subject: Trend Trading Strategies That Follow Gold And Oil In Trading USD-CAD And USD-AUD Pairs! [print this page] Trend Trading Strategies That Follow Gold And Oil In Trading USD-CAD And USD-AUD Pairs!
Oil prices tend to affect some currencies more than others. Two currencies that show strong correlation to oil costs are the Canadian Greenback (CAD) and the British Pound (GBP). When oil costs rise, they tend to rise for several months. Oil costs usually pattern for a number of months. Canada is a major oil exporter to the United States. CAD is extremely sensitive to oil worth changes.
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As US imports more oil from Canada, this means that CAD should increase in worth in relationship to the US Greenback (USD). What this means is that the foreign money pair USD/CAD should start trending down in case oil consumption in the US economy increases. You ought to use this development trading technique with this pair once you spot an increase in US oil imports from Canada. This pattern trading strategy is determined by the use of Channel Commodity Index (CCI).
This development trading technique works when the oil costs are increasing and the USD/CAD trade price is going down. It'll also work when the oil costs are decreasing and the USD/CAD alternate rate is ascending. Suppose the oil prices are growing and the USD/CAD change price is going down. The kind of scenario can happen. It happened in 2008 when the oil prices jumped from around $60-70 per barrel to round $150 per barrel. This trend continued for some months.
Look ahead to the time when the 14 period CCI crosses above the a hundred after which crosses back beneath 100. What this means is that the consumers had entered the market with the hope of turning the pattern up but they gave up. That is the time to brief USD/CAD. Enter the brief trade with a restrict order of 300 pips and a stop loss of seventy five pips. This way you do not get out of the market if there's a slight retracement. If you divide seventy five by 300, you get a threat reward ratio of 1:4 which isn't bad.
In the same manner, Australian Dollar (AUD) reveals a robust correlation with the gold prices. This has to do with the reality that Australia is a serious producer and exporter of gold. Now, USD has an inverse relationship with gold prices. When gold prices rise identical to right this moment, USD falls in value and when gold prices drop, USD rises in value.
What this implies is that when gold costs rise just like they are rising within the current market conditions, you'll give you the option to anticipate the USD/AUD forex pair to fall in value too. Equally when gold costs begin a downtrend, you need to anticipate the USD/AUD pair to start an uptrend. So when gold costs are in an uptrend, we will quick the USD/AUD pair. In the identical manner, when gold prices start a downtrend, we are able to go lengthy on the USD/AUD pair.
Now, in case of trading USD/AUD pair, we might be using the Relative Power Index (RSI). You may ask this query that while trading the USD/CAD pair we had used the CCI indicator. The reason is simple. CCI reacts extra to volatility. So it gives quick trading signals. We must always apply it to less unstable forex pairs. USD/CAD is a much less volatile currency pair.
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However alternatively the RSI indicator reacts much less to volatility and provides slower trading signals. So, we ought to always apply it to a more volatile foreign money pair. USD/AUD is a risky forex pair. This makes the RSI indicator supreme for USD/AUD.
Now use a moving average to find out if the gold costs are in an uptrend. Watch the 7 period RSI on the USD/AUD chart to see if it enters the reversal zone and then strikes again out of the reversal zone and starts transferring in the same direction as the gold costs are trending.
Enter a brief trade on USD/AUD if the gold prices are rising and the RSI indicator crosses back above the 30 line. In the identical manner, enter a protracted trade on USD/AUD if the gold prices are falling and the RSI indicator crosses under the 70 line.
Set a restrict order of 200 pips and a cease loss order of fifty pips. This will give you a danger to reward ratio of 1:4. This is the best time to trade the USD/AUD pair because the gold prices are rising. You might make many pips by following this simple development trading strategy.
