hangover
That is an article that everyone should read and totally understand. I dont know how his HeatMap is calculated so cant comment on that, but the inforamtion is good and the best I've seen.
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In order to construct a good 'heat map' you must consider the currency's strength weighed on a balanced basket of currencies. It appears he has not balanced his analysis.
Most heat indicator also are constructed in a strength/Weakness analysis, it should be like measuring Heat itself, that is Strength (heat) or lack there of. When measuring heat theres no such thing as cold. Cold (Weakness) must be viewed as just the lack of heat (Stength). You must measure just one side of the equation.
The use of a mommentum indicator to masure strength is not useful either, one must contruct an index of each currency as in the dollar index, but the dollar index is traded weighed and of limited use. All currencies must be weighed against an even basket of other currencies, and an index should be derived so as to calculate true relative strength of that currency.
Also of consideration is the pip value, spread, swap rate, and margin requirments of any anticipated trades between the different currencies to assess the returns.
Theres other things that need considering but would take to long to explain here.
All in all. every one should read that link and spend time to totally under stand it, its one key to successful trading.
Keit
That is an article that everyone should read and totally understand. I dont know how his HeatMap is calculated so cant comment on that, but the inforamtion is good and the best I've seen.
....
In order to construct a good 'heat map' you must consider the currency's strength weighed on a balanced basket of currencies. It appears he has not balanced his analysis.
Most heat indicator also are constructed in a strength/Weakness analysis, it should be like measuring Heat itself, that is Strength (heat) or lack there of. When measuring heat theres no such thing as cold. Cold (Weakness) must be viewed as just the lack of heat (Stength). You must measure just one side of the equation.
The use of a mommentum indicator to masure strength is not useful either, one must contruct an index of each currency as in the dollar index, but the dollar index is traded weighed and of limited use. All currencies must be weighed against an even basket of other currencies, and an index should be derived so as to calculate true relative strength of that currency.
Also of consideration is the pip value, spread, swap rate, and margin requirments of any anticipated trades between the different currencies to assess the returns.
Theres other things that need considering but would take to long to explain here.
All in all. every one should read that link and spend time to totally under stand it, its one key to successful trading.
Keit
DislikedBenji,
I thought the following article might interest you. Pairing the strongest against the weakest currency takes this idea one step further.
Happy reading,
DavidIgnored
Trader Keit ... Methods Of A Dirt Road Mad Man....
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