Currency Strength Pair Distortion Analysis

What I'd like to discuss is calculation of an

Over-Bought and Over-Sold index for each

of 28 major Currency Pairs. I've done this

work about a year ago and it's a practical guide

for short term scalping.



Most of the attempts to do this use "lame"

Moving Averages. But I've used the "internals"

of Currency Strength analytics to yield a reliable

over-bought / over-sold / neutral continuous

index.



If we have a "reliable" index, then we will generally

"fade" the index value above a given threshold of

"distortion" (either positive or negative). I'll just

discuss in general how the calculation or estimate

is derived.



Over-Bought Currency Pairs will be taken Short and

Over-Sold Currency Pairs Long. The rationale for this

is that we are looking at a "distortion" of the particular

Currency Pair, as against its "Fair Value" or expected

value.



We expect this distortion to be resolved in the short

term so this can be used for short term scalping. I'll

follow up with more.



HyperScalper