Thursday, November 28, 2013

Currency Strength Meter : 'Thanksgiving'

Here is Currency Strength Meter chart for 28/11/2013 (Thanksgiving in US - happy Thanksgiving by the way). As expected things pretty flat. Biggest upset was on GBP where governer Mark Carney announced the removal of FLS (Funding for Lening Scheme - which was intended to help house buyers). This caused GBP/USD to spike to new highs.

Here's the Multi-Compare chart showing the main global indices - as expected, very flat.

Wednesday, November 27, 2013

New Release of Composite Profile

Addition of "N-hours/days/weeks back" mode. This makes it really easy to create a profile, of say last week, or last 5 days, or last 10 weeks, etc.

Release 11:
  • Added "N-hours/days/weeks back" mode

The new version can be found on the download site.

Composite Profile allows you to "anchor" the profile to the left of right edge of the chart. So, you can easily add 2 profiles with different profiling durations. In the chart below, I added a profile of the last week ("N-weeks back (N=1)") on the left, and profile of the last 4 hours the right ("N-hours back (N=4)").

Tuesday, November 26, 2013

Currency Strength Meter : 26/11/2013

GBP still looking strong. JPYgaining strength. AUD still under pressure.

Uncorrelated DAX

The DAX has been out of sync with other markets this week. Yesterday it made a huge move up whilst S&P was side-ways to down, and FTSE was down. Again, this morning, it is holding ground whilst the other markets are slightly down.

The Multi-Compare shows a negative correlation of DAX and S&P. These 2 instruments are normally highly correlated. It seems that something is "odd" with this market this week.

New Release of Currency Strength Meter and Multi-Compare

I've just uploaded a small, but useful, update for the Currency Strength Meter and the Multi-Compare indicators. The change allows the "reference / start date" to be set according to "N-bars back", which is particularly useful if using one of the post-processing modes like MACD(1, 200) as it requires 200 bars of data for the moving averages.

Multi-Compare (Release 7):
  • Added "N-bars back" mode

Currency Strength Meter (Release 11):
  • Added "N-bars back" mode

Existing users can download the updates from the download site. The indicators can be purchased from the products page.

Currency Strength Meter (in "Top Paid" section of FXCM Apps)

The Currency Strength Meter continues to be very popular, and features on FXCM's "Top Paid" section of their FXCM App Store site. You can also get it direct from my blog.

Monday, November 25, 2013

Currency Strength : 25/11/2013

Currency Strength Meter. GBP still strong, but sliding slightly. NZD made a recovery, and back to neutral. AUD and JPY still weak.

Here's the ranking according to Tyler Yell off DailyFX. Strongest & weakest are same as my Currency Strength Meter again.

Friday, November 22, 2013

Composite Profile : new mode added

I just added a new mode for the Composite Profile indicator. It now supports "N-bars back", "N-hours back", "N-days back" and "N-weeks back" for constructing the composite profile.

In this 4H chart of GBP/USD, I've used the "N-weeks back" mode (with N = 5).

NOTE: the "N-bars back" mode is a 'rolling' profile, i.e. every new bar it constructs a new profile from the previous N bars. However, the other modes are fixed at the time that you add the indicator to the chart (or modify it).

This new development is in testing, and will be incorporated into the next version.

Currency Strength : 22/11/2013

Today's post of the Currency Strength Meter.

The top chart is the distance from the currency to its 200 EMA on 4H. The slope of the line is important information as well as the absolute position. GBP still strongest currency, but slowing down for sure.

The bottom chart is RSI on 1H. Over-bought (70 level) and over-sold (30 level) are marked. However, it is normally usual to wait for the level to cross below the 70 / 30 levels.

This indicator is available on my blog or at FXCM Apps.

Thursday, November 21, 2013

Doctor Copper ?

"Market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper's widespread applications in most sectors of the economy - from homes and factories, to electronics and power generation and transmission - demand for copper is often viewed as a reliable leading indicator of economic health." (source Investopedia)

Here I use the Multi-Instrument Compare to compare various stock indices, USDOLLAR, gold, oil and copper. This chart is a daily chart for the current year (i.e. since 1/1/2013). I've enabled the correlation matrix, and high-lighted the row for copper.

