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I have followed this discussion and I want to introduce my strategy.
I developed it on a spreadsheet, and I would like to someone improve it on metatrader, to have real time signals.
The algo is simple:
1) Calculate the log of price
2) Calculate the strength of a currency in the following way:
e.g. usd_strenght= 1/eurusd+usdchf+ 1/audusd +……. and so on for all pairs.
role: when the x_strenght is at the numerator in the currency do the inverse, otherwise add it normally.
3) Compute the “correlation” between the time series strenght obtained in the previous step, e.g.:
4) Trading role: sell/buy when
a) the x_strenght is negative correlated (below a threshold) and
b) we have a strong vs weak currency.