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Money flows: Trading the strongest / weakest major currency cross

  • #241
  • Jun 21, 2017 12:19pm Jun 21, 2017 12:19pm
Keep in mind that there is only 7 pairs that really "moving":
EUR/USD GBP/USD NZD/USD AUD/USD USD/JPY USD/CAD USD/CHF----MAJORS
the rest of pairs are just mathematically defined(with a little inaccuracy ) from major pairs.
For example:
If EUR/USD go up 50 pips and GBP/USD go up 50 pips,then EUR/GBP will not show significant(if any) move(they are both stronger then USD at same measure).
In other way:
If EUR/USD go up 50 pips and GBP/USD go down 50 pips,then EUR/GBP will shoot up hard.
Thats why on high impact news you see big moves for particular currency,for example:
High impact news for EUR...EUR/USD go down,meantime GBP/USD,NZD/USD,AUD/USD,USD/JPY,USD/CAD,USD/CHF don't show any move,so...what will happen?
EUR/GBP EUR/JPY EUR/NZD EUR/AUD EUR/CAD EUR/CHF will go down.
Actually,you need to look only on those 7 pairs.
This is a fact...I learned this from one protrader/investor...if you don't believe pull up charts with majors and crosses and see it for yourself.
SMKNYC---LIAR
  • #242
  • Jun 21, 2017 12:31pm Jun 21, 2017 12:31pm
Well then, there you go. Thanks Nick

DerPat from SHF didn't even include NZD in his index weightings because he said the volume was so low it didn't really affect anything. What are your thoughts on just dropping that? Its hard to fit 7 charts on a screen, but 6 fit nicely
  • #243
  • Jun 21, 2017 12:41pm Jun 21, 2017 12:41pm
Quoting rudy5
What are your thoughts on just dropping that? Its hard to fit 7 charts on a screen, but 6 fit nicely
I think it is bad idea,unless you don't care about quality of your analysis.
SMKNYC---LIAR
  • #244
  • Jun 21, 2017 1:26pm Jun 21, 2017 1:26pm
Quoting rudy5
Well then, there you go. Thanks Nick DerPat from SHF didn't even include NZD in his index weightings because he said the volume was so low it didn't really affect anything. What are your thoughts on just dropping that? Its hard to fit 7 charts on a screen, but 6 fit nicely

NZD really has no bearing on the weighting regarding the USD Index.

The US Dollar Index (USDX, DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies,[1] often referred to as a basket of US trade partners' currencies.[2]
It is a weighted geometric mean of the dollar's value relative to other select currencies:

  1. Euro (EUR), 57.6% weight
  2. Japanese yen (JPY) 13.6% weight
  3. Pound sterling (GBP), 11.9% weight
  4. Canadian dollar (CAD), 9.1% weight
  5. Swedish krona (SEK), 4.2% weight
  6. Swiss franc (CHF) 3.6% weight

Find The Pain Points On Your Chart & Trade Off Those Levels
  • #245
  • Jun 21, 2017 2:16pm Jun 21, 2017 2:16pm
Yeah but isn't that a super old weighting?
  • #246
  • Jun 22, 2017 5:17am Jun 22, 2017 5:17am
Quoting rudy5
Yeah but isn't that a super old weighting?
Yes.
Watch Usdx spike right on Nzd news.
SMKNYC---LIAR
  • #247
  • Jun 22, 2017 8:01am Jun 22, 2017 8:01am
Quoting unknown4x
{quote} But i have to say i have done lots of indices work over the years and i really mean _A LOT_... but at the end nothing beats proper major/minor analysis. I got about 30 synthetic indices of my own which do create a phenomenal hitrate even on their own without watching the major itself but at the end the simple major/minor analysis even beats them.
.
  • #248
  • Jun 23, 2017 3:29am Jun 23, 2017 3:29am
Quoting rudy5
Yeah but isn't that a super old weighting?
What is it that you think has changed?

