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Currency Ranking And Forex Pair Trading Direction

  • #1
  • First Post: Jun 10, 2016 1:37am Jun 10, 2016 1:37am
Currency Ranking and Forex Pair Trading Direction

The ranking of the currencies plays a critical role in their performance as pairs. Whenever a higher ranking currency is the top pair, the trading direction tends to be upward or long.

Conversely whenever a higher ranking currency is the base pair, the trading direction tends to be downward or short. The farther apart the ranks, the sharper the directionality.

The currently observed ranking of some selected currencies is as follows: CAD>EUR>NZD>AUD>GBP>USD>JPY.

Thus by default, (see above chart)
EUR/CAD will be a short trade
EUR/NZD will be a long trade
EUR/AUD will be a long trade
NZD/CAD will be a short trade
EUR/GBP will be a long trade
EUR/USD will be a long trade
AUD/CAD will be a short trade
GBP/NZD will be short trade
GBP/AUD will be a short trade
GBP/CAD will be a short trade
GBP/USD will be a long trade
GBP/JPY will be a long trade and
USD/JPY will be a long trade

CAD/JPY and EUR/USD should have the sharpest directionality because they are farthest apart in rank.

Even where a new position starts out in an opposite direction, tracking and retrading the currency pair until it records positive P/L is all that needs to be done. Once a stable profit line is established the position may show positive P/L for a long time. (See much Forex updates).

To avoid even starting out a position with high negative P/L, I use Chandler ' Momentum Oscillator (CMO) and Full Stochastics indicators to synchronize the predicted market direction and the indicated market directions.

To qualify for trade, a Forex pair must show progressive increase or decrease in price across the H4, D1, W1 and M1 periods. Pairs with prices progressively increasing are bought, while those with progressively decreasing prices are sold.

Use Elliot's Wave (EW) and Volatility Switch (VS) indicators to ensure that price and volatility are trending in the same direction.
Flip-flopping across the zero line disqualifies any pair that exhibits it.

Again, the market has a mind of its own and some times breaks all the rules in the books. In such situations, I recallibrate my indicators with the forex pairs that are performing as predicted.
Mecrandie
  • #2
  • Oct 22, 2016 5:43am Oct 22, 2016 5:43am
Top Five Currency Ranking Update (In decreasing Order)

USD
JPY
GBP
EUR
AUD
CAD

Going by this ranking,
AUD/USD should be trading short
AUD/CAD should be trading long
EUR/AUD should be trading long
GBP/AUD should be trading long
AUD/JPY should be trading short
CAD/JPY should be trading short
EUR/CAD should be trading long
EUR/GBP should be trading short
EUR/JPY should be trading short
EUR/USD should be trading short
GBP/AUD should be trading long
GBP/CAD should be trading long
GBP/JPY should be trading short
GBP/USD should be trading short
USD/CAD should be trading long
USD/JPY should be trading long

Click on the link below to compare with OANDA long/short ratio

https://www.oanda.com/forex-trading/...osition-ratios

How do you compare in your own positioning?
Mecrandie
  • #3
  • Oct 22, 2016 11:38am Oct 22, 2016 11:38am
Quoting mecrandie
Currency Ranking and Forex Pair Trading Direction The ranking of the currencies plays a critical role in their performance as pairs. Whenever a higher ranking currency is the top pair, the trading direction tends to be upward or long. Conversely whenever a higher ranking currency is the base pair, the trading direction tends to be downward or short. The farther apart the ranks, the sharper the directionality. The currently observed ranking of some selected currencies is as follows: CAD>EUR>NZD>AUD>GBP>USD>JPY. Thus by default, (see above chart)...
thankyou!
how do you recognize the rank of currencies?
where do i find VS ,CMO indicators?
what is P/L?
  • #4
  • Edited Oct 24, 2016 4:40am Oct 23, 2016 12:40pm | Edited Oct 24, 2016 4:40am
Quoting arya.aryaee
{quote} thankyou! how do you recognize the rank of currencies? where do i find VS ,CMO indicators? what is P/L?
EUR-BASED CURRENCY RANKING
Each currency is ranked by its relative strength against the EUR currency in the last 24 hours using the D1 period. The strength is measured by the slope of the linear graph of each currency paired withe the EUR. A dominant influence against the EUR is indicated as a + sign, while non-dominant influence is indicated as - sign. The number of plus or minus sings indicate the relative strength of each currency.

