Hello all at forexfactory!
I am NOT the originator of this system and all of the credit must go to Capito from these forums for such a great method of finding strength vs. weakness. His thread is in the commercial forum but his website now offers free membership so I thought I'd post the trading method over here. You can also check out the site at Forexmechanics.com
Firstly.. How the markets move
since the forex market offers currency pairs you are trading one currencies strength/weakness vs another currencies strength/weakness. If they (the currencies themselves) are moving in opposite directions we have a trend.
Secondly You won't know where a pair is actually going unless you are tracking both currencies seperately. Here's where this comes in handy, The ONLY broker (that I know of atleast) that offers these individual currency indices is liteforex's sigtrader 4. Download this platform at liteforex.com
Open the market window and click show all.. These individual currency indices are labeled with the suffix (LFX which stands for liteforex) so USDLFX, GBPLFX, and so on.
The idea is to match a strong/weak currency with one that is going in the opposite direction. This allows for a pair that stands close to a 90% chance of going into profit. As I am writing this I have shorted most gbp pairs and they are all in profit for a basket that is currently up 800 pips with more room to the downside as their counter currencies are heading north.. such as NZDLFX and USDLFX.
The best time to trade is within the first 10 days as the most important currency news releases come out in that time period.
The average trade lasts anywhere from 3-15 days or more if you catch a strong move.
Once a currency index crosses over our filter line then you want to find another index that is heading in the opposite direction (within the first 10 days) you place a trade and let it ride for atleast 3 days. 80% of the time the markets are ranging so it takes time for moves to actually be profitable and 72 hours is the minimum for a trade to see if your initial position was correct.
On to the system
Here is a shot of our indices.. we apply a custom macd to look for divergence and macd crossovers. also a laguerre filter line with a setting of .7 gamma. A 14 ema for price crossovers to find the correct indices to trade. Also a trend display for all timeframes up to the monthly (yes monthly candle is very important!!) it is based off a basic 3 rsi. monthly pivots for support/resistance. And last but not least the demark trendline indicator (we'll get into that indicator later)
This is the GBP index for the month of december up until now. (pay attention to december 7th cross)
http://img560.imageshack.us/img560/8834/cicr1.png
Now here's an image of AUDLFX (AUD INDEX) Pay attention to the December 8th crosshttp://img85.imageshack.us/img85/9696/cicr3.png
Now that we have two currencies going in opposite directions..let's see what happens on GBPAUD after you pair these indices together
http://img707.imageshack.us/img707/4084/cicr5.png
I want you to take note that this is not even a prime example of how to trade these indices.. There are much larger moves taking place but I am already spending alot of time posting this method here so didn't have much time to scan the charts.
Download template+indicators below:
Put the profiles (ALL IN ONE) folder into the sigtrader profiles and you will get all of the indices on seperate tabs like so..
http://img39.imageshack.us/img39/9382/cicr6.png
More to come please stay posted
I am NOT the originator of this system and all of the credit must go to Capito from these forums for such a great method of finding strength vs. weakness. His thread is in the commercial forum but his website now offers free membership so I thought I'd post the trading method over here. You can also check out the site at Forexmechanics.com
Firstly.. How the markets move
since the forex market offers currency pairs you are trading one currencies strength/weakness vs another currencies strength/weakness. If they (the currencies themselves) are moving in opposite directions we have a trend.
Secondly You won't know where a pair is actually going unless you are tracking both currencies seperately. Here's where this comes in handy, The ONLY broker (that I know of atleast) that offers these individual currency indices is liteforex's sigtrader 4. Download this platform at liteforex.com
Open the market window and click show all.. These individual currency indices are labeled with the suffix (LFX which stands for liteforex) so USDLFX, GBPLFX, and so on.
The idea is to match a strong/weak currency with one that is going in the opposite direction. This allows for a pair that stands close to a 90% chance of going into profit. As I am writing this I have shorted most gbp pairs and they are all in profit for a basket that is currently up 800 pips with more room to the downside as their counter currencies are heading north.. such as NZDLFX and USDLFX.
The best time to trade is within the first 10 days as the most important currency news releases come out in that time period.
The average trade lasts anywhere from 3-15 days or more if you catch a strong move.
Once a currency index crosses over our filter line then you want to find another index that is heading in the opposite direction (within the first 10 days) you place a trade and let it ride for atleast 3 days. 80% of the time the markets are ranging so it takes time for moves to actually be profitable and 72 hours is the minimum for a trade to see if your initial position was correct.
On to the system
Here is a shot of our indices.. we apply a custom macd to look for divergence and macd crossovers. also a laguerre filter line with a setting of .7 gamma. A 14 ema for price crossovers to find the correct indices to trade. Also a trend display for all timeframes up to the monthly (yes monthly candle is very important!!) it is based off a basic 3 rsi. monthly pivots for support/resistance. And last but not least the demark trendline indicator (we'll get into that indicator later)
This is the GBP index for the month of december up until now. (pay attention to december 7th cross)
http://img560.imageshack.us/img560/8834/cicr1.png
Now here's an image of AUDLFX (AUD INDEX) Pay attention to the December 8th crosshttp://img85.imageshack.us/img85/9696/cicr3.png
Now that we have two currencies going in opposite directions..let's see what happens on GBPAUD after you pair these indices together
http://img707.imageshack.us/img707/4084/cicr5.png
I want you to take note that this is not even a prime example of how to trade these indices.. There are much larger moves taking place but I am already spending alot of time posting this method here so didn't have much time to scan the charts.
Download template+indicators below:
Put the profiles (ALL IN ONE) folder into the sigtrader profiles and you will get all of the indices on seperate tabs like so..
http://img39.imageshack.us/img39/9382/cicr6.png
More to come please stay posted
Attached File(s)
CICR.rar
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2,150 downloads