As forex traders our sole goal is to profit from a currency’s strength or weakness. In other words, we look to buy when a currency is oversold and sell when a currency is overbought. Unfortunately, one of the difficulties many new forex traders have is understanding that a currency can be simultaneously strong in one timeframe and weak in another. This is simply a reflection of how the forex markets move. In other words markets do not rise and fall in a straight line but in a series of steps, higher or lower and it is the steps that we see in our intra day price action which is then all part of a longer term trend. So for example on a 15 minute chart the eurodollar may be rising whilst on a 60 minute chart the pair could be falling. In other words it is all about having a defined trading strategy and staying with the timeframes you have chosen and detailed within your trading plan.
For a view of how currencies are likely to be moving this week, our Hawkeye fatman indicator is invaluable. This indicator has been designed to work in all timeframes and gives us a view of whether currencies are either strengthening or weakening. The weekly fatman is particular interesting today, as we have a number of currencies which have now reached an extreme and look set to move either higher or lower. The currency to watch this week is the British Pound which is now in oversold territory and is likely to start moving higher over the next few days, in particular against both the US dollar and the Japanese Yen which are both overbought. However, a word of caution – currencies can stay overbought or oversold far longer than most traders expect but at least with the fatman indicator forex traders no longer have to guess but can see in an instant an individual currency’s relative strength and weakness and so position him or herself to profit accordingly.
If you would like more information on Hawkeye and we use it in our own forex trading just complete the comments form below.
Have a great day’s trading.
Why not join me in one of my FREE live training rooms – I look forward to seeing you there – Anna