Hey I thought I'd start this thread to show you
a new way to trade Forex. Now, this is all a
revelation to me because I come from an "ex control
freak" background and short term trading
perspective. But, having put a year or so into
this Currency Strength facility "on steroids", I
have completely changed my view on trading
Forex.
You have all seen and probably used various
Currency Meters. In my view, these are little
Toys which are cute, like many other "indicators"
but which are really useless when it comes to
making you consistent Money. Last time I checked
it was consistent profitability which separates
the Pros from the Wannabees
So I created yet another Currency Strength facility,
which is a lot more than just a "Currency Meter". Let me go
through the goals I had, and why I think this is now
a facility which is more than a Toy, and which can
help us to make big money consistently. By this
I mean, reliably identify the 30, 50, 100, 150 PIP trades
and rarely get us into much price adversity trouble.
DATA STABILITY OVER TIME
Most Currency Meters use internal calculations which
are based upon yesterday's range for each of the
Currency Pairs underlying the strength estimates.
Thus, readings from one day to the next may not be
comparable.
I decided to make sure that the prior reference was
not just a day, but several weeks of stable prior
data. The goal is to make Currency Strengths from
today comparable to yesterday's and those from
this week to be comparable to those in the past
week or two. Why?
CURRENCY TREND ANALYSIS ABILITY
Most of us as traders are "married" to one or a few
Currency Pairs in which we hope to become "experts"
and therefore make money. So we do "chart analysis"
on that Currency Pair, using support and resistance,
or bollingers, or rsi or any of dozens of other Price
Based indicators in the hopes that we can figure out
where it's going to go for our next trade.
Note: Every trader in the world sees Currency Pair
prices so, of course, these are made deceptive. But
almost no trader is able to see the underlying Currency
Strengths presented in a way which allow for high
probability Currency Pair trade identification. Almost
all of our "indicators" are simply another way to look at
Currency Pair price action, and very little that may lie
"behind" those movements as fundamental factors.
So Currency Strength Trend analysis allow us to
"pull back the curtain" and see some deeper information.
Well, since Currency Pairs are driven like "exchange
rates" from underlying Currency Strengths, most methods
of Price Action Analysis is really looking at the Effect,
rather than looking at a fundamental Cause of Currency
Pair movements. Chart readers would disagree, I suppose
but that's why this is such an interesting and controversial topic.
IMAGINE A BETTER WAY TO CHOOSE TRADES
If we could know the underlying Currency relative strengths,
then "theoretically" we could predict where Currency Pairs
should be, by just looking at a ratio of any 2 Currency
Strengths. (It's a little more complex than that, but this
is the primary driver of movements in exchange rates,
or in other words Currency Pair prices as fractions, or ratios
of an underlying Currency strength entity.)
The solution is to keep Currency Strength Charts and to
do Trend Analysis on *Currency Strength* movements,
rather than trend analysis on Currency Pair movements
which is what 99% of Forex traders do every day.
CURRENCY TREND ANALYSIS
So in our new way of thinking, we won't any longer primarily
use Currency Pair (Chart) trend analysis, but will watch for
Currency Strengths themselves, and their charted trending
over time.
HIGH PROBABILITY TRADES
Well, the simplest way of choosing trades is to Buy the
Weakest Currency against Selling the Strongest one.
So if A is the Weakest, and B is the Strongest, then we Bid to go
Long in the A/B Currency Pair. Why? Because A is
already weak, and not so likely to go much weaker; and
B is strong but not so likely to get much stronger. Rather
there is a higher probability that either or both of A and B (assuming
they exceed some threshold strength and
weakness level) will "revert to the mean" strength, and
therefore, that A will become less weak (or strengthen),
and that B may become less strong (or weaken). And,
of course, if the A/B pair does not exist for the Long trade,
but the B/A pair does exist; then we go SHORT the B/A
pair for exactly the same reason.
BUT WHAT ABOUT CONTINUATION IN STRENGTH?
Now, whenever you get trading "tips" or "signals" from
Currency Strength guys, notice that they are always going
for the continuation or "with trend" trades. Why am I saying
that we want to "fade" the strengths, and therefore take
a "counter trend trade" in the Currency Pair? How can that
be a good way to trade? Isn't that swimming against the
trend? Well, the conventional wisdom says "Yes, it is not
wise to take such a bet on a reversal."
