Powerful trading concepts to boost your consistency and long-term performance in the Forex, Indices & Commodities markets.
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Do you ever find yourself having these frustrating thoughts at the start of a trading week?
“There’s too many markets that look good to trade. I don’t know which one to choose! This is overwhelming.”
“I want to focus on one market, but I don’t know how to tell which one is the best choice.”
“This market I’m interested in could trend this week, but I’m not sure. I wonder if there’s a way to tell if it will…”
The result: Analysis Paralysis
This is typical...
Don’t get frustrated. With forex being such a big market with an endless number of opportunities, possibilities and methods to consider, we must cut down on the number of charts we monitor, and filter out the noise, in order to be successful.
So how do I create a high probability shortlist for myself?
The answer is simple: look for opposing-trend currencies. In other words, find the strongest currency you can and pair it with the weakest.
How do you do that? Use the currency futures markets as your guide.
You’ll find them in TradingView, with these code names.
Just like the Dollar Index (DXY), every currency has its own index too. You could go into all the pairs and analyse manually how your particular currency is performing against all others. But this is faster.
This Futures Indices come particularly useful in those times when you’re not fully confident in your technical analysis of the charts and reading the candles. These charts give you more data on how the currency is performing as a basket – i.e. across the board, as it relates to other currencies.
So what do I look for specifically in these charts?
Look for the clearest most obviously-trending one-directional chart (or currency in this case).
So, for example: a clearly Bullish trend on the CAD (strength), combined with a clearly Bearish trend on USD (weakness), would give you the scenario to look at USD/CAD for a Sell setup. The opposing directions indicate a high probability for the market to move hard in one direction, which would produce a result that looks similar to this, below.
Remember the rules of low probability scenarios:
Two strong currencies cancel each other out – creating a ranging market behaviour.
Two weak currencies cancel each other out – creating a ranging market behaviour.
And as always, if you can’t tell what’s trending/strong/weak, then best avoid that currency completely.
The practical use
The key to using this method with more accuracy, is to look at the Weekly chart (like the examples here) and anticipate not only the overall trend, but the immediate direction the market is likely to go, based on last week’s (i.e. the previous) candle.
Watch the video for more examples.
Written by: Dima Mihailovich, Technical Analyst for Forex Prop News
Contact and follow Dima on Twitter: @dimafpn
Image by Geralt on Pixabay
(Please note: All comments made in this video and article are not trading or investment advice and are for education purposes only. You are responsible for your own decisions and the risk that goes with it.)