Relative Rotation Graphs? What are they?
In this post, I’ll be discussing how I use them for identifying the FX pairs I select for trading.
My Trader’s Timeframe is the 18-day Swing. What this means is I am trading the monthly trend. So, my first port of call in my analysis is the monthly RRG with the USD as the base currency.
Here’s a brief description of the quadrants:
- The top right-hand quadrant is one signifying strength.
- The bottom left-hand quadrant is one signifying weakness.
- The bottom right-hand quadrant is one signifying the transition from strength to weakness.
- The top left-hand quadrant is one signifying the transition from weakness to strength.
So, in the RRG chart above, the USD is weak against the CAD, AUD and EUR. The GBP may be ready to make a move against the USD. The NZD and JPY are weakening against the USD.
The chart also provides a perspective for the crosses. I’d consider buying the CAD, AUD and EUR against the NZD and JPY.
I stress the RRG is merely the first step of the analysis. But, it is an important one because it fines down the analysis horizon.