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Money flows: Trading the strongest / weakest major currency cross

  • #101
  • Jul 20, 2012 10:12am Jul 20, 2012 10:12am
Quoting unknown4x
If there is interest i can start an interactive thread and provide some more or less realtime insight into what i am watching at. I won't give any signals though. I do pure breakout + bounce trading.
That would be great!
  • #102
  • Jul 20, 2012 10:22am Jul 20, 2012 10:22am
Will give it a thought over the weekend on how it might be possible since it is pure PA trading so a view can change within seconds / minutes if the breakout does not happen or gets invalidated. Might simply hook my execution API into twitter or something like that since i won't be able to post right on the action when stuff gets funky.
  • #103
  • Jul 20, 2012 3:18pm Jul 20, 2012 3:18pm
Heading into the weekend. Hope everyone cut a few pips out of the pie today.

Have fun


Remember... weekend = some loving for the ladies


Inserted Video
  • #104
  • Jul 21, 2012 3:53pm Jul 21, 2012 3:53pm
#10 Compounding & Consistency

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein

... and how he was right.

https://en.wikipedia.org/wiki/Compound_interest


Compound interest is the reason for gigantic profits in all areas of trading that feature high throughput / trading frequency. It fits money flows on the lower timeframes _extremely_ well. I cannot stress this enough.


A word of caution first: Compounding will with a simple 30 pips a day strategy not make you a billionaire like sometimes fantasized and used to discredit it. Compounding only works to the point where liquidity of your exchange / broker, other factors like other market participants actively exploiting your huge exposure etc start to kick in.That said you will make a 7 digit number out of _any_ account size within a very short amount of time but then this is it and you are maxed out because of the constraints the market puts on you.


Basically the most profitable way of trading - till this limit kicks in - is a high frequency of small - small risk trades. A bunch of safe 10-20 pip trades a day with a R:R of 1:1 or better is all you need.


Actually every standard money management is or should be using compounding. A standard money management is based on 0.x 1 2 3 whatever percent risk per trade / day / week etc. This means you should increase your trading size with every trading win. People that advocate your trading size should stay the same till you got e.g. at least whatever amount of buffer actually tell one thing about their strategy: too high risk at the beginning. If i have a 1% risk per trade MM then there is no point in watering it down by staying with a constant trade size. If i do that it tells me i am not comfortable with 1% risk and should not have taken it from the beginning on / wanted to get rich quick.


Prominent example for small daily trades compounding: http://www.forexfactory.com/gleneagles


So again... compound... compound the hell out of it and stay consistent! Stay with small amounts of risk but compound your gains to the sky. There is nothing known to men that makes your strategy more profitable than if its well compoundable. At the end i would go as far as saying your overall strategy does not matter at all as long as it is consistent and compoundable. No R/R, number of pips whatever will ever have the same impact that a good compounding factor will have.
  • #105
  • Jul 21, 2012 4:05pm Jul 21, 2012 4:05pm
Saturday so either relax or put those glasses on and have some fun


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  • #106
  • Jul 22, 2012 11:56am Jul 22, 2012 11:56am
As requested and time permits i will show some of my daily views here:

http://www.forexfactory.com/showthread.php?t=374905

I hope everyone had a fantastic weekend.
  • #107
  • Jul 22, 2012 3:41pm Jul 22, 2012 3:41pm
Thanks, I will be following with interest.
  • #108
  • Jul 22, 2012 3:55pm Jul 22, 2012 3:55pm
You are welcome. Collaboration is always welcome. Also no question is so dumb as to not be asked
  • #109
  • Oct 30, 2012 8:56am Oct 30, 2012 8:56am
Very interesting thread thanks for posting. For sharing - I found this tool on oanda.
http://fxtrade.oanda.co.uk/analysis/currency-heatmap
I would like to program something similar with options for different formulas and time frames. I like how it is visually presented in Oanda I think it gives a good overview. I am interested how you identify new flows. Any 'hints' would be appreciated. I was thinking to make 2 oanda like graphics with 2 different time reference points.
Thanks,
Withnail
Attached Image (click to enlarge)
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  • #110
  • Feb 27, 2013 4:31pm Feb 27, 2013 4:31pm
Quoting withnail
Very interesting thread thanks for posting. For sharing - I found this tool on oanda.
http://fxtrade.oanda.co.uk/analysis/currency-heatmap
I would like to program something similar with options for different formulas and time frames. I like how it is visually presented in Oanda I think it gives a good overview. I am interested how you identify new flows. Any 'hints' would be appreciated. I was thinking to make 2 oanda like graphics with 2 different time reference points.
Thanks,
Withnail


In a similar way but with real charts instead. I have a custom charting program for this which enables me to squeeze the major currencies with about 2x60 custom (synthetic + real) mini charts on one screen each.


