do currencies have their own characteristics? | Forex Factory

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do currencies have their own characteristics?

  • #1
  • First Post: Mar 29, 2007 11:57am Mar 29, 2007 11:57am
Sisters and Brothers, i am struggling with this notion. Clearly you can argue that different securities whatever they may be behave in different ways, but read any kind of literature and it dictates that a good trading system should perform well across different markets. Somehow i cannot reconcile this two ideas and i hope to get some thoughts on this.
Welcome to the Layer Cake son!
  • #2
  • Mar 29, 2007 12:04pm Mar 29, 2007 12:04pm
Quoting wahomeron
Sisters and Brothers, i am struggling with this notion. Clearly you can argue that different securities whatever they may be behave in different ways, but read any kind of literature and it dictates that a good trading system should perform well across different markets. Somehow i cannot reconcile this two ideas and i hope to get some thoughts on this.
I suggest that you take a look at long term charts (at least 300 days) of all the currencies against the USD. You will see that, over the longer term, there is very little difference. So.... unless you have a particular reason to trade a specific currency, you are best advised to play in the deepest pool (that is, Euro, GBP or Yen)

.
  • #3
  • Mar 29, 2007 3:56pm Mar 29, 2007 3:56pm
Quoting fibbinarchi
Hi Jacko
Been reading up on your posts, some interesting reading in there, but you seem vague to me in the details and what you really see before you pull the trigger.
You say as many talking before you have said in the past, 'trade with the trend, aim at round numbers, 50% retracement', blah, blah.
This is very generalised, we all know to go long in an uptrend, so how do you establish an uptrend (dont say by looking at one corner of a chart from the left and then to the right, that's insulting).
Lets start from the beginning if you please, you want to open a long trade on say the GBPUSD for example, what firstly do you do? There must be a set of tasks you do, can you go through them from the start to the closure of the trade?

Below was posted on a different site where you also posted on, I think the question is along the same lines as what I'm asking:

~~~~Originally Posted by jacko http://forexfactory.com/images/buttons/viewpost.gif
Itme,

Why not just trade with the trend??

It is sooo much easier and soooo much more profitable.


Thanks, Jacko. I think we went over this territory before. To trade with the trend is the same thing as saying "to win" or "to profit". Everyone attempts to trade with the trend who is trying to win or succeed at investing. The devil is in the details. How does one determine exactly when to enter the market in order to trade "with the trend"?
Yes, I do understand that to attempt to predict the reversal point exactly is more difficult than to attempt to recognise an existing trend, and then to carefully choose an appropriate point of entry. The best entry point is at the point when a retracement has ended, and the forward motion is about to resume. I accept that, and have mentioned it several times as a good strategy. We need a method to do this, however. And then we need a method to know how long to stay in the trend until it is over, not too much before, and not too much after. Do you know a specific method? I've heard that you do. Is it a specifically formulated trading system? Does it have a name? Where or how can one examine it? What is its performance? What is the average Win%, Reward : Risk Ratio, frequency of trades, and distribution of losses? Thanks for showing us a way ahead, Jacko. I've heard that you are a very successful trader. What is the ticket to success?~~~~

Here's some more from myself:

Do you look at the weekly or daily chart to see the trend? How do you spot when the trend is over? What signals do you look for to enter in an already established trend? What time frame intraday do you trade from when using the 50% retracement idea? What time frame do you look at to enter and exit a trade? Can you post us some charts up so we can visually see what you are seeing along side your comments? Even in an uptrend you can have several weeks of a downtrend, so the generalised idea to buy in an uptrend sort of fails with that alone, how do you get around downward corrections in an uptrend and the same in a downtrend?
It's questions like this that need to be answered as fully as possible to fill in the gaps in your theory.

TIA

hey there buddy, you seem to be posting in the wrong thread. jacko does not run this thread, he posted a reply. Unless you are posting towards this thread, reserve you opinions and correspondence with jacko to another place. Thank you.
Welcome to the Layer Cake son!
  • #4
  • Jun 3, 2007 12:30am Jun 3, 2007 12:30am
[
Quote
quote=wahomeron;257716]Sisters and Brothers, i am struggling with this notion. Clearly you can argue that different securities whatever they may be behave in different ways, but read any kind of literature and it dictates that a good trading system should perform well across different markets. Somehow i cannot reconcile this two ideas and i hope to get some thoughts on this.