It does not change very often and was last changed to accommodate the creation of the Euro. You can see the info GPips provided was still current in 2015 here

https://www.theice.com/publicdocs/fu..._Index_FAQ.pdf
Good Trading
  • #249
  • Jun 24, 2017 2:07am Jun 24, 2017 2:07am
Quoting rudy5
Last time I looked into this stuff I stopped because the indexes looked so similar to the USD crosses I decided it wasn't worth the extra analysis
I agree that index analysis is often noise. BUT there r very few occasions where the index makes a telling bar at a level of significance. for this purpose, I use volume price candles on cme's fx futures (width adjusted for volume). for eg. after May's 1st fri nfp, nzd chf & eur futures showed stronger volume, relative to the past, while breaking out of trendlines. eventually, it was nzd that had follow thru, even thou volume is much lower compared to chf & eur

simple straight up cross anaylsis is still useful for longer term swing trades. helps as a filter for pair selection. for eg. if you are bullish euro, eurusd is making higher highs, while eurjpy is making lower highs. telling sign that euro is not really strong. an immediate filter to cross out this trade idea. it could be that usd is weak OR yen is strong, pulling eur along. next step would be to look at other usd majors & yen crosses
  • #250
  • Jul 8, 2017 11:14pm Jul 8, 2017 11:14pm
Quoting econbizer
{quote} ... for eg. if you are bullish euro, eurusd is making higher highs, while eurjpy is making lower highs. telling sign that euro is not really strong. an immediate filter to cross out this trade idea. it could be that usd is weak OR yen is strong, pulling eur along. next step would be to look at other usd majors & yen crosses
That's some out/underperforming analysis...works good in stocks market but with good timing(critical part)...same for fx.
Regarding your example...
Here comes the funny part-TIMING.
For example:
Majors trend
Down trend for U/C U/J U/Chf
Up trend for G/U E/U A/U N/U
Ok...this situation means weak USD,right?
Ok...now we need to find most strong currency.
Ok...we did some analysis and it looks like EUR is most strong...
YES!Buy EUR and sell USD if you are a basket trader or buy EUR/USD if you prefer traditional way...
Ok...you get in...and now only 2 options-you take profit if your timing was right or you take your loss if not.
And you are probably thinking now "what the heck are you are talking about"?But I am talking about this:
Remember then you did your analysis?You probably didn't seen that GBP/USD is ranging around support for a day or two,CAD have unemployment news release soon to be announced so is USD,plus USD have oil inventory news release which more likely will impact commodity based currencies and JPY...this things can initialize short(medium) term correction and this will be enough to ruin your trade...yes,your analysis maybe was right but your timing not.
SMKNYC---LIAR
  • #251
  • Jul 11, 2017 4:26am Jul 11, 2017 4:26am
Quoting Nick.Sa
{quote} That's some out/underperforming analysis...works good in stocks market but with good timing(critical part)...same for fx. Regarding your example... Here comes the funny part-TIMING. For example: Majors trend Down trend for U/C U/J U/Chf Up trend for G/U E/U A/U N/U Ok...this situation means weak USD,right? Ok...now we need to find most strong currency. Ok...we did some analysis and it looks like EUR is most strong... YES!Buy EUR and sell USD if you are a basket trader or buy EUR/USD if you prefer traditional way... Ok...you get in...and...
yes u r right, I have no idea what is your point. do you mean to say strength/weakness analysis is useless?

you took my example out of context. it was a hypothetical one. I was not talking about movements in the market at that time

structure should always precede strength-weakness / fundamental analysis. I use strength-weakness analysis as an initial filter to see where the action is. as discussed several times in this thread, you still need to use other tools to determine if the train is still going OR if it has already left the station
  • #252
  • Jul 11, 2017 9:57am Jul 11, 2017 9:57am
Quoting econbizer
{quote} ...do you mean to say strength/weakness analysis is useless...
not useless but by the time you find strong/weak
Quoting econbizer
{quote}it has already left the station
SMKNYC---LIAR
  • #253
  • Jul 11, 2017 3:52pm Jul 11, 2017 3:52pm
I agree. A lot of the time once you see it its over. However its worth looking at all the PRZs
  • #254
  • Jul 11, 2017 9:34pm Jul 11, 2017 9:34pm
Quoting rudy5
I agree. A lot of the time once you see it its over. However its worth looking at all the PRZs
Rudy

What is PRZ?