Copper is moderately negatively correlated with the stock indices for this period (e.g. -0.7 for S&P500, -0.8 for DJI). On the face of it, it would seem Dr Copper hasn't been doing so well lately.

This article also high-lights the anti-correlation of copper and S&P, and cites it as proof that the stock market rally will soon be over!

Currency Strength 21/11/2013

Today's Currency Strength Chart. GBP is clearly on top. NZD which was strong for much of the past week, is on decline. EUR looking fragile after yesterday's negative rate talk, but currently holding.

EUR/USD : PMI down / PMI up

EUR/USD made some nice moves on PMI news this morning. French PMI was weak, and EUR/USD went down, unfortunately I had a small long position on and was stopped out on the trade. Price traded right down to a High Volume Node (HVN) that I've had my eye on for the last few days, so I re-entered long here. 30mins later and German PMI sent the Euro back up. My net trade was just profitable because of the earlier loss.

News (like the poor PMI) can spook the market, but generally speaking these are just opportunities for the big boys to make money from the retail traders. Price will be marked-down sharply to a volume node, where they will then buy back (covering shorts and accumulating new longs).

Candle Profile shows the aggregated price action inside a bar/candle. Knowing that there was an HVN there was crucial to entering this trade.

Wednesday, November 20, 2013

Currency Strength

A quick look at the currencies. The upper indicator is the delta from the 200 period Moving Average. The lower indicator is RSI.

FTSE100, floor pivots and news

Well, the news wires were alive today with ECB prospect of -0.1% interest rates, plus comments about FED December tapering (again).

Anyway, when the market panics, floor pivots seem to become obvious targets, as you can see when R1 was hit, and instantly rejected.

Other pivots, acted as significant reaction levels all day.

Tuesday, November 19, 2013

Currency Strength Meter: MACD display mode

The Currency Strength Meter calculates an average value for a base currency from analysing a basket of constituent currency pairs (e.g. for computing the USD value, it computes the geometric mean of EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, USD/CAD and NZD/USD).

The Currency Strength Meter can display this 'raw' data as % change from some reference datum (e.g. N-days back, or a specified time). It can also post-process this data using RSI, SMA or MACD.

The MACD mode is particularly interesting when used as follows...

A MACD consists of 2 moving averages, one slow and one fast. The MACD is simply the difference of these 2 averages (i.e. fast - slow). A positive value indicates increasing momentum (strength), and negative value indicates decreasing momentum (weakness). A traditional MACD usually has a 3rd average which smooths the result, but the core computation is the use of the slow/fast moving averages.

Using a MACD(1, 200) (fast average = 1 period, slow average = 200 periods) may seem curious, but an average using 1 period is just the value itself, so this configuration actually computes the difference of the raw value and its 200 period moving average.

The use of the 200 period moving average in this way is a commonly used technique for currency strength analysis, and is used by DailyFX presenter Tyler yell (@ForexYell). The analysis can be done by hand or spreadsheet, but the use of the Currency Strength Meter automates the process, as well as being more flexible.

If you have access to DailyFXplus then you can see a recent archived webinar by Tyler, where he uses and explains the 200 period moving average technique on 4Hour charts.

The following chart shows 2 instances of the Currency Strength Meter. The upper one is using 4H data, and MACD(1, 200). The lower one is using 1H data, and MACD(1, 20). The strategy would be to look for currencies that are strong in the upper chart but weak in the lower chart, i.e. try to buy short-term weakness in the longer-term strength.

Currency Strength Meter Release 10

I just released a bug-fix version for the Currency Strength Meter. Actually, this version was made some time ago, but I didn't get around to updating the documentation and release package.

Release 10:
  • Bug-fix for missing historic data

The fix relates to some calculation errors when very old historic data is used (e.g. back several years), which has some holes is some currency pairs. This was causing odd calculations. Now, the calculation is only valid when data for all pairs is available.

Monday, November 18, 2013

Currency Strength (Strong to Weak)

Just listening to Tyler Yell of FXCM's DailyFX. He's talking about ranking currencies (strong to weak). The technique he's using is looking at 4H chart, and seeing how far each currency is above its 200 period moving average.