BUT WHEN CAN REVERSALS OR PIVOTS BE JUSTIFIED?
Here we have to dive a bit deeper into the idea of Currency
Trend Analysis (note: not Currency Pair trend analysis),
which identifies Trends in *Currency Strengths*
themselves. And here's where a bit of "conspiracy theory"
makes its appearance. We actually *assume* that Markets
are manipulated, and that prior to Major Events, or News
Events in Currencies, that Market Manipulators actually
position CURRENCY Strengths in the OPPOSITE direction
of their intended move AFTER the news is announced.
MARKET MANIPULATION AND HOW TO SEE IT
Many News Events or regular Daily Events are known to
most traders published well in advance. These are the
times when Forex markets move the most, even if there
is just "Non News" like the FOMC deciding to do nothing,
as everyone expected, but Markets use these "non news"
events as an "excuse" to shake up the markets and make
a little money off the Retail trader population. Yes, it's
true that Forex Market movements are "engineered" in
advanced by powerful entities, SO GET USED TO IT !!
In fact we may well be able to turn deception to our advantage !
In fact, we welcome these market manipulations, because
we can SEE their "setups" in Currency Strength trending
many times, just ahead of the events. Therefore, we can
"fade" their "setups" and confidently trade in the right
direction.
CURRENCY STRENGTH TRENDING CHOOSES PAIRS
Rather than to be "married to" one or just a few Currency
Pairs, by using Currency Trend Analysis, we are able to
take advantage of the "market scanner" feature, where
pairs of Currency Strengths lead us to the highest
probability Currency Pair choices, and also tell us on which
side of the market (long or short) we should place our
trade. So the confusing aspect of "which pair should I
trade" is somewhat simplified.
SUSPICIOUS MOVEMENTS OF CURRENCY STRENGTHS
Using this approach, not only are we looking for Extreme
Currency Strengths to "fade" as one strategy; but we are also
looking for "suspicious" movements in any Currency which
gives us a clue as to a "setup" for a trade. Here I use the term
"hook" to illustrate what we are looking for. If Currency A has
been moving for hours in a flat line, and then it is moved (hooked)
upwards, this is most likely so that an upcoming event will be
used to move it in the OPPOSITE direction of the "hook".
Moveover if we can find A hooking upwards, and another Currency B
which is hooking downwards, assuming these are "fake" or
"engineered" movements, then we can "fade" both A against B
and get a "slingshot" movement of the Currency Pair A/B or
the Currency Pair B/A, whichever happens to be available. This
is where we find the really big movements of 100 PIPs or more
on occasion.
FEATURE AND TREND ANALYSIS
So we may be able to come up with a reply to the guy who says,
"Why not assume a strong currency will continue to strengthen,
and a weak currency will continue to weaken; and therefore take
trades in Currency Pairs which are in trend direction." If we are
able to differentiate between a continuation trend in a Currency
itself, versus a setup for reversal in a Currency trend, then clearly
we could do EITHER with trend or counter trend trades using
this approach. I think "feature analysis" is able to differentiate the
"hooks" (which should be faded) and the slow straight line trends
(which perhaps should be expected to continue) from the same
Currency Trend charts.
Well, that's a lot of stuff which should provoke some discussion
but let me summarize. Unless you are really measuring underlying
Currency Strengths, and can also compare them meaningfully
from moment to moment, then you are lost, so you are "guessing"
and so you cannot be consistently successful as a trader.
BUT... with reliable Currency Strength Trend Analysis, then trading
becomes EASY. We are always choosing what appear to be
High Probability positions in Currency Pairs, because we have
some (albeit perhaps imperfect, but tradable) knowledge of the
underlying drivers of Currency Pair movements, which are the
Currency Strength relationships themselves.
Then all that is left for the trader is execution, methodology,
timing and other techniques because the primary criteria for
selecting trades, Currency Strength Trend Analysis, removes
much uncertainty from profitable trading.
I no longer have to be "micro managing short term control freak"
requiring long hours at the terminal, because I have reliable information
in which I can progressively place more faith that I'm able
to choose successful high probability trades in Forex, consistently
and with high confidence.
