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  • #41
  • Oct 1, 2008 7:49am Oct 1, 2008 7:49am
Quoting Forexharry
The usd portion has nothing to do with the eur/jpy. and the usd is a major part of the eur/usd and usd/jpy. Good luck

The USD is a very important part of the EUR/JPY. If the EUR was traded as a single entity (like the USD Index which is not paired with any other entity) and the JPY (like the USD Index) was traded as a single entity, then the USD would not have nearly the importance. But in Retail Forex we are trading pairs and EUP/JPY moves in exact accordance with the relationship between the USDJPY and the EURUSD. If you were referring to something else in this post (like the way your charts display the data?) I apologize. But the involvement of the USD (as a component of the underlying pairs making up the EURJPY) in the crosses in the manner that crosses are offered in the Retail FX market is of paramount understanding and it would be a disservice to newer readers / traders to mistake your comment. Just a polite correction.

Cheers
  • #42
  • Oct 1, 2008 10:42am Oct 1, 2008 10:42am
Quoting Pipsqueak4x
The USD is a very important part of the EUR/JPY. If the EUR was traded as a single entity (like the USD Index which is not paired with any other entity) and the JPY (like the USD Index) was traded as a single entity, then the USD would not have nearly the importance. But in Retail Forex we are trading pairs and EUP/JPY moves in exact accordance with the relationship between the USDJPY and the EURUSD. If you were referring to something else in this post (like the way your charts display the data?) I apologize. But the involvement of the USD (as a component of the underlying pairs making up the EURJPY) in the crosses in the manner that crosses are offered in the Retail FX market is of paramount understanding and it would be a disservice to newer readers / traders to mistake your comment. Just a polite correction.

Cheers
I hope you don't mind if I show you that you are incorrect. First when I starting working in this concept seveal years I also thought the same thing as you stated above about the eur/usd and usd/jpy. To start with very few actually don't know how the price of the eur/jpy is arrived. Did you realize if you took the eur/usd and multiply it times the usd/jpy price that equals the current price of eur/jpy at all times within 2 or 3 pips, which is your broker spread settings. So, at this point it looks like your thoughts are correct right ?
Wrong the same things happen when you take any pair of where the eur is the first part and the jpy is the last part and multiply them it will equal the eur/jpy price such as..... eur/aud and aud/jpy = eur/jpy also eur/chf and chf/jpy= eur/jpy and eur/gbp and gbp/jpy, and eur/cad and cad/jpy, and eur/nzd and nzd/jpy all equal eur/jpy price at the same time. Interesting to see the least. This is not just limited to finding the eur/jpy price but also the gbp/jpy price is also done like this with numerous pairs and so on through all the corresponding pairs. Your thoughts that usd price somehow effects the eur/jpy is not correct. But the very best part is that your interest in discovery what is happening here is the best hid secret of learning how to put together a trading method that works with proper software and data that does give you a true edge of knowing which currency is strongest and weakest and what degree of momentium the push of the currency will experience in multiply time frames so that you can make a scalping trade or just enter a swing trade till a change in momentium is displayed.

I have tried to be and will continue to be of help with this thread because this is to my knowledge the only way possible to make money trading the forex that works day after day and month after month. After spending many hundreds of hours of studying this concept and understanding how to establish charting that shows you excatly the strength and direction before entering the trade. Other then immediate spikes in one direction or goverment intervention holding the currency price at certain levels the percentage of correct trades you can accomplish will truly astound you.

Unless your trading a demo account or micro accounts you will be foolish not to investigate this more with all available resources you can find to show you live what the strength and direction of the trade is when you enter.
I have received many personal messages asking for me to continue here, so I am trying again to be of assistance with this great thread on this subject.
  • #43
  • Oct 1, 2008 12:26pm Oct 1, 2008 12:26pm
Let me give you an example that I just seen while trading that might help clear this usd question even more. First hopefully you will agree that the best time to trade the eur/jpy is when both parts are causing it to move in one direction, instead of only one part. Example if the eur part becomes strong and the jpy part weak then the eur/jpy will move up easily, meaning it takes more jpy to buy a eur. It will continue to move in that direction until one part changes strength to equal the other 's part in the opposite direction, then the eur/jpy will move sideways until strength is showed by one or both parts again.

