Trading Convergences / Divergences

FX:GBPUSD   British Pound / U.S. Dollar
Cable has seen significant volatility throughout the month of October for a variety of reasons, not just Brexit.

October has seen frequent spikes for what I suspect to be liquidity requirements (orders needing to be filled for bank's liquidity requirements and prices being below key levels, it'll be silly to not get the orders filled at that rate).

That being said, the market is still rangebound albeit with larger swings this week. To identify key turning points, the Dxy & Sxy indicator are great tools. For instance, if the Sxy index remains constant but Dxy is seeing a spike upwards (the trade off between risk on and risk off) then wouldn't capital flow from the swissy to the dollar which would cause the sxy to depreciate and diverge from the Dxy . The weightings do skew this (as Dxy ~57% weighted on euro ) so i'm not looking for a like for like play on currency barometers, but rather looking for a period in which the two indexes are so far diverged that I pick short/ long positions for the risk on/risk off indexes to converge.

This convergence/ divergence significantly reduces the number of fades by the market and helps aid a bias.


Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing Refer a friend House Rules Help Center Website & Broker Solutions Widgets Charting Solutions Lightweight Charting Library Blog & News Twitter
Profile Profile Settings Account and Billing Referred friends Coins My Support Tickets Help Center Ideas Published Followers Following Private Messages Chat Sign Out