[/quote]

Brian Dolan wrote a good article for Currency Trader magazine titled Currency Personalities. It is in the Sept.'05 issue. These personalities have more impact on shorter time frames. If you were scalping you'd need a different approach to cable then Eur/Usd, even though as Jacko stated, they behave more closely on a longer time frame. If you're still researching this I can try to find the article and send it to you.
  • #5
  • Jun 3, 2007 2:52pm Jun 3, 2007 2:52pm
Quoting billflet
[
Brian Dolan wrote a good article for Currency Trader magazine titled Currency Personalities. It is in the Sept.'05 issue. These personalities have more impact on shorter time frames. If you were scalping you'd need a different approach to cable then Eur/Usd, even though as Jacko stated, they behave more closely on a longer time frame. If you're still researching this I can try to find the article and send it to you.[/quote]


thanks billflet I would really appreciate if you can find me that article.
Wahomeron.
Welcome to the Layer Cake son!
  • #6
  • Jun 3, 2007 3:02pm Jun 3, 2007 3:02pm
Wahomeron and others,



Here is the article mentioned by billfllet and one more for good measure.


http://www.gaincapital.com/files/Cur...der0905-BD.pdf


http://www.forex.com/currency_pairs.html
Unus pro omnibus, omnes pro uno
  • #7
  • Jun 3, 2007 4:08pm Jun 3, 2007 4:08pm
Quoting wahomeron
Sisters and Brothers, i am struggling with this notion. Clearly you can argue that different securities whatever they may be behave in different ways, but read any kind of literature and it dictates that a good trading system should perform well across different markets. Somehow i cannot reconcile this two ideas and i hope to get some thoughts on this.
Different ccy pairs trade very differently. You can get a sense of this just by looking at trend lengths versus variance within the trend, or the distribution of trend lengths themselves. $CAD is pretty classical & well behaved (look at the nice fib bounces over the last 6 years on the weeklies, for example); use the same analysis on $JPY & you'll lose lot's of money...Maybe it comes down to the different trade relations among countries, or even the different types of traders at the main deskes during a pairs main period of operation, who knows. But there is no "one size fits all" approach, otherwise we'd all be rich...
  • #8
  • Jun 3, 2007 4:13pm Jun 3, 2007 4:13pm
pairs with wider interest rate spreads typically trade in larger ranges. Therefore, when contemplating range trading strategies in forex, traders must be keenly aware of rate differentials and adjust for volatility accordingly. Failure to take interest rate differential into account could turn potentially profitable range ideas into losing propositions.

revoke
  • #9
  • Jun 3, 2007 4:37pm Jun 3, 2007 4:37pm
take eurgbp as an example last year 500 pip range aprox i still favor gbp strenght against euro the Interest Rate Spread (in basis points) is current 175 i recommend u to calculate different ranges for different pairs per year this will probably give u a litle idea of the chararistica for them

revoke
  • #10
  • Jun 3, 2007 5:14pm Jun 3, 2007 5:14pm
Quoting moneda
Wahomeron and others,



Quote
Here is the article mentioned by billfllet and one more for good measure.


http://www.gaincapital.com/files/Cur...der0905-BD.pdf


http://www.forex.com/currency_pairs.html
Thanks moneda, for bringing those articles to the surface.
  • #11
  • Jun 4, 2007 2:19am Jun 4, 2007 2:19am
Just the thing i was looking for , thank you billflet and moneda and everyone else. If you run into any more info please post it.
happy trading all.
Welcome to the Layer Cake son!
  • #12
  • Jun 4, 2007 2:23am Jun 4, 2007 2:23am
Without a doubt the pairs all have different personalities. You bring up a point that few look at in their trading. Not only do the pairs act different, they act different during the various trading sessions. The usd/cad is a weird pair that works by itself most of the time. It's true that cable and the euro tend to move together but not all the time and not the same pip gain. This is why it is critical to paper trade and create a trade journal for many pairs over many months. I started to chart the exotics many months before I was willing to trade them so that I would have a record of how they moved when I was finally ready. It's a business. Few businesses of any kind make money their first 3 years and you had better know all you can. Always good to ask questions.
  • #13
  • Jun 4, 2007 10:26am Jun 4, 2007 10:26am
ur right that eurusd and gbpusd use to trade in same direction but when they dont do its time to trade eurgbp ;-) i kinda like to play gbp strenght trough eurgbp


revoke
  • #14
  • Jun 4, 2007 10:31am Jun 4, 2007 10:31am
Quite frankly, in my opinion a chart is a chart, and I trade them with the same system and using the same tools.

