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Trading Rotation in the Forex Market
This is a reprint of an article I posted at the end of last year. I am posting it again to highlight the trading clues you can get by identifying the flows driving the price action and what side is more easily absorbed.
In this regard, note the current price action today where EURGBP is moving higher pulling EURUSD up while GBPUSD trades slightly softer as the market is currently having more difficulty absorbing the EUR buying side of the flow. Scroll to the bottom of this article to see a short video illustrating this point.
I posted the following on the AT forum yesterday. It is a good way to look at the current forex market where the dollar is trading weak and currencies are in rotation, taking turns leading the way. Recognizing when there is rotation offers opportunities to trade as I illustrate in a video posted below.
Note, rotation may simply be a commercial transaction that sees a flow from one currency to another. As retail traders, all we need is to recognize when there is a cross flow going through so we can recognize what is driving the price action. Rotation is often a term that is heard in the stock market.
From the AT Forum
GVI Forex 16:54 GMT 12/29/2020 - My Profile Think in terms of how stocks trade. When one sector gets sold off it is often accompanied by a move into another sector. It is called rotation, especially when in a Bull market.The same may be true for forex when the dollar is in a bear market. When a currency is sold odds are the seller is not going into dollars but a flow into another currency.
An example is the current choppy price action in EURGBP that may see EURGBP and EURUSD move in opposite directions for brief periods of time. When the dollar is in a general bear trend the side of the cross being sold tends to have a limited downside as the flow represents rotation rather than an outright move into the dollar.
Personally, the best way I know to get in sync with rotation and associated flows is with the Amazing Trader
and the AT Ladder Strategy,
In this regard take a look at the following video as one example of using crosses to trade spot Fx.
and creator of the Amazing Trader
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