Thanks
  • #255
  • Jul 11, 2017 10:09pm Jul 11, 2017 10:09pm
Potential reversal zone
  • #256
  • Jul 12, 2017 11:38pm Jul 12, 2017 11:38pm
Quoting rudy5
I agree. A lot of the time once you see it its over. However its worth looking at all the PRZs
You guys are right to say "A lot of the time once you see it its over".

However, remember- the fact that some traders will be looking for "PRZ" makes these moves trade-able. You wanna fade a bullish drive into a "PRZ". when they are triggered into such a trade by say a bearish pinbar, they are 'making a market'. on the other side are those looking to trade a continuation move. the SLs of both groups of traders, further provide for liquidity for prices to move

It boils down to a trader's understanding of the current 'macro' trend. (for myself as an intra-day trader, trading M5 / M15, macro to me is H1 / H4 / D1). is this "drive" a first leg? then look to trade the second leg. Is this drive a second or third leg into a "PRZ"? then look for better clues to fade it on reversal structures
  • #257
  • Jul 12, 2017 11:46pm Jul 12, 2017 11:46pm
Quoting rudy5
Potential reversal zone
Thanks Rudy...
  • #258
  • Aug 14, 2017 4:51am Aug 14, 2017 4:51am
Well, was hoping to discover something new, but realized this is overcomplicated and OP have some misunderstanding.
Ｎevertheless there is one golden nugget here, which is money flow, which can be acheive only by observing major pairs that made up most fx volume.

A trader can then intepret the changing correlation between the movement of currency pairs.
Normally all currencies move in the same direction against the greenback, when they are tearing, depending on which pair, can give early signal of potential development in the fundamental front.

But most important is can you use multiple pair analysis to identify the right timing of a move, instead of jumping in when the move is pretty extended

In essense this is the basic form of intermarket analysis
  • #259
  • Aug 31, 2017 6:43am Aug 31, 2017 6:43am
It's been a while since my last post in ff.

ANd one thread that keeps me coming back is this one.

I want to share something that is essential in understanding the op's theory.

- it is targetting some quick pips. Not swing/daily trading kinda of trade.
- if you want to make 10/20 pips per day, than this is the right kinda mindset to think about.
- not much indicator involved - thus less confusions. And we're concentrating more on the relation of them (the currencies involved).
- Lastly : we're trading forex for profit. Not for debating, whos right whos wrong. If im wrong, but still make money, than no harms involved.

Take a look at this few examples (many examples can be shown, but this is the simplest form that i can spend my time on).

Attached Image (click to enlarge)
Click to Enlarge Name: wh1.png Size: 50 KB


THis is NZDJPY. Take a good look at the vertical line in the middle: The candle closed outside the low bb. This means that a 'momentum' just started. We called them Momentum Candle in BBMA (famous trading technique in Malaysia, Indonesia, Brunei).

Attached Image (click to enlarge)
Click to Enlarge Name: wh2.png Size: 49 KB


And the latter is NZDUSD. There is momentum cs can be seen too.

We can make quick 30 pips there.

To improve the signal (or more confidence to execute) we can add more pairs to see what NZD's doing.

This is one simple example on how we can take advantage of the relationship of pairs.
  • #260
  • Oct 16, 2017 6:29am Oct 16, 2017 6:29am
Quoting unknown4x
yes tyoon. as standard reference i will use alpari demo times: around 3:30 most flows stop. we get some unimportant cross flows without any breakout character. cadx + gbpx do a small one but the minors tell us no big deal. Real fun starts around 8:30-9:00 chfx starts to get inflows, around 10:30 all of its minors break to the upside + usdx breaks away again, usd majors are all long anyways -> boom chfusd trade. For me SL was 15 pips, exit 11:00 when both chfaud and chfnzd hit resis on m5+m10+hourly close. RR 1:2 incl commission, drawdown 0. 2% bagged....
Hi unknown4x
Please let me know which time zone you are referring to ?.Is that GMT ?
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