The #3CR strategy is all about price momentum and trend reversals or pullbacks in the higher timeframe trend. You trade with the trend (Sonic R Dragon) during periods of high momentum (RSI Histo & TMA Slope) and enter trades after a #3CR reversal pattern being mindful of areas of support & resistance as potential trade exit points.
Dashboards help to identify trades
I like dashboards because they're a great way to monitor an indicator across multiple timeframes (MTF) for any number of symbols. You get a birds-eye view of where the best trading opportunities are without having to scan large numbers of charts.
BestForexMethod executes trades on lower timeframes (1m or 5m) after analysis on higher timeframes (30m,H1 & H4). Trades are therefore short lived and it's important to keep an eye on momentum across several symbols.
So I wondered what if I could plot the RSI Histo lines for all my symbols on one chart? Would I be able to identify periods of high momentum better? Could I spot trend reversal more easily? After a lot of head scratching and months of MT4 coding, I got my answer: YES - it works! I use it all the time to find the best trades and I hope you find it useful too.
As always I welcome any feedback on future development.
Relative RSI Histo Indicator
The above image shows the RSI Histo lines for the major FX pairs on the 5 minute chart timeframe. The chart is drawn on a sub-window and I've used the blank-black template. You select the RSI Histo period (BFM uses 8). You can insert lines to show the gray zone levels (I prefer to call it the Dead Zone!) and add any trendlines you want using the MT4 built-in lines feature. A cross of the zero line (middle dashed line) shows price momentum changing from positive to negative or negative to positive. You can customise this indicator to your preferences.
I've coloured the FX pairs that move the same way in response to US dollar strength and weakness in the indicator settings
Pair USD Strength USD Weakness Colour
EURUSD Falls Rises Red
GBPUSD Falls Rises OrangeRed
AUDUSD Falls Rises Orange
NZDUSD Falls Rises Yellow
USDCAD Rises Falls RoyalBlue
USDCHF Rises Falls DodgerBlue
USDJPY Rises Falls Aqua
US Dollar STrength vs Weakness
Each of the pairs are quoted versus the USD and therefore respond directly to US dollar strength and weakness as represented by the US Dollar Index (DXY). The reason I do this is that you can easily spot when one FX pair is misbehaving i.e. not following the trend of its peers.
You can see this with the USDCAD and USDJPY in the above image. The USDCAD, which is highly correlated to oil prices, rallies to a peak whilst all the other FX pairs respond to US dollar weakness. I tend to avoid a pair that misbehaves because it means that something I don't know about is happening and it's risky to bet on the price returning to "normal" behaviour (mean reversion).
Further, it's easy to spot the overall trend of the US dollar - red to yellow lines falling and blue coloured lines rising is US dollar strength and vice versa. However, one small issue with the US Dollar Index (DXY) is that it is more influenced by movement in the Euro and Yen but this indicator gives a clearer picture of the influence of the US dollar on all the major FX pairs.
It's a chart of relative RSI Histo values
In order to get all the RSI Histo lines on one chart, they needed to be re-scaled so the new RSI Histo values better show the comparative performance across the symbols. I won't dwell on the math here but all you need to know is that the lines are re-drawn to be on the same vertical scale. Accordingly the trigger levels of +20 / -20 you use on the standard RSI Histo indicator are not the same here - they are slightly lower.
Trend Reversal at Extreme Values
Remembering that RSI Histo measures price momentum, we know that as a trend becomes exhausted prior to reversal, the momentum slows. You can see in the chart above that the pairs USDCAD and USDJPY reached extreme values and then reversed. A handy feature of this indicator is that you can"turn off" lines for pairs you don't wish to trade. Let's remove a few and see what happens.
In the indicator settings, I've turned off all lines except for GBPUSD, USDCHF and USDJPY.
This is what you get: Notice the peaks (yellow circles) at extreme values where price reverses.
One thing I have noticed is that the extreme reversal points below the zero line tend to be lower than those above. This probably relates to the volatility structure of the market identified by Robert Schiller where downside moves are bigger than upside moves: When an asset is in an uptrend, volatility attenuates (declines) but in a downtrend it accelerates.
So what is price doing?
So next question you're bound to ask is do these Relative RSI Histo peaks actually correspond to price reversals? I've used the indicator settings to only show the USDJPY pair and show the pair price as a line (orange). You can see for yourself that the indicator very closely follows price and helps to identify changes in trend and also divergence with price.
Alerts
I have added alerts that notify you via a pop-up message and sound when a symbol moves out of the gray zone.
Concluding thoughts
When learning a new strategy or using a new indicator, it's always a good idea to use it on one pair or symbol. It forces you to use the indicator properly rather than hunting around several symbols looking for the "Holy Grail"set-up.
I'm so used to my colour scheme that I can easily watch all 7 pair but, if you're new to this indicator, then I suggest you start with 1 - 3 symbols. This way you'll get used to it and be better able to exploit its virtues. EURUSD and USDCHF are a good duo because they work together but in opposite directions (negative correlation).
Choose a colour scheme that works for you and stick to it because it helps you read "at a glance" what the market is doing. If you keep changing colours, you may trade the wrong pair by accident!
Relative RSI Histo is invaluable for trading a single symbol as you can see with the USDJPY example above and there are multiple trading opportunities each and every day.
Remember to keep the odds of positive trading outcome on your side, be patient and wait for the best set-ups and if you're not sure, wait.
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