justatrader
Short

An experiment with relative volatility index - NZDJPY

FX:NZDJPY   New Zealand Dollar/Japanese Yen
371 10 0
I'm just playing around with the Relative Volatility Index . A little used indicator which measures volatility. Rather than using this as a OB/OS with 50 level as reference point, I find the sharp peaks and troughs a good way to measure divergence. Here's an NZDJPY             short trade as confirmed by the RVI             and price action itself after breaking the trend line.

There are some nice hidden tricks within the RVI             . I'll publish them as and when I find them to be valid.

Targets come in at 83.595 and expect a bounce before pushing lower to 82.147 or even 81.1 (very long term target).

Tonight Kiwi inflation is due... did a quick search and some local NZ             news sites expect inflation to come out softer than usual. JPY has been gaining steadily across most pairs ahead of BoJ decision which is likely to remain flat. So putting it all together, shorts seem like the obvious trade on NZDJPY             .
Professional market analyst with a keen interest on futures. Love keeping an eye on the markets. Currencies, bonds, commodities. Combining technical analysis and the fundamentals. Contact me for more details.
The problem with this ideea is that you are fighting the most agressive money printing in the world, so the fundamentals contradict this ideea. Besides this, on every JPY cross you look, it seems that the last weeks were corrections, consolidations, not trend reverseals. I'm not saying this strategy doesn't work, you know better than me that's for sure, I'm just saying that the pair might not be well chosen. I hope I am right cause I want to go long on EUR/JPY and maybe also on this pair
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Hi Vlad.. Fundamentals I agree, but its not always the case. Some times charts tend to lead the fundamentals and vice versa. EURUSD septaper was one such example where the charts led the way.

Regarding divergence and you mentioning trend reversal. The chart above by no means indicates a trend reversal. It is widely written that divergences happen ahead of a trend change but that is incorrect. In fact divergences are mere correction to a trend. A trend reversal is where we get 2 opposite divergences which acts as a validation.

Also as price moves in a trend it leaves divergences all along the way. Whether they get filled or not, price only knows.

A good example is this Gold chart (https://www.tradingview.com/v/RNI7qi70), where there's a divergence waiting to be filled at 940 region. While most call Gold to be bearish if we look to the monthly charts its actually a correction to the uptrend, and cleanly identified by divergence to RSI.

I guess it all depends on the perspectives.
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vlad.adrian PRO justatrader
2 years ago
First of all, thank you for your answer! Second of all, i want to ask you if you can tell me a bit more about the opposite divergences. Did u mean divergence, then hidden divergence or for example in an uptrend bearish divergence followed by a bullish one and then price making a Lower high? I know that in a trend small divergences point to a correction, I've been working on a forex strategy that uses the RSI specifically for this. I am asking because in my trading decisions I always watch for divergences, and sometimes divergences are the reason of the trade itself. I would love to hear a more detailed description on how you use them in general!
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justatrader PRO vlad.adrian
2 years ago
Well, if I have to explain it in detail, I guess this space wouldn't be sufficient. But just to keep it simple, I find a change of trend taking place when price = HH & RSI = HL. One of the signals to watch is for price to make a fresh new high or stall near the previous high while RSI makes a lower high. Taking this signal along with the price pattern of HH - LH and price retesting the higher low from below can be considered a trend change. The thing is, I find taking a few pips within a trend more profitable rather than try to get in on the whole trend. If you are interested, you can check out my blog http://tradingedge.eu/ I focus purely on divergence based trading.
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mtorrey
2 years ago
Thanks for the addition, enjoy reading your perspectives on this and I happen to be short this pair also. Best of luck
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justatrader PRO mtorrey
2 years ago
I hope you held on to the shorts. Price was scary since last night's surprise CPI data. Only now seeing some easing to the bullishness. I personally think JPY is going to gain strength in the coming days/weeks. I've been short GBPJPY and EURJPY and managed to get in right at the top since last week.
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This how the chart looks on the 1hour TF. Bearish cross over of the moving averages could mean stops can be moved to 87.2 and possibly later to 87.023

snapshot
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The B!tch is finally moving. Trade at BE. Tested my patience for 3 days. @vlad... look to Yen pairs, most of them are dropping like a rock. A case of technicals leading the fundamentals???
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Target price updated to 81.1 Will take some more days but should be reached.
snapshot
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Can you take a look here
The Dow - Divergence analysis. What
and tell me how do you interprete these divergences?
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