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Matt
Thq for ur post. I'm glad it gives me an opportunity to explain.
The basic premise here is that if the GBP is rising against the USD, that currency is gaining strength. At the same time, the USD is weakening.
From the second week of October, the internal strength of USD (red line) is showing a warning of strength vis a vis the GBP (green line). While the GBP is rising, and made a higher peak its Internal Strength has made a lower peak, thus exhibiting a classic negative divergence.
Similarly, there is a positive divergence displayed by the USD Internal strength. Because the USD has been weakening all the while and yet its internal strength is rising. In effect, its Internal strength also has made a negative divergence.
During the last four days, there has been a change in the movements of the respective internal strengths, which are now moving towards each other, setting up a potential crossing.
The signals are calculated by another algorithm. These are calculated by a complex set of mathematical rules devised by me.
However, the rules are simple:
Long term trend up and short term trend up = Long Entry (LE)
Long term trend up[/color] and short term trend down = Long Exit (LX)
Long term trend down and short term trend down = Short Entry (SE)
Long term trend down and short term trend up = Short Exit (SX)
The signal generated four days back was a LX (long exit). Yesterday, a short entry was generated. On a daily basis, therefore, a trader should consider shorting options.
Any more q's please do not hesitate.
Dusant
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