You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Creating a Forex Index?
- Thread starter BOC
- Start date
That sounds like a portfolio of buying and holding. Index makes sense only if others track it and base their performance on it.
In a sense it is buy-and-hold, yes. Its a rule of trend-following that you stay in until the trend starts to fail, so it can look like buy-and-hold or short-and-hold, but that's a superficial similarity only.
An index can reflect what others are doing, which is a pointer towards staying on the right side of a trade. It can be an entirely non-public indicator, its not dependent on on multiple players' conscious decisions to track it.
No, the opposite. Highly correlated currencies will have individually less weight.
Ok, I seen the reasoning of that now. I really like the idea of using correlations to refine the index and will definitely look into it. Thanks a lot.
Interesting idea, and possibly overdue, might help private retail traders.
I wonder if there's a simpler way through this though? I note whether each pair with a major currency as base is either bullish or bearish using simple TA criteria. Right now, this tells me that AUD is bearish in all of the 7 pairs against the other major currencies, while CAD is bullish in all 6 of its pairs charts against majors. This suggests the optimum pair to short right now for me would be AUD/CAD - take a look at the chart to check this but it would be hard to find a more bearish daily chart.
Meanwhile, the EUR is bullish in 3 out of 7 major pairs, GBP is bullish in 4 of 7 major pairs, so EUR/GBP is pretty neutral, not attractive to my trend-following strategy for either going long or short, agreed?
One thing I was considering was along the same lines of comparing the indexes, the strongest vs the weakest, and looking at those pairs. I'm also interested in using the indexes with Relative Strength.