Introduction
When analyzing the spot forex across multiple time frames and drilling down the charts on a lot of different currency pairs sometimes you can spot currency pairs that are oscillating, or ranging between support and resistance, that can be easily traded. I have been telling forex traders for many years that:
Sometimes the market is not trending but it is oscillating or consolidating in a wide range and then at some point the pairs finally break out of their ranges and start to trend again.
Spotting forex pairs that are oscillating and planning trades for the oscillations is fairly easy. Here are some hand sketches of four different types of oscillations numbered 1, 2, 3 and 4 below.
1. Steady tops and bottoms hitting the same support and resistance
2. Increasing tops and bottoms
3. Decreasing tops and bottoms, and
4. Ragged oscillations, probably best not to trade these or be very careful.
The smooth oscillations shown in sketch 1-3 are much easier to trade.
Remember once again that all currency pairs are trending or oscillating. After a long trending period when the forex market stalls it generally starts to oscillate.
Oscillations can be smooth and clear, trade-able cycles or ragged and choppy like sketch number 4 above. Look at the hand sketches of oscillations above. It is best to not trade a choppy currency pair oscillation like number 4, or be very careful.
Sketches 1, 2 and 3 are smooth oscillations, sketch number 4 is messy and choppy and on the spot forex it can actually be much worse than this illustration. Your goal is to identify the clear oscillations and only trade those for safety.
Example 1 has support and resistance areas that repeat. Examples 2 and 3 have increasing tops and bottoms and decreasing tops and bottoms, respectively.
Basically you just wait for one cycle to finish and wait for the next move in the opposite direction with oscillations. The timing of the trade entry ans cycles are now somewhat predictable. In the case of increasing tops and bottoms its better to wait for a down cycle to finish because if you buy it as it breaks to the upside off of support it could breakout of the oscillations to the upside at the top and start trending up.
In the case of decreasing tops and bottoms its better to wait for an up cycle to finish because if you sell it as it breaks to the downside off of resistance it could breakout of the oscillation to the downside at the bottom and start trending down. Entry points on oscillations are when a new cycle starts up or down when the red and green trend indicators are crossing.
Oscillations on the H4 and higher time frames are strongly recommended. Never trade oscillations on less than an H4 time frame, if you go to a time frame lower than this there is not enough pips to justify the entry and your money management ratio goes way wrong……or else do not trade at all. Actively looking for oscillations across alot of different pairs will result in a forex trader finding a lot of oscillations and potential trades on the H4 time frames and larger, especially in a non trending market.
Trading oscillations on the smaller time frames is not even necessary if you are looking at alot of different currency pairs. If you look across about 28 pairs the oscillations on the H4 time frames will be much more frequent, generating more trading scenarios and potential pips. Also eliminating the need for trading the smaller time frames.
“All currency pairs are either trending or oscillating”
Sometimes the market is not trending but it is oscillating or consolidating in a wide range and then at some point the pairs finally break out of their ranges and start to trend again.
Spotting forex pairs that are oscillating and planning trades for the oscillations is fairly easy. Here are some hand sketches of four different types of oscillations numbered 1, 2, 3 and 4 below.
1. Steady tops and bottoms hitting the same support and resistance
2. Increasing tops and bottoms
3. Decreasing tops and bottoms, and
4. Ragged oscillations, probably best not to trade these or be very careful.
The smooth oscillations shown in sketch 1-3 are much easier to trade.
Forex Oscillations and Time Frames
Remember once again that all currency pairs are trending or oscillating. After a long trending period when the forex market stalls it generally starts to oscillate.
Oscillations can be smooth and clear, trade-able cycles or ragged and choppy like sketch number 4 above. Look at the hand sketches of oscillations above. It is best to not trade a choppy currency pair oscillation like number 4, or be very careful.
Sketches 1, 2 and 3 are smooth oscillations, sketch number 4 is messy and choppy and on the spot forex it can actually be much worse than this illustration. Your goal is to identify the clear oscillations and only trade those for safety.
Example 1 has support and resistance areas that repeat. Examples 2 and 3 have increasing tops and bottoms and decreasing tops and bottoms, respectively.
Basically you just wait for one cycle to finish and wait for the next move in the opposite direction with oscillations. The timing of the trade entry ans cycles are now somewhat predictable. In the case of increasing tops and bottoms its better to wait for a down cycle to finish because if you buy it as it breaks to the upside off of support it could breakout of the oscillations to the upside at the top and start trending up.
In the case of decreasing tops and bottoms its better to wait for an up cycle to finish because if you sell it as it breaks to the downside off of resistance it could breakout of the oscillation to the downside at the bottom and start trending down. Entry points on oscillations are when a new cycle starts up or down when the red and green trend indicators are crossing.
