Today is one of the first few days in around 4 months that I am taking a look at several of my charts of various financial instruments. Am quickly sharing how I go about it.
The last 4 months I have paid very little attention to the financial markets. For the month of May, as well as working part-time on another project, I’m looking to spend 2-3 hours per day taking trades on the 4-hour timeframe, executing two trading strategies that I was working hour up to the end of last year.
In order to catch myself up with what has been going in the markets, I am just going to complete a quick technical review of the markets I am looking to trade. I will not read up on what events have shaped the market in recent months – hopefully looking at the charts alone will get me into a good starting position.
Currency Strength/Weakness Matrix
The strength/weakness analysis is a simple and fast way of establishing where various FX markets are at. This is a technique I learned from Paul Wallace, my first trading coach. Thanks to him, I have an MT4-based application that effectively takes a snapshot of the markets in real time. The points are calculated by looking at weekly, daily and 4H timeframes – the more points, the stronger the currency:
- Euro – 11 (4)
- Swiss Franc – 2 (2)
- US Dollar – 10 (7)
- Japanese Yen – 10 (5)
- Australian Dollar – 1 (3)
- British Pound – 9 (0)
- New Zealand Dollar – 3 (1)
- Canadian Dollar – 10 (6)
- Swiss Franc, Aussie Dollar and the Kiwi are weak on all of the timeframes – sell these were possible
- US Dollar, the Yen and the Canadian are the strong ones at the moment – buy these where possible
- Expect good trends in USD/JPY/CAD v CHF/AUD/NZD, thus consider:
- AUDUSD, NZDUSD, USDCHF, AUDJPY, CHFJY, NZDJPY – I don’t feel very excited about trading CAD crosses (a personal preference)
Indices (daily timeframe)
- Rallying and/or edging up – FTSE, CAC, Eurostoxx, Nikkei – trade these on 4H where possible
- Mostly sideways & decreasing volatility – US indices (see chart below), DAX – avoid
- Decreasing volatility across the board
Commodities (daily timeframe)
- Oil trending up but is choppy – trade on 4H, but carefully
- Gold is trending sideways – avoid on 4H
For both strategies, I prefer to trending market conditions. The quick analysis above has given me the heads up of what instruments to look at. It may turn out that the charts of the instruments actually look quite choppy, but it will be good place to start looking. As I start looking further through other charts, I am also likely to spot other trending markets that did not get caught by the above analysis.
Hope that made for easy to understand reading.