I want to know the eur\usd position?
Please any one over here can help me?
My indicators (rsi and stoch ) are indicating oversold…but why it is going down?
And what will happen now?
It will go further downsidde? Or will start rally?
Please tell me…i am waiting for suggestions…thank you…
Hi fxsrikanth,
I’m also new on this forum but let me attempt an answer to the situation you have identified.
Momentum indicators like RSI and MACD can be very effective in identifying overbought and oversold conditions in the market. However, in my experience, we have to use momentum indicators across multiple timeframes to really see how price is being pushed and pulled at different degrees of trend.
One thing I do every day is to look at the 15-minute charts of all 28 major currency pairs for significant momentum divergences. [I look for divergences only; I am not concerned with signal line crossovers, zero line crossovers, etc.] Based on this analysis, I label each pair as “bullish,” “bearish”, or “neutral”. I On a weekly basis, I then perform the same kind of momentum divergence analysis on the 30-minute, 1-hour, 2-hour, 4-hour, 8-hour, daily, weekly, and monthly charts for each of the 28 major pairs. This takes quite a bit of time as totally one is looking at more than 200 charts, but it is a good weekend activity for me.
For trading purposes, I am looking for pairs that are consistently bullish or consistently bearish across multiple timeframes. It’s rare that a currency pair will display only bullish or only bearish momentum divergences across all the timeframes, but it’s quite common that a pair will display bullish consistently from the 15-minute through the 4-hour chart. When this happens, I investigate further to see whether this is a real trading opportunity using Elliott Wave analysis.
In EURUSD presently, here are my momentum analysis results:
15-M: bullish
30-M: bullish
1-H: bullish
2-H: bearish
4-H: bearish
8-H: bullish
D: bullish
W: bullish
M: bearish
So just from a momentum perspective, I’d say that EURUSD is waiting on the 2-hour and the 4-hour charts to turn bullish before beginning a significant rise, which in my trading system is defined as a rise of 2.5% or more in nominal price (around 200 pips at current prices).
Beyond momentum analysis, I find that Elliott Wave analysis helps me to understand why a currency pair can often continue to rise or fall for long periods of time in spite of significant momentum divergences. It also helps me to choose entry and exit points; therefore, I like to use momentum together with Elliott Wave.
Personally I am not trading EURUSD at the moment so I have no particular bias one way or another regarding this pair. Based on Elliott Wave relationships I see on the daily chart, I suspect this pair will fall to the 1.2050-1.2179 range before making a significant rally.
Here is an 8-hour chart which illustrates what I consider to be a likely course for the EURUSD over the coming weeks based on the combination of momentum and Elliott Wave indicators described above.
i’ve learned to interpret those types of oscillators differently. just because the osc has entered into oversold region doesn’t mean the price is going to reverse. it may continue doing what it’s doing for a while. once the osc leaves oversold and goes back towards the middle (50% or so), the price will fall slower and will likely flatten out. once the osc slides into overbought, it’ll start pulling the price up.
think of it like a pilot and an airplane. there is going to be a lag between the pilot’s throttle & lift inputs, and the plane’s behaviour. let’s say the plane is climbing. when the pilot starts to reduce lift using those wing flaps, the plane doesn’t instantly DIVE, it just climbs slower and eventually stays flat / level. likewise, if the plane is diving (hard) and the pilot cranks in a ton of lift, the plane doesn’t go UP, it just doesn’t fall as fast and eventually stops falling.
think of the osc action (overbought / oversold) as relative to what the price is actually currently doing, NOT relative to the flat horizontal line. an osc in the overbought (high) range can either pull a flat price UP, or slow down a price that’s currently falling. it does NOT necessarily have to cause a FALLING price to start CLIMBING. just fall slower.
I agree that price doesn’t reverse at the first sign of momentum divergence, in fact I think we basically agree on how to use momentum. A few things I’ve found about momentum that I keep in mind when looking for potential trades are -
it’s usually on the third or fourth significant divergence that price starts to turn, not the first or second divergence.
if we are looking at RSI instead of MACD, then if the third or fourth divergence is accompanied by an RSI peak below 70 or a trough above 30, that is a good sign price is probably about to reverse. In the chart above I used MACD instead of RSI.
momentum divergence on a single chart is often inconclusive; I like to see consistent divergences on the short-term (15M) through at least the medium-term (4H) charts if not also the 8H and Daily before getting into a trade.
I like the airplane analogy. I guess in my own mind, I’ve come to think of momentum as a rubber band that gets tighter and tighter as one pulls it back. Eventually, the thing will be released and it will rise or fall with intensity that is proportional to the tension it was put under during the preceding trend.