HyperScalper
a new way to trade Forex. Now, this is all a
revelation to me because I come from an "ex control
freak" background and short term trading
perspective. But, having put a year or so into
this Currency Strength facility "on steroids", I
have completely changed my view on trading
Forex.
You have all seen and probably used various
Currency Meters. In my view, these are little
Toys which are cute, like many other "indicators"
but which are really useless when it comes to
making you consistent Money. Last time I checked
it was consistent profitability which separates
the Pros from the Wannabees
So I created yet another Currency Strength facility,
which is a lot more than just a "Currency Meter". Let me go
through the goals I had, and why I think this is now
a facility which is more than a Toy, and which can
help us to make big money consistently. By this
I mean, reliably identify the 30, 50, 100, 150 PIP trades
and rarely get us into much price adversity trouble.
DATA STABILITY OVER TIME
Most Currency Meters use internal calculations which
are based upon yesterday's range for each of the
Currency Pairs underlying the strength estimates.
Thus, readings from one day to the next may not be
comparable.
I decided to make sure that the prior reference was
not just a day, but several weeks of stable prior
data. The goal is to make Currency Strengths from
today comparable to yesterday's and those from
this week to be comparable to those in the past
week or two. Why?
CURRENCY TREND ANALYSIS ABILITY
Most of us as traders are "married" to one or a few
Currency Pairs in which we hope to become "experts"
and therefore make money. So we do "chart analysis"
on that Currency Pair, using support and resistance,
or bollingers, or rsi or any of dozens of other Price
Based indicators in the hopes that we can figure out
where it's going to go for our next trade.
Note: Every trader in the world sees Currency Pair
prices so, of course, these are made deceptive. But
almost no trader is able to see the underlying Currency
Strengths presented in a way which allow for high
probability Currency Pair trade identification. Almost
all of our "indicators" are simply another way to look at
Currency Pair price action, and very little that may lie
"behind" those movements as fundamental factors.
So Currency Strength Trend analysis allow us to
"pull back the curtain" and see some deeper information.
Well, since Currency Pairs are driven like "exchange
rates" from underlying Currency Strengths, most methods
of Price Action Analysis is really looking at the Effect,
rather than looking at a fundamental Cause of Currency
Pair movements. Chart readers would disagree, I suppose
but that's why this is such an interesting and controversial topic.
IMAGINE A BETTER WAY TO CHOOSE TRADES
If we could know the underlying Currency relative strengths,
then "theoretically" we could predict where Currency Pairs
should be, by just looking at a ratio of any 2 Currency
Strengths. (It's a little more complex than that, but this
is the primary driver of movements in exchange rates,
or in other words Currency Pair prices as fractions, or ratios
of an underlying Currency strength entity.)
The solution is to keep Currency Strength Charts and to
do Trend Analysis on *Currency Strength* movements,
rather than trend analysis on Currency Pair movements
which is what 99% of Forex traders do every day.
CURRENCY TREND ANALYSIS
So in our new way of thinking, we won't any longer primarily
use Currency Pair (Chart) trend analysis, but will watch for
Currency Strengths themselves, and their charted trending
over time.
HIGH PROBABILITY TRADES
Well, the simplest way of choosing trades is to Buy the
Weakest Currency against Selling the Strongest one.
So if A is the Weakest, and B is the Strongest, then we Bid to go
Long in the A/B Currency Pair. Why? Because A is
already weak, and not so likely to go much weaker; and
B is strong but not so likely to get much stronger. Rather
there is a higher probability that either or both of A and B (assuming
they exceed some threshold strength and
weakness level) will "revert to the mean" strength, and
therefore, that A will become less weak (or strengthen),
and that B may become less strong (or weaken). And,
of course, if the A/B pair does not exist for the Long trade,
but the B/A pair does exist; then we go SHORT the B/A
pair for exactly the same reason.
BUT WHAT ABOUT CONTINUATION IN STRENGTH?
Now, whenever you get trading "tips" or "signals" from
Currency Strength guys, notice that they are always going
for the continuation or "with trend" trades. Why am I saying
that we want to "fade" the strengths, and therefore take
a "counter trend trade" in the Currency Pair? How can that
be a good way to trade? Isn't that swimming against the
trend? Well, the conventional wisdom says "Yes, it is not
wise to take such a bet on a reversal."