They do have their own characteristics as far as volatility and acceleration (GBP crosses at London market open, for example), but the overall T.A. principles (trends, support/resistance, breakouts, etc) apply to them all in a similar fashion.
  • #15
  • Jun 5, 2007 8:10pm Jun 5, 2007 8:10pm
Regarding the statistical modelling of currencies movements. To those learned in the art:

- I have a distant memory of reading that currencies have fluid dynamiclike properties and are nonlinear and dynamic, is that correct?

- Which analysis tool in your opinion, is the best "readyreckoner" for modelling the markets? (Ive read in econometric papers, that Gaussian distribution is inaccurate, as the prob of extreme daily moves is 4times greater than gaussian distribution would suggest(on the ES). Ive read that random motion analysis of the market doesnt work, as the market isnt purely random)

- So, what type of statistics are used to model markets? How do you define the character/ the personality of each currency statistically?
- What (eg. audio, tidal waves, fluiddynamics, topology etc ) are the markets closest in nature, behaviour and character to?
another INTP
  • #16
  • Jun 5, 2007 8:30pm Jun 5, 2007 8:30pm
polinomia regress is best.
then forier analisis.

not fluid dinamix - because conserve what quantity? mass? momentum? energy?

in markets, these quantity not presents.
only pricing of object desire.
  • #17
  • Jun 6, 2007 7:36am Jun 6, 2007 7:36am
Quoting anthonybaker
Regarding the statistical modelling of currencies movements. To those learned in the art:

- I have a distant memory of reading that currencies have fluid dynamiclike properties and are nonlinear and dynamic, is that correct?

- Which analysis tool in your opinion, is the best "readyreckoner" for modelling the markets? (Ive read in econometric papers, that Gaussian distribution is inaccurate, as the prob of extreme daily moves is 4times greater than gaussian distribution would suggest(on the ES). Ive read that random motion analysis of the market doesnt work, as the market isnt purely random)

- So, what type of statistics are used to model markets? How do you define the character/ the personality of each currency statistically?
- What (eg. audio, tidal waves, fluiddynamics, topology etc ) are the markets closest in nature, behaviour and character to?
Re the statistical background, get some books out on the markets by Mandelbrot and read "Fooled By Randomness" and "The Black Swan" by Nassim Taleb ( http://www.fooledbyrandomness.com ), or at least the articles on his home page. (Watch out, it's rather eclectic.). But I doubt there's a single simple distribution that covers a ccy behaviour over long periods, or even very accurately on different timeframes (i.e. different subsampling rates). If you want the most ccy dependence and least time dependence, work with point & figure type solutions on a log scale. You may find that of interest as well...


I haven't tried to classify ccy's directly, so I can't help you there. But don't just look at price; price velocity is also important and often useful, though obviously more prone to randomness than price. (The integration order of a time series like price is important to at least understand - i.e. how many times can you difference it before having something indistinguishable from random). FWIW, it seems to be a signficant marker when price velocity stops being random and shows coherent behaviour...

But I have been using a 1st order Kalman filter & variations of it almost exclusively for a little while, and would suggest it as a useful tool if you are getting into classification. It has well-known statistical properties, and produces interesting charateristics of whatever you study with it.
  • #18
  • Jun 6, 2007 7:57am Jun 6, 2007 7:57am
Well said! Agree with u

Quoting pip pirate 2
Without a doubt the pairs all have different personalities. You bring up a point that few look at in their trading. Not only do the pairs act different, they act different during the various trading sessions. The usd/cad is a weird pair that works by itself most of the time. It's true that cable and the euro tend to move together but not all the time and not the same pip gain. This is why it is critical to paper trade and create a trade journal for many pairs over many months. I started to chart the exotics many months before I was willing to trade them so that I would have a record of how they moved when I was finally ready. It's a business. Few businesses of any kind make money their first 3 years and you had better know all you can. Always good to ask questions.
Start trading everyday with a simple mind, and everything seems very clear!
  • #19
  • Jun 6, 2007 10:13am Jun 6, 2007 10:13am
I have been using eurchf as a leading indicator to trade usdchf or eurusd as efctively long eurusd and long usdchf in same time is long eurchf its not a perfect strategy but it works for me combinded with intraday setups on example eurusd


revoke
  • #20
  • Jun 6, 2007 5:19pm Jun 6, 2007 5:19pm
Quoting jane
polinomia regress is best.
then forier analisis.

not fluid dinamix - because conserve what quantity? mass? momentum? energy?

in markets, these quantity not presents.
only pricing of object desire.
currencies certainly do have momentum.
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