5/19 Analysis: When to stay out of the market
What you are looking for:
- Look for the strong currencies (those above the zero line) and weak currencies (those below the zero line)
- Which direction are those currencies continuing to move? You want to see a strong currency continuing to get stronger and a weak currency continuing to get weaker.
Prior to the London open, you can see that only 1 currency meets the criteria which is the NZD (the currency at the very bottom) because it’s weak (below the zero line) and continuing down.
All the rest are moving opposite of their overall trends. The CAD (green) and EUR (dark purple) are below the zero line (weak) and moving up while all the others are strong (above the zero line) and moving down or sideways.
What does this mean? There is nothing to trade at the moment. You can’t force things that aren’t there, you must wait for the market to come to you which is an important lesson. So our Currency Strength Indicator also tells you when to stay OUT of the market as well.
Now, let’s look at what happens when the London market opens. Within 1 minute, this is what it looked like:
You can now see the EUR (dark purple) turns steeply down and the USD (Blue) and JPY (Yellow) turn steeply up. This signaled a big move. The most important thing to look for are those steep lines because that indicates momentum.
Here is what the move looked like on the EUR/USD chart:
This was a 143 pip move immediately after the London open with huge momentum. So you see not only did you get the pair right, but the timing as well. And you also see which currencies to avoid.
Watch the video analysis below:
Watch the entire video to see several additional trades you could have chosen at the London open plus I’ll show you how certain currencies that don’t show momentum on our strength indicator trade in a tight sideways channel and should have been avoided.
If you are simply trading your favorite pair (which most amateur traders do) instead of looking at individual currencies, you will miss the most profitable opportunities of the session while sometimes forcing a trade into a non-favorable market condition.
You can see that our Currency Strength Indicator is an effective tool for getting into the very best trends early on and allowing you to ride them out for maximum profits.
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