BUT WHEN CAN REVERSALS OR PIVOTS BE JUSTIFIED?
Here we have to dive a bit deeper into the idea of Currency
Trend Analysis (note: not Currency Pair trend analysis),
which identifies Trends in *Currency Strengths*
themselves. And here's where a bit of "conspiracy theory"
makes its appearance. We actually *assume* that Markets
are manipulated, and that prior to Major Events, or News
Events in Currencies, that Market Manipulators actually
position CURRENCY Strengths in the OPPOSITE direction
of their intended move AFTER the news is announced.
MARKET MANIPULATION AND HOW TO SEE IT
Many News Events or regular Daily Events are known to
most traders published well in advance. These are the
times when Forex markets move the most, even if there
is just "Non News" like the FOMC deciding to do nothing,
as everyone expected, but Markets use these "non news"
events as an "excuse" to shake up the markets and make
a little money off the Retail trader population. Yes, it's
true that Forex Market movements are "engineered" in
advanced by powerful entities, SO GET USED TO IT !!
In fact we may well be able to turn deception to our advantage !
In fact, we welcome these market manipulations, because
we can SEE their "setups" in Currency Strength trending
many times, just ahead of the events. Therefore, we can
"fade" their "setups" and confidently trade in the right
direction.
CURRENCY STRENGTH TRENDING CHOOSES PAIRS
Rather than to be "married to" one or just a few Currency
Pairs, by using Currency Trend Analysis, we are able to
take advantage of the "market scanner" feature, where
pairs of Currency Strengths lead us to the highest
probability Currency Pair choices, and also tell us on which
side of the market (long or short) we should place our
trade. So the confusing aspect of "which pair should I
trade" is somewhat simplified.
SUSPICIOUS MOVEMENTS OF CURRENCY STRENGTHS
Using this approach, not only are we looking for Extreme
Currency Strengths to "fade" as one strategy; but we are also
looking for "suspicious" movements in any Currency which
gives us a clue as to a "setup" for a trade. Here I use the term
"hook" to illustrate what we are looking for. If Currency A has
been moving for hours in a flat line, and then it is moved (hooked)
upwards, this is most likely so that an upcoming event will be
used to move it in the OPPOSITE direction of the "hook".
Moveover if we can find A hooking upwards, and another Currency B
which is hooking downwards, assuming these are "fake" or
"engineered" movements, then we can "fade" both A against B
and get a "slingshot" movement of the Currency Pair A/B or
the Currency Pair B/A, whichever happens to be available. This
is where we find the really big movements of 100 PIPs or more
on occasion.
FEATURE AND TREND ANALYSIS
So we may be able to come up with a reply to the guy who says,
"Why not assume a strong currency will continue to strengthen,
and a weak currency will continue to weaken; and therefore take
trades in Currency Pairs which are in trend direction." If we are
able to differentiate between a continuation trend in a Currency
itself, versus a setup for reversal in a Currency trend, then clearly
we could do EITHER with trend or counter trend trades using
this approach. I think "feature analysis" is able to differentiate the
"hooks" (which should be faded) and the slow straight line trends
(which perhaps should be expected to continue) from the same
Currency Trend charts.
Well, that's a lot of stuff which should provoke some discussion
but let me summarize. Unless you are really measuring underlying
Currency Strengths, and can also compare them meaningfully
from moment to moment, then you are lost, so you are "guessing"
and so you cannot be consistently successful as a trader.
BUT... with reliable Currency Strength Trend Analysis, then trading
becomes EASY. We are always choosing what appear to be
High Probability positions in Currency Pairs, because we have
some (albeit perhaps imperfect, but tradable) knowledge of the
underlying drivers of Currency Pair movements, which are the
Currency Strength relationships themselves.
Then all that is left for the trader is execution, methodology,
timing and other techniques because the primary criteria for
selecting trades, Currency Strength Trend Analysis, removes
much uncertainty from profitable trading.
I no longer have to be "micro managing short term control freak"
requiring long hours at the terminal, because I have reliable information
in which I can progressively place more faith that I'm able
to choose successful high probability trades in Forex, consistently
and with high confidence.
HyperScalper
