If you are new trader, it would be difficult for you to balance the primary daily trend as well short period secondary trend. When you apply different time frames graphs which are pointing in two different directions, it would be very difficult for you to locate a directional bias for placing trades.
In this article I am going to review the Currency pair AUDUSD. I will use a day and thirty minute chart to locate momentum. This analysis would ultimately allow you to consider a diverse trading opportunities apart from market’ future direction.
I am using daily chart of currency pair AUDUSD. This currency pair made its high 1.0473 on 27, April; now the price has declined at 893 pips lower to its high level. This decline in price shows a strong downtrend momentum, because the currency pair made lower lows by its June, ‘NFP’ announcement. During the whole month of June a currency pair AUDUSD has been higher against the daily trends but it has to build a new high yet. If you are a longer term trader, keeping all this in mind, you would look for opportunities for selling strength below 1.0473. You can achieve this purpose by monitoring the graph of the shorter term.
You may better understand the present upturn and momentum for short term on the currency pair AUSDUSD through zeroing in on your ‘building blocks’ for trend development. You can use a thirty minute graph for this purpose. After the steep decline in price, (893) pips, as I mentioned above, the currency pair AUDUSD has become higher 604 pips from its ist June low.
Now, if you block off your previous Monday and Wednesday, you can observe that price momentum is gradually increasing along with both ‘Block 1 & Block 2’ and making higher highs. Now the price has currently become higher over the Block-11 high, it shows that a new blue up block would be printed at base of wrapping up on the Wednesday trading. At this point in time, if you are a limited term momentum trader, you might be wanting to trade the higher highs, until no lower lows get created.
Which Direction Should Trade?
If you are a long term trader, then by using the above mentioned analysis, you should look for the lower lows on your thirty minute graph, prior to enter into the daily trend’ direction. A confirmation of the trend for short term will occur upon the price, starting lower lows under 1.0056 on the first hand, then at .9921 low under the standing of Block 2, You can use these points for getting potential ‘ breakouts’, in a daily trend’ direction.
If you are a short term trader, you can utilize the same information for trading upward momentum unless price makes higher highs continuously. In case no fresh higher highs get formed, it will be an indication for the resumption of a broader trend. A confirmation might occur upon the price breakout to lower lows at 1.0056 first under, then at .9921 low, under the standing Blocl-11. If you are short term trader , You can use these points for a change in trading bias, and look for new sell positions in daily trend’ directions.