With the Currency Strength Meter, you can do something very similar. Using the MACD display mode with the fast period set to 1, and the slow period set to 200, this essentially gives the same result (since average of 1 period is just the raw value). (Make sure the chart covers at least 200 bars for the 200 period moving average to be valid).

So, the ranking using this technique, the ranking (strong to weak) would be GBP, NZD, USD, CAD, EUR, CHF, AUD and JPY.

Here's Tyler Yell's ranking, as shown on live webinar today.

Same result.

Multi-Instrument Compare Release 6

I added RSI, MACD and SMA display modes to the Multi-Instrument Compare indicator some time ago, but never got around to updating the release. Well, here it is at last.

Release 6:
  • Addition of post-processing modes: RSI, Moving Average, MACD
  • Addition of fixed ‘70/30’ lines for RSI

Existing owners can get the upgrade for free from the download site. The product can be purchased form this page.

Friday, November 15, 2013

Comparison and correlation of markets this year

Here the Multi-Compare indicator is used to compare major markets (including USD/JPY, gold and oil). The correlation matrix (in lower-left) shows the correlation of each instrument with every other.

Nikkei Rally !

Nikkei up 7.5% since start of the week! Dovish comments from Yellen. We're still in bull territory folks!

Multi-Compare allows different instruments to be compared relatively to each other. Uses a fixed reference datum (e.g. N-days back, specified date, etc.) and then calculates the change in value from that datum, and displays the change as % value.

Thursday, November 14, 2013

Floor trader pivots

Floor trader pivots are simple calculation-based support/resistance levels. There are many formulas, and variants ("Floor trader", "DeMark", "Woodies", etc.). I've been using "Floor trader" pivots. Some of the formula seem slightly different, but often it is the same formula just expressed in slightly different way.

Wednesday, November 13, 2013

Market Profile Indicator Release 12

I've just completed the documentation changes for the latest release of the Market Profile indicator.

The first thing to point out is that I've changed the name. The indicator is now called "Profile".

("Market Profile" is a registered trademark of the CME Group. Although the term "Market Profile" is often used generically to describe similar TPO profile and even Volume Profile systems. However, I decided to avoid using the name, and have adopted the simpler name of "Profile").

Release 12:
  • Improved graphics 
  • Bug-fix and other performance improvements 
  • Some changes to input parameter names and order 
  • Changed the indicator name to “Profile”

Existing owners can get the upgrade for free from the download site. The product can be purchased form this page.

Al Brooks on Big Mikes Trading Forum

This is an older webinar hosted on Big Mike's Trading Forum, which I watched again recently.

Monday, November 11, 2013

MTS Webinars Presents: Danny Riley – “Trading Rules 101″ in effect

Webinar by Danny Riley.

Candle Profile : what "period" data source to use?

The CandleProfile indicator creates a price/volume profile for each bar/candle of the instrument by using a lower timeframe data source. For example, the profile of a 4H bar can be reconstructed from 1min data.

The following charts are of EUR/USD using 4H bars/candles. The CandleProfile indicator is applied using 1min, 5min, 30min and 1H data sources. It should be obvious form the charts that the smaller time-frame data source gives a higher level of detail in the completed profile. Using 1H data for a 4H candle is particularly poor (since the profile uses only 4 data points per 4H candle/bar). However, even still, it is somewhat similar (and recognisable) to the other profiles.

There is of course a trade-off: 1) lower timeframe data takes longer to load, and 2) there is a 15000 bar limit for any data source in the current version of FXCM TradingStation II.

The 15000 bar data limit is important since it will limit how much data the indicator can load, and therefore limit how far back it can draw the profiles. To put it into context, there are 1440 x 1min bars in a day, so 15000 bars is just over 10 days. Or, 96 x 15min bars in a day - which would be just over 156 days, etc.

The indicator can also use tick data, but in this case there is a 5000 tick limit. For an instrument like EUR/USD, 5000 ticks is often less than 1H ! However, for something like FTSE100, it can be several hours.

Sunday, November 10, 2013

Composite Profile Release 10

I've just put release 5 of the Composite Profile indicator on the download site.