Now lets look at the eur/usd and usd/jpy while this up move is going on with the eur/jpy. Since the usd is on opposite sides of the eur and the jpy in eur/usd and usd/jpy the usd strength is cancelled out when dealing with the eur/jpy, that is just a math equation. The usd strength is the same for both eur/usd and usd/jpy but in opposite directions. Many many times you can watch the eur/jpy move fast and quick in one direction while the eur/usd or usd/jpy one of which is not moving because the usd has stopped its move . Another way to look at it, the eur/usd and usd/jpy cannot move in the same direction if the move is being caused soley by the usd. The move for them will be opposite. So if you are watching the eur/usd move up and the usd/jpy move down at the same time most likely the cause is the usd such as after a major news announcement concerning the usd. When this is happening the eur/jpy is moving in the direction of which ever part eur/ or jpy has the most strength.

Please don't let this cause more confusion but challenge you to investigate more into this concept. Once you can understand this clearly you will look at trading in a different light because you are now understanding why strength of the each individual part of the forex currency is so important to know before entering a trade. Throw out all indicators unless they can show you something about each part indivually and then be careful because they all lag the actual trading of the market.
  • #44
  • Oct 1, 2008 12:53pm Oct 1, 2008 12:53pm
Quoting Forexharry
investigate this more with all available resources you can find to show you live what the strength and direction of the trade is when you enter.
Many thanks to everyone!

My understanding is improving or
my brain is swelling. One of the two!
LOL

  • #45
  • Oct 1, 2008 1:46pm Oct 1, 2008 1:46pm
Why not just chart each currency as an index?

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  • #46
  • Oct 1, 2008 5:22pm Oct 1, 2008 5:22pm
Quoting Forexharry
I hope you don't mind if I show you that you are incorrect. First when I starting working in this concept seveal years I also thought the same thing as you stated above about the eur/usd and usd/jpy. To start with very few actually don't know how the price of the eur/jpy is arrived. Did you realize if you took the eur/usd and multiply it times the usd/jpy price that equals the current price of eur/jpy at all times within 2 or 3 pips, which is your broker spread settings. So, at this point it looks like your thoughts are correct right ?
Wrong the same things happen when you take any pair of where the eur is the first part and the jpy is the last part and multiply them it will equal the eur/jpy price such as..... eur/aud and aud/jpy = eur/jpy also eur/chf and chf/jpy= eur/jpy and eur/gbp and gbp/jpy, and eur/cad and cad/jpy, and eur/nzd and nzd/jpy all equal eur/jpy price at the same time. Interesting to see the least. This is not just limited to finding the eur/jpy price but also the gbp/jpy price is also done like this with numerous pairs and so on through all the corresponding pairs. Your thoughts that usd price somehow effects the eur/jpy is not correct. But the very best part is that your interest in discovery what is happening here is the best hid secret of learning how to put together a trading method that works with proper software and data that does give you a true edge of knowing which currency is strongest and weakest and what degree of momentium the push of the currency will experience in multiply time frames so that you can make a scalping trade or just enter a swing trade till a change in momentium is displayed.

I have tried to be and will continue to be of help with this thread because this is to my knowledge the only way possible to make money trading the forex that works day after day and month after month. After spending many hundreds of hours of studying this concept and understanding how to establish charting that shows you excatly the strength and direction before entering the trade. Other then immediate spikes in one direction or goverment intervention holding the currency price at certain levels the percentage of correct trades you can accomplish will truly astound you.

Unless your trading a demo account or micro accounts you will be foolish not to investigate this more with all available resources you can find to show you live what the strength and direction of the trade is when you enter.
I have received many personal messages asking for me to continue here, so I am trying again to be of assistance with this great thread on this subject.

Thank you, Forexharry, for the time spent elucidating your experience. It expands the awareness of all involved. Your math is correct as well BUT, in response, you have to realize that, as I stated earlier and the math confirms, the RETAIL PRICE of CROSSES quoted by the brokers is nothing more than an algorithm (or, formula in easy terms) to the reaction of the price changes in the EURUSD versus the USDJPY (we've been using the EURJPY as an example). The cross currencies offered by the RETAIL brokers are NOT traded as independent contracts (they are formulas, not free floating, freely arrived at prices to futures contracts); rather, they are offered as high-spread offers to the majority who THINK they arrive at a price independently, on their own, like a MAJOR (a currency paired with the USD) does.

