which we’ll refer to as XYZ. In this scenario, CAD is the base currency, while XYZ is the quote currency.
To get started, plot the Power of CAD indicator on your chart first, followed by the Power of XYZ.
You’ll find two key scenarios that can guide your trading decisions:
If the indicator curves are close together, it suggests a higher likelihood that the price of the CAD/XYZ pair will move UP. However, remember to consider these signals within the broader market context, such as support and resistance levels.
Conversely, if the curves are far apart, this indicates a greater chance that the price of the CAD/XYZ pair will trend DOWN. Again, don’t ignore the overall market conditions when interpreting these signals.
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