Trading Forex Oscillations

When analyzing the spot forex across multiple time frames and drilling down the charts on a lot of different currency pairs, sometimes you can spot currency pairs that are oscillating, or ranging between support and resistance, that can be easily traded. Traders need to know that:
“All currency pairs are either trending or oscillating”
Sometimes the market is not trending but it is oscillating or consolidating in a wide range and then at some point the pairs finally break out of their ranges and start to trend again. Spotting forex pairs that are oscillating and planning trades for the cycles is fairly easy. Here are some hand sketches of four different types of oscillations numbered 1, 2, 3 and 4 below.
1. Oscillating currency pair with steady tops and bottoms hitting the same support and resistance.
Oscillating Currency Pair
2. Oscillating pair with increasing tops and bottoms.
Increasing Tops and Bottoms
3. Oscillating pair with decreasing tops and bottoms.
Decreasing Tops and Bottoms
4. Ragged and choppy oscillation cycles, probably best not to trade these, especially the smaller time frames.The smooth oscillations shown in sketch 1-3 are much easier to trade.
Forex Choppy Charts

Forex Oscillations and Time Frames

Remember once again that all currency pairs are trending or oscillating. After a long trending period when the forex market stalls it generally starts to oscillate.
Oscillations can be smooth and clear, trade-able cycles or ragged and choppy like sketch number 4 above. Look at the hand sketches of oscillations above. It is best to not trade a choppy currency pair oscillation like number 4, or be very careful.
Sketches 1, 2 and 3 are smooth cycles, sketch number 4 is messy and choppy and on the spot forex it can actually be much worse than this illustration. Your goal is to identify the clear oscillations and only trade those for safety.
Example 1 has support and resistance areas that repeat. Examples 2 and 3 have increasing tops and bottoms and decreasing tops and bottoms, respectively.
Basically you just wait for one cycle to finish and wait for the next move in the opposite direction with oscillations. The timing of the trade entry and cycles are now somewhat predictable. In the case of increasing tops and bottoms it is better to wait for a down cycle to finish, then you can buy the pair as it breaks to the upside off of support. The pair you sell might break out of the cycles to the upside at the top and start trending up.
In the case of decreasing tops and bottoms it is better to wait for an up cycle to finish, then you can sell the pair as it breaks to the downside off of resistance. The pair you sell might break out of the oscillations to the downside at the bottom and start trending down. Entry points on oscillations are when a new cycle starts up or down when the red and green trend indicators are crossing.
Oscillations on the H4 and higher time frames are strongly recommended. Never trade oscillations on less than an H4 time frame, if you go to a time frame lower than this there is not enough pips to justify the entry and your money management ratio goes way wrong……or else do not trade at all. Actively looking for oscillations across a lot of different pairs will result in a forex trader finding a lot of oscillations and potential trades on the H4 time frames and larger, especially in a non-trending market.
The reason most forex traders move to the smaller time frames looking for oscillations to scalp is that they only follow one or two pairs so defaulting to the smallest time frames becomes a way of life as they seek to “manufacture a trade” or scalp the smallest time frames. At the same time H4 oscillations are clearly there on many other pairs in the eight major currency families if traders would just look for them they would find them frequently.

Volatility and Pip Ranges of Pairs

Some pairs are not as volatile as others, so the ranges between the top and bottom of the oscillation cycles (amplitude) can be different on two different pairs on the same time frame. Amplitude is just the number of pips between the top and bottom of the oscillations cycles. This is the pip potential of each cycle to estimate your pip potential for the trade cycle and money management ratio. Amplitudes between different currency pairs are contrasted below.
Forex H4 Time Frame Oscillation
Look at the illustration/sketch above. This is an H4 time frame oscillation cycle example with two exponential moving averages. How many pips will it move up and down?? The H4 oscillation cycle on a less volatile pair like the NZD/USD might only be 100 pips from the top to the bottom of the cycle. The H4 oscillation cycle on a much more volatile pair like the GBP/CHF might be 250 pips from the top to the bottom of the cycle, substantially more pip potential because the pair is more volatile.
On the higher time frame oscillations it could be hundreds or even over 1000 pips from top to bottom of the oscillation cycle. Know your pairs and know the difference so you know the pip potential of each move before you enter. If you move to even higher time frames the pip potential on oscillating pairs is huge and your money management ratio is excellent.

Oscillations And Parallel and Inverse Analysis

If the USD/CHF is oscillating and then hitting support you can check the EUR/USD to see if it is oscillating and hitting resistance on the same time frame. This means that the USD is getting ready to strengthen and you have verified the trade with two different pairs.
EURJPY Sell Signal Forex Heatmap
Up until now we have used hand sketches to illustrate our points. Now we will present a series of actual charts showing currency pairs oscillating on two different charting packages. One of the charting packages is a set of forex trend indicators for Metatrader. Clearly, any forex trader who is willing to drill down the time-frames can spot a lot of pips in the forex looking for oscillations. The images are below of pairs oscilating in wide ranges.
This is the USD/JPY oscillating in a fairly wide range on the H4 time frame.
USDJPY Oscillation
When a pair is oscillating the entry point is when the new cycle is starting, here is the estimated trade entry points on a oscillating pair.
Trade Entry Point
This is the USD/CAD oscillating on the H1 time frame in about a 175 pip range.
USDCAD Chart Oscillation

Summary and Conclusions

When analyzing the forex charts across different pairs and drilling down the charts across multiple time frames you should always be looking for clear oscillations and potential trades if the forex market is not trending. Compare the oscillations you find with charts of other pairs in the same individual currency families for confirmation.

The forex market is not always trending. If you combine trading oscillations with the pips you can make in a trending forex market across a lot of different pairs you will see that there are a lot of pips to be made in the forex market month after month and you can adapt to changing market conditions.