Such heatmaps are kinda kind of a very basic version of that. Thing is they don't really show you which currency is breaking out, which one is on the opposite side etc. You don't want a trade where both are at top / bottom already. That's the picture when the trade is pretty much over. Useless like most of those MT indicators showing currency strength. When it shows a currency at max strength and one at max weakness well what had to happen for it to get there? Money flows... -> game is already over. Extremely risky to enter there. Trains hasn't left the station... it might already be at the finish line and you open yourself up to huge risk.
  • #111
  • Mar 13, 2013 11:56am Mar 13, 2013 11:56am
Quoting unknown4x

. . . To tell which pair currency the money is shifting into the most watch its major + all of its minors. . .
Thanks for sharing your concepts, I have learned a lot since I know your thread, please accept mi vouch
may request an extension to this information. thanks
Humble & Kalcker CLO2 = Covid killer
  • #112
  • Mar 14, 2013 5:09pm Mar 14, 2013 5:09pm
Quoting jusiur
Thanks for sharing your concepts, I have learned a lot since I know your thread, please accept mi vouch
may request an extension to this information. thanks
Nice to hear. What do you want to know.
  • #113
  • Mar 14, 2013 10:40pm Mar 14, 2013 10:40pm
Thanks for your reply, If I would kindly like to ask a favor of a recent example of how to systematically you choose a pair to trade (step by step). I understand that you can not show your charts and I agree, the concept itīs enough for me, just I need the date range of the example to analyze.
thanks for you time.
J
Humble & Kalcker CLO2 = Covid killer
  • #114
  • Mar 14, 2013 10:47pm Mar 14, 2013 10:47pm
Quoting jusiur
Thanks for your reply, If I would kindly like to ask a favor of a recent example of how to systematically you choose a pair to trade (step by step). I understand that you can not show your charts and I agree, the concept itīs enough for me, just I need the date range of the example to analyze.
thanks for you time.
J
Here's a method

http://i.imgur.com/2ylnHJ3.png
Politics is the womb in which war develops.
  • #115
  • Mar 15, 2013 5:35am Mar 15, 2013 5:35am
Quoting FiatFap
Here's a method

http://i.imgur.com/2ylnHJ3.png
I would be careful with that. It is the same like the heatmap. Actually the heatmap is a bit better in my opinion. Both have the same flaw though: When they show you currency X as strongest and Y as weakest you could be fooled to long X/Y but like i said before: in that moment you might (and probably will) have a problem: the move might already be over. To get X to strongest and Y to weakest large sums of money have already been exchanged. The very train you wanted to ride has already left the station. In case that it was a pullback you might actually be even more in trouble. Chance is you buy high and sell low. Now you could do that over multiple timeframes along with charts S/R or wait for pullback and go at it again. That could certainly work. But it is still far from ideal in my opinion.
  • #116
  • Mar 15, 2013 5:57am Mar 15, 2013 5:57am
Quoting jusiur
Thanks for your reply, If I would kindly like to ask a favor of a recent example of how to systematically you choose a pair to trade (step by step). I understand that you can not show your charts and I agree, the concept itīs enough for me, just I need the date range of the example to analyze.
thanks for you time.
J
Hard to give examples without you looking at the same kind of charting but maybe you will figure those out:

Today approx. times for M2-M5-M15 timeframe breakouts:

7am GMT: USD overall short, GBP overall long, USDJPY short -> GBPUSD long
9am GMT: USD overall short, JPY starting to go overall short, GBP pulling back, CHF going strongest, USDJPY neutral / still short side -> USDCHF short (CHFUSD long) with eyes watching usdjpy / chfjpy (also keeping an eye on eurchf)
9:30am GMT: JPY overall short, usdjpy going long, CHF still overall long, -> CHFJPY long (depending on how you had interpreted EURCHF you would have longed EURJPY instead / both)


It is very hard to do without proper / custom charting on the lower timeframes. Inverted charts / indices / custom indices will help, also if you can put a lot of charts below each other.
  • #117
  • Mar 15, 2013 5:59am Mar 15, 2013 5:59am
Hi unknown4x:

I discover your thread today and im reading it with much interest.
Congratulations to you for this great great work.
I can see you are very prof. and I anime you to will continue post for readers learning.
I trade single pairs and for a time im trading basket charts. I think this way could be very very interesting at combination with basket currencies.