Release 10:
  • Improved graphics
  • Bug-fix and other performance improvements
  • Some changes to input parameter names and order

Existing owners can get the upgrade for free from the download site. The product can be purchased form this page.

Friday, November 8, 2013

Candle Profile Release 5

I've just put release 5 of the Candle Profile indicator on the download site.

Release 5:
  • Improved graphics for the micro-profile
  • Bug-fix and other performance improvements
  • Some changes to input parameter names and order

Main change is the new graphics for the micro-profile, which works really well with this indicator.

The profiles scale really nicely when you zoom-in / zoom-out, as shown in this little movie.

Existing owners can get the upgrade for free from the download site. The product can be purchased form this page.

Tuesday, November 5, 2013

Pivot Power!

Well, if you were ever in any doubt about the power of pivot points then the following chart should convince you:

Price action tested and re-tested all the way from the highs, through the PP (Pivot Point), to S1, to S2, to S3 and back again, with the major reversal occurring at S3 (almost to the tick). On this particular chart, the major reversal at S3 also occurs at 10am EST (15:00 GMT). This is another key time for US stock indices.

Every major price inflexion occurred at or around a pivot or support/resistance line.

Of course, there are some caveats:
  1. This really works best on certain instruments - in particular those with a real "session" such as SP500, DAX, FTSE, etc.
  2. "Proper" pivot calculation must be used, i.e. using the high, low and close of the session. The default indicator that comes with MarketScope uses the "FXCM day" which starts at 5pm EST, which is totally inappropriate for computing the pivots of SP500 and most other stock indices.
  3. Confluence with other support/resistance lines, Value Area, POC, mid-line, previous close, etc. all help.

The SessionLines indicator is specifically designed to track a session-traded instrument like SP500, DAX, FTSE, etc. The start and end times are configurable, and the indicator can compute and display a range of key levels for day trading such as: high of day, low of day, mid, POC, Value Area, Initial Balance, Opening Range, and floor trader pivots support/resistance levels.

Value Candles

I found this interesting post (actually a short series of posts) on the Rancho Dinero website/blog.

It is about MarketProfile, and trading value area. Part 4 of the series culminates in something that the author calls "Value Candles" - which are similar to ProSticks and my own Candle Profile.

I'm really liking this approach to trading, and I'm using Candle Profile on 1H, 4H and daily candlestick/bar charts to show the Value Area, POC and profile.

Friday, November 1, 2013

Are FX Markets "Rigged" At The London Closing Fix?

I originally saw this article on Zero Hedge.

"Banging the close," is hardly a new 'event' but the ubiquity with which it is occurring around 4pm GMT (when major FX market benchmarks known as 'WM/Reuters rates' are set) is prompting authorities to investigate potential abuse of these benchmarks by the major banks. From Libor to ISDAFix and from base-and-precious metals to energy markets, adding the largest markets in the world - foreign exchange - to the banks' pernicious manipulations does not seem like a stretch.Critically, benchmark providers base daily valuations of indexes spanning different currencies on the 4 p.m. WM/Reuters rates (which in turn drives derivative settlements and triggers).

Read the full article here.

Busy busy busy!

I have a heap of un-finished projects to do, and a ton of other work on top of that. And Christmas is only 8 weeks away! Wow, doesn't time fly.

  • Updates to Market Profile, Composite Profile and Candle Profile
    • NOTE: Next version, I am changing the name of the Market Profile indicator (since it appears to be CME/CBOT registered TradeMark). Suggestions welcome (post a comment below) - but I will probably just change it to "Profile" (nice and simple!)
  • Updates to Currency Strength Meter (minor bug fix)
  • Updates to Multi-Compare (some updates to RSI mode, etc.)
  • Updates to Line Sync (using the pop-up menu for changing line settings, etc.)
  • I plan to put some more indicators on FXCM App Store
    • Currency Strength Meter is already there
    • I will add Multi-Compare, and I am thinking about adding some others
  • I am still fighting with some bugs in the new MarketScope version - anybody else having problems?

I am pretty busy until the end of the month, so not sure when I can fit all this in. I'll post any developments on the blog as usual.