Oscillations on the H4 and higher time frames are strongly recommended. Never trade oscillations on less than an H4 time frame, if you go to a time frame lower than this there is not enough pips to justify the entry and your money management ratio goes way wrong……or else do not trade at all. Actively looking for oscillations across alot of different pairs will result in a forex trader finding a lot of oscillations and potential trades on the H4 time frames and larger, especially in a non trending market.
Trading oscillations on the smaller time frames is not even necessary if you are looking at alot of different currency pairs. If you look across about 28 pairs the oscillations on the H4 time frames will be much more frequent, generating more trading scenarios and potential pips. Also eliminating the need for trading the smaller time frames.
The reason most forex traders move to the smaller time frames looking for oscillations to scalp is that they only follow one or two pairs so defaulting to the smallest time frames becomes a way of life as they seek to “manufacture a trade” or scalp the smallest time frames. At the same time H4 oscillations are clearly there on many other pairs in the eight major currency families if traders would just look for them they would find them frequently.
Volatility and Pip Ranges
Some pairs are not as volatile as others, so the ranges between the top and bottom of the oscillation cycles (amplitude) can be different on two different pairs on the same time frame. Amplitude is just the number of pips between the top and bottom of the oscillations cycles. This is the pip potential of each cycle to estimate your pip potential for the trade cycle and money management ratio. Amplitudes between different currency pairs are contrasted below.
Look at the illustration/sketch above. This is an H4 time frame oscillation cycle example with two exponential moving averages. How many pips will it move up and down??
The H4 oscillation cycle on a less volatile pair like the NZD/USD might only be 100 pips from the top to the bottom of the cycle. The H4 oscillation cycle on a much more volatile pair like the GBP/CHF might be 250 pips from the top to the bottom of the cycle, substantially more pip potential because the pair is more volatile.
On the higher time frame oscillations it could be hundreds or even over 1000 pips from top to bottom of the oscillation cycle. Know your pairs and know the difference so you know the pip potential of each move before you enter. If you move to even higher time frames the pip potential on oscillating pairs is huge and your money management ratio is excellent.
Combining Oscillations with Parallel and Inverse Analysis
If the USD/CHF is oscillating and the hitting support you can check the EUR/USD to see if it is oscillating and hitting resistance on the same time frame. This means that the USD is getting ready to strengthen and you have verified the trade with two different pairs.
This is entry verification and trade planning with two pairs, For more confident entries you can verify entries on pairs with up to 10 pairs using The Forex Heatmap® from Forexearlywarning.com
Here is a snapshot of The Forex Heatmap®, a real time visual map of the spot forex. On the USD/CHF and EUR/USD example you could set a buy alarm on the USD/CHF and when the alarm goes off check the Forex Heatmap® for USD strength and entry verification.
Up until now we have used hand sketches to illustrate our points. Now we will present a series of charts showing oscillations on the spot forex using two charting packages.
One charting package is the red and green light software which has a unique chart characteristic called a pacman, when you combine this with with parallel and inverse pair analysis it can easily confirm an oscillation on the next set of smaller time frames and you can plan your oscillation entries better.
When you see pacman on one of the larger time frames start to look for oscillations on the smaller time frames immediately to the left. Illustrations of “pacman” are below with more detailed explanation. The second charting package is a set of exponential moving averages, which are available at no cost to any forex trader on the Forexearlywarning.com homepage and can be easily set up by any forex trader. The moving averages do not have a “pacman” type of chart pattern.
Now that we have described both charting packages we will present a picture of a pacman below on the red and green light software.
The pac-man on the left (1) has the green line on top. This means that the currency pair with the pac-man just moved up (in the direction of the green line) and should oscillate back down next on the smaller time frames to the left..
The pac-man on the right (2) has the green line on the bottom. This means that the currency pair with the pac-man just moved down (in the direction of the green line) and should oscillate back up next on the smaller time frames to the left. Pretty simple.
Now we will present a package of eight images below showing currency pairs oscillating on two different charting packages. Clearly, any forex trader who is willing to drill down the time-frames can spot a lot of pips in the forex looking for oscillations. The images are below.
Summary and Conclusions
When analyzing the forex charts across different pairs and drilling down the charts across multiple time frames you should always be looking for clear oscillations and potential trades if the forex market is not trending. Compare the oscillations you find with charts of other pairs in the the same individual currency families for confirmation. You can then prepare a forex trading plan and get solid entry verification from tools like The Forex Heatmap® from Forexearlywarning.com
The forex market is not always trending. If you combine trading oscillations with the pips you can make in a trending forex market across a lot of different pairs you will see that there are a lot of pips to be made in the forex market month after month and you can adapt to changing market conditions..
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