Stocktwits Forex RRG
Relative Rotation Graphs (RRG) are useful visual tools to identify how an instrument or a sector performs against a benchmark. The benchmark used for the FX RRG is the U.S. Dollar Index (DXY).
Without going into the nitty-gritty details, the four colored sectors can be thought of like this, so imagine you’re in a race:
- Leading Quadrant (green) – You are in 1st, 2nd, or 3rd place. You are leading the pack. You’re going to medal. Anthems will be sung, tears will fall, and you may or may not pass a doping test.
- Weakening Quadrant (yellow) – You’re losing your momentum and out of breath. You just realized that your spouse or your mom didn’t show up to watch you, sapping your enthusiasm. You’re falling back and in the middle of the pack.
- Lagging Quadrant (red) – You pulled a hamstring. You pulled a Michael Scott and ate five pounds of fettuccine alfredo an hour before your race. You fell down. You’re dead last. No anthems will be sung, but tears will fall, and no one will remember your name.
- Improving Quadrant (blue) – You see your spouse or your mom in the stands. The crowd starts to see you get up. Emotional music begins, and the camera pans to the crowd in slow motion. You’re back on your feet and in the middle of the pack, gaining on the leaders.
How analysts interpret the RRG:
The further something is from the middle, the greater, the more extended or overdone it is.
An FX pair in the Leading Quadrant (top right) far away from the center can be a strong sign that it is extremely overbought.
An FX pair in the Lagging Quadrant (bottom left) and far away from the center be a strong sign that it is extremely oversold.
Daily RRG
The gif below shows the last 10 trading days worth of movement.
Weekly RRG
The gif below shows the last 13 weeks of movement.