Your correct mathematics can easily be observed on tick charts (in MT4 it is easiest viewed on the 1 minute chart) and more (expensively) on data feeds in direct platforms from a number of banks directly (I am a Forex trader for a mid-sized hedge fund and have access to unfiltered feeds, without the lag of MT4 feeds; MT4 is a RETAIL brokerage platform and wonderful as it is, it still has the broker's interest at heart). Interpret: That is why this powerful tool is free!

So, this is not a debate on who is more correct (my grandfather told me that truth never has to defend itself) but more importantly, to the small investor trying to find an edge, the question is: What does this information mean to retail investors who is looking to these forums for direction on making decisions on how to pull the trigger in a specific direction on a specific currency? This is what we are providing in our discussion.

I visit these forums only sporadically because there are some occasional fresh ideas a bit of interesting coding that is created by hungry, green traders who haven't been spoiled by the reality that the only way to get rich in the foreign exchang market is through low leverage contracts placed on the major, regulated exchanges (and there is grift there, too, that must be learned to be avoided).

You won't get rich through a retail broker (sorry to pop some bubbles). But, for the savy, dedicated investigator (like yourself, Forexharry) and who also fully understand the psychology of trading, (which is, in my opinion the most important part of trading), you can find a gap to exploit, the awareness of correlation gap, and some decent money can be made short term with a RETAIL broker. Rare are those few who do so, though. Those intrepid few always find their way to the bigger exchanges, away from the unseen retail games. That is what this discussion is about. This is what this thread is about, understanding the mathematical formula that can be used to trade a vehicle which gathers information from underlying currency pairs and trading another.

Observe the strength / weakness on the BASE currencies (where the USD is involved ex.: EURUSD and USDJPY) and you will see the formula used (as Harryforex showed) and you can trade trade the cross in the proper direction. If you study it with enough dedication, it is easy to see that there are 9 correlations in the strength and weakness comparison (try to discover these on your own and you will have an epiphany), by which a trader can make appropriate decisions to enter a trade based on their account size, tolerance for risk, economic goals, time available and understanding of oneself. All these ingredients are also necessary to exit the trade, as well, to have consistent gains and limited losses.

May these observations come with dedication. It took me a long time to be able to see and interpret this. When the light bulb comes on, you catapult to a different trading level. Correlation trading is probably the best friend you can have in trading the Retail market when the over-leverage is so high. Reduce your leverage (if your broker allows you to) and you will see that you will be able to make more correct decisions because you can withstand, financially and psychologically, the swings that knock out most retail traders. High leverage seduces and then kills. The brokers are reading this post, too. This opportunity won't be around too long in the retail market so study hard and take advantage while you can.

My best to you all. May learning and growth define your actions as a person, and may your trading account only reflect your advancements on your personal journey.

Peace and clarity,

pipsqueak4x
  • #47
  • Oct 1, 2008 5:57pm Oct 1, 2008 5:57pm
Forexharry and Pipsqueak4x:

Thank you both for insightful commentaries; this is what I wanted this thread to generate.

I want to try and simplify your comments for my benefit as well as for the benefit of those who are reading and learning. If I err, please correct me.

Forexharry: Your position is that the use of special software and accompanying data feed allows the savvy trader to determine the strengths and weaknesses of an individual currency. Then the weak is paired with the strong as a starting point for trade consideration. I have viewed the videos you allude to in earlier posts which focus on a program that shows these values with the use of color banding. Match the bright red with the bright green and you have the ideal pair to look at closely.

Pipsqueak4X: Your emphasis is on correlation trading. This is a topic I know very little about, but your posts provide me incentive to learn more, particularly if this method of trading "is probably the best friend you can have in trading the Retail market".

Have I missed anything important?
  • #48
  • Oct 1, 2008 6:00pm Oct 1, 2008 6:00pm
euclid........

I for one would appreciate some explanation to accompany your charts. Would you be so kind as to favor us?

Quoting euclid
Why not just chart each currency as an index?