All the best mate.
Regards.
That which you give to others, life will return it in spades
  • #118
  • Mar 15, 2013 7:01am Mar 15, 2013 7:01am
Quoting unknown4x
Thing is they don't really show you which currency is breaking out, which one is on the opposite side etc. You don't want a trade where both are at top / bottom already. That's the picture when the trade is pretty much over. When it shows a currency at max strength and one at max weakness well what had to happen for it to get there? Money flows... -> game is already over.
And thats the key right there...as most if not all generic tools show the aftermath of a move. In a way like defining a 'trend' --> it can only be done once it has happened. So the whole 'trade the trend' is nonsense as it is essentially trading the past and not the present moment. Just like most CSM's will show the effect after it has happened, which gets you in once the move is well on its way to the point of maturity.

Question is, what exactly is required to be able to 'detect' money flows from infancy? Does it just boil down to a ton of synthetic charts in lower tf's or am i missing the obvious?
  • #119
  • Mar 15, 2013 8:12am Mar 15, 2013 8:12am
Quoting Pipalicious
And thats the key right there...as most if not all generic tools show the aftermath of a move. In a way like defining a 'trend' --> it can only be done once it has happened. So the whole 'trade the trend' is nonsense as it is essentially trading the past and not the present moment. Just like most CSM's will show the effect after it has happened, which gets you in once the move is well on its way to the point of maturity.

Question is, what exactly is required to be able to 'detect' money flows from infancy? Does it just boil down to a ton of synthetic...
Exactly. This will not make money. Classic buy high / sell low error. You might get the lucky follow through because higher tfs aligned from time to time but in general the heatmap approach with simple "trade the extremes" is not advisable.

Well first of all you need to find yourself a method for a single currency cross. How do you determine that it will bounce / breakout whatever. So decide if you want to be a top/bottom picker or a middle breakout trader. The tools for that kind of stuff is in the first post. You might want to choose a method that does not involve too much work (remember you don't try to be 100% correct on a single cross...). Speed / easy comprehension should be valued first as you need to apply that to many charts at the same time / short time depending on your timeframe traded.

If you only trade 1-2 major crosses then you can get away without synthetic symbols. I use them heavily but only for the first look and because i trade every major usd / jpy cross. Sometimes even the minors but that adds a lot of additional complexity. With just 1-2 majors find a decent charting platform that can easily cram a lot of charts (all affiliated minors / majors) on one screen and do previous logic + overall logic all of those.

As long as you restrict yourself to 1-2 majors you will be able to trade the lower timeframes too. If you want to trade more then it's kinda impossible without custom charting / synthetic indices since you cannot make your decisions fast enough without them on so many charts what would be required without the synthetics. You could go into higher timeframes to have more time but you will also need to have a brain that can hold enough information to pull it all together at the end. Not everyone will physically be able to handle the amount of information.

So unless you got a good developer on your hand i would advise you to start very basic with one major, decide on your strength/weakness analyses method and setup your charting platform for that one major and take a look at some standard timeframe like M5 or so to get a feeling for the whole thing. Depending on how good your visual / logical comprehension is this will take a long time.

Which timeframe you trade is pretty much irrelevant except for spread / how exact you do it. It's the same over all timeframes from a tick chart to the daily.
  • #120
  • Mar 15, 2013 12:12pm Mar 15, 2013 12:12pm
I've set up a profile with a broker that provides futures prices, to compare the difference of currency correlation with a site Tyoon posted here. The currency index page is here but it's a java applet that takes forever to load, you can't change the candle data and loading each symbol takes another aeon.

Below is a comparison with the FXNews app; i need to add a button that sets the candle data from the start of the day, but you can do it manually by sliding the bar. Another feature i'd like to add is be an alert when a symbol hyper-extends and will ordinarily snap back or revert to its median. The true trend is the slower trend so they hide their footprints in the snow; beware of momentum on extended moves as they are capture zones to trap retail volume.

Momentum is calculated by:

http://i.imgur.com/5fVp4aL.png

http://i.imgur.com/aLQ6xdc.png
Politics is the womb in which war develops.
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