Attachment
  • #49
  • Edited 1:41am Oct 2, 2008 12:08am | Edited 1:41am
Quoting BeachBum
Forexharry and Pipsqueak4x:

Thank you both for insightful commentaries; this is what I wanted this thread to generate.
Yes! Thanks Again!

I'm busy digesting everything. Awesome and perception-changing!



The premise behind what is being discussed here on this thread really
seems solid! This is the only thing I've seen that looks into the pairs themselves.
Most stuff operates like Merlin describes here:

Quoting merlin
its almost impossible for a novice to come up with a good premise because they dont understand whats going on behind those little candles. instead they look at the candle itself, just seeing the surface, and making little patterns in their head or with a computers.
  • #50
  • Edited 3:38am Oct 2, 2008 3:09am | Edited 3:38am
Quoting Pipsqueak4x
Observe the strength / weakness on the BASE currencies (where the USD is involved ex.: EURUSD and USDJPY) and you will see the formula used (as Harryforex showed) and you can trade trade the cross in the proper direction.

I think I'm starting to see it.

Correlation trading is probably the best friend you can have



The brokers are reading this post, too. This opportunity won't be around too long in the retail market so study hard and take advantage while you can.

It seems like this is a way of trading better by understanding
and observing how things really tick.
How can the brokers remove your ability to correlation trade?
(Don't answer if you don't want to tell them how. LOL)

Below: Making baby steps toward retail correlation trading(?)
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  • #51
  • Oct 3, 2008 10:03am Oct 3, 2008 10:03am
Thanks again for the perspective-changing
posts this week everyone!

I have a lot to have sink into my head over
the weekend. LOL



http://www.youtube.com/watch?v=zIXI7NE7d_M&feature=related
Attached Image
  • #52
  • Oct 4, 2008 9:54am Oct 4, 2008 9:54am
Excellent. Thanks.
  • #53
  • Oct 4, 2008 3:05pm Oct 4, 2008 3:05pm
Thought I'd move part of this reply to our thread:

Quoting Pipsqueak4x
Trading currencies is about identifying strength and weakness between currency pairs. It is not about some newly discovered, magic, mathematic algorithm telling you something is overbought or oversold or whatever..

Bears reiterating!

Trading Chaos by Bill Williams (although I don't trade his style, I love his descriptions of the market dynamics)

Is this a book which will help us here? Any other recommended
books or web resources?
Thanks!
Brent
  • #54
  • Oct 4, 2008 5:28pm Oct 4, 2008 5:28pm
Hi all,

A couple of years ago I ran into the same conceptual maze that I'm seeing here. I concluded that trying to determine the strength of an individual currency in terms of currency pairs is like standing in a house of mirrors. Everything is just a reflection of a reflection of a refl... well, you get the idea.

For instance, is EUR/JPY simply a "cross" product of EUR/USD and USD/JPY? Or is a surge in the price of USD/JPY the result of major price moves in EUR/USD and EUR/JPY?

When GBP/CHF goes up is it because the pound is strong or because the franc is weak? Or a combination of both?

In order to cut through this Gordian knot, I look at the strength of each individual currency using a benchmark which is outside the set of currencies; namely its buying power with respect to oil. I use oil because it's a real physical commodity, its price is the same all over the world (unlike say, the price of a Big Mac which is affected by local conditions), and it is a commodity that is near the "bottom of the price chain" in all economies.

By calculating how much oil each currency can buy, I can see the percentage change in that buying power from day to day. I keep track of this performance over a rolling period of 20 days, where each currency starts off the period with 0% strength at the beginning of the period. Thus, at a glance I can see how the relative strengths of each currency are changing with respect to one another.

I didn't realize there would be such an interest in this question, but because of this thread I've placed a couple of tables and a chart showing this approach on the front page of my site, and I'll be updating them each day. You can see it there. Hope this helps!
  • #55
  • Oct 4, 2008 5:35pm Oct 4, 2008 5:35pm
Yo Beach.

I would think that the analysis is more effective if done against ALL currencies in the basket as well....

Suppose the Dollar is neutral, but every pair in the basket is bullish for some reason. It would make the Dollar look weak, when in reality it is just an illusion.

Quoting BeachBum
"Relative Strength Analysis
To determine the relative strength of a currency, it is necessary to detect whether the currency is bullish or bearish against a basket of other currencies. If we discover that the currency is predominantly bullish against a basket of other currencies, we will have gained valuable knowledge about current market sentiment towards that currency. As speculators, we can apply this knowledge towards buying or selling the currency against any other individual currency."
  • #56
  • Oct 4, 2008 5:38pm Oct 4, 2008 5:38pm
Well there is a marriage to the dollar on all prices linked to Oil (because Oil is priced in dollars.)

The way to fix this is to include the dollar's fluxuation against oil with every currency's own fluxuation. In other words, figure out the dollars change in strength/weakness against oil first, and then use that as a multiplier against the currencies own variance.

God, this sounds so complicated. I hope you can understand after a read or two...

Quoting capitalist88
In order to cut through this Gordian knot, I look at the strength of each individual currency using a benchmark which is outside the set of currencies; namely its buying power with respect to oil.
  • #57
  • Oct 4, 2008 6:08pm Oct 4, 2008 6:08pm
Quoting tdion
Well there is a marriage to the dollar on all prices linked to Oil (because Oil is priced in dollars.)

The way to fix this is to include the dollar's fluxuation against oil with every currency's own fluxuation. In other words, figure out the dollars change in strength/weakness against oil first, and then use that as a multiplier against the currencies own variance.

God, this sounds so complicated. I hope you can understand after a read or two...

I see you retired your red-faced snorting bull icon. Anyway, I think I'm doing exactly what you said, but that's in my backend spreadsheet which uses 26 columns to calculate the final results for eight currencies. Actually, it doesn't matter if the oil price fluctuates with respect to dollars or clamshells, as long as we know the value of each currency with respect to that pricing currency.

Take a look at the table that's up on my site now. The price of oil went from 53.30 pounds to 52.99 pounds yesterday for example. If you take the inverse of each number to see how much oil a pound buys, you'll see that the pound buys 0.6% more oil as of the close on Friday than it did at Thursday's close. Compare this to the change in buying power for the yen yesterday. The price of oil actually went UP from 9867 yen to 9885 yen, which translates to a 0.2% drop in the yen's buying power.

From that, I conclude that the slight increase in the GBP/JPY was mainly the result of pound strength, and only slightly the result of yen weakness.

The thread's original question was about how to determine the strengths of currencies relative to each other, and from the table, you can see that the three strongest currencies on Friday were the CHF, GBP and NZD, while the weakest was the yen.
  • #58
  • Oct 4, 2008 6:11pm Oct 4, 2008 6:11pm
Hi capitalist, I see your point. The dollar fluxuation will be uniform against all currencies, thus nullified.

I'm embarassed I didn't realize that when I wrote my last post.
  • #59
  • Oct 4, 2008 6:56pm Oct 4, 2008 6:56pm
Quoting BeachBum
euclid........

I for one would appreciate some explanation to accompany your charts. Would you be so kind as to favor us?
I don't want to sidetrack this thread too much with my particular charts, which are not available in the public domain. I'll probably start a journal and discuss it in that.

In this thread I'm merely musing why, in a thread titled "Individual Currencies & Relative Strength", there have been no charts of individual currencies apart from mine. Does nobody else plot and analyse individual currencies?
  • #60
  • Edited 7:57pm Oct 4, 2008 7:08pm | Edited 7:57pm
Quoting euclid
I don't want to sidetrack this thread too much with my particular charts, which are not available in the public domain. I'll probably start a journal and discuss it in that.

In this thread I'm merely musing why, in a thread titled "Individual Currencies & Relative Strength", there have been no charts of individual currencies apart from mine. Does nobody else plot and analyse individual currencies?

I do http://www.forexfactory.com/showpost...&postcount=466

I do not worry much about the actual chart numbers. I could normalize them the way you have done, but it is the movement that concerns me. Here is the MQ4 and anyone is welcome to build on it or change it entirely if they wish. Also included is the Template. I have made a lot of money by picking a strong currency and trading it against a weak currency.

You can also put an envelope on it and adjust the dev. I use.10 on 5 min and about .2 on 1hour. When the price jumps out of either boundary it can mean a strengthening or weakening of that currency based on whether it jumps the lower or the upper. I have just kept the envelope at 14 simple first indicator on each.
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