Current Currency Rankingcurrency. 10/24/16
NZD +8
AUD +7
USD + 6
JPY + 5
GBP +4
EUR
CAD - 5

HOW TO USE THE RANKING
Each currency is expected to to dominate the ones below it.
The farther apart the currencies are in rank, the more dominant the effect.
Thus NZD/USD should be showing very strong NZD dominance.
The trading direction should be long because NZD is the base pair.
But the dominance in GBP/NZD will be in the short direction because NZD is the top pair.

Compare the results with OANDA Fx Lab Results at
https://www.oanda.com/forex-trading/...osition-ratios
Note that the OANDNAFX LAB is using w1 period instead of h1 period
Feedbacks are always welcome.
Mecrandie
  • #5
  • Edited 6:10pm Oct 24, 2016 12:59pm | Edited 6:10pm
Currency ranking status for 10/24/16
USD +8
EUR
JPY - 7
GBP - 6
AUD - 5
NZD - 4
CAD - 10
Mecrandie
  • #6
  • Oct 24, 2016 1:05pm Oct 24, 2016 1:05pm
what do you want to achieve with this thread?
  • #7
  • Oct 26, 2016 7:34am Oct 26, 2016 7:34am
Quoting ruma29
what do you want to achieve with this thread?
Having a sense of these rankings tells you at glance which pairs to target for further analysis. It also tells you when to close out a trade even before the indicators say so. If EUR/AUD short trade changes from down to up trend in D1, that means AUD has lost its dominant influence over EUR and therefore ranks below EUR. If at the same time EUR/JPY short trade is still trending downward, thereby ranking above EUR, the AUD/JPY pair can only be expected to trend downward, because JPY ranks higher than EUR and AUD.

It is just like putting EUR on one side of a scale and sequentially putting each of the other currencies on the opposite side as short trades. Stronger currencies will tilt the EUR-based pair chart downward (that is, it resists its growth). But with weaker currencies, the scale will tilt upward showing some growth in the form of an up trending chart.

If I am trading long on USD/CAD and the chart is trending down, I will check to see how EUR/CAD and EUR/USD are doing. If EUR/NZD is trending strongly down, I will continue long USD/CAD because USD is still stronger than EUR and EUR is stronger than CAD.
Mecrandie
  • #8
  • Edited 5:15pm Oct 26, 2016 4:50pm | Edited 5:15pm
Quoting ruma29
what do you want to achieve with this thread?
USING CURRENCY RANKING TO CHOOSE TRADES

This is based on the fact that currencies that are farther apart in rank make better trading pairs with clear cut directions.

The higher ranking pair always dominates the lower ranking pairs and pushed them against the trading direction.

The base pair pushed up and complimentary pair pushes up.

Using EUR as the common denominator is based on its being the only currency always trading as the base pair or baseline pair.

Trading SHORT is based on the need to see how much each currency can suppress the growth of EUR price, as indicated by how low each currency can push the chart when paired with EUR.

Using a line chart makes it easy to see the chart slope of each pair.

Using SAM-7 helps with establishing market direction.

INITIAL SET OF PAIRS TO SHORT TRADE
EUR/AUD
EUR/CAD
EUR/GBP
EUR/JPY
EUR/NZD
EUR/USD.

Place demo trades on a practice account on OANDA, FXCM or THINKORSWIM or cTRADER. Use the chart slope or PnL numbers to rank the currencies.

A positive PnL on a short EUR trade means the complimentary currency ranks higher than EUR

Conversely a negative PnL means the complimentary currency ranks below EUR.

The degree of positivity or negativity determines the ranking among currencies.

CHOOSING NON-EUR PAIRS TO TRADE
Once a ranking is establoshed, it is easy to figure out that AUD+8/USD -2 should be trading long because AUD ranks much higher than USD at the moment.

I use D1 window for monitoring because I do Longterm trading without stop loss.

Day traders can use the h1 or m5 windows with SL and TP as it SUITES their overall strategies.

This trading system is original to me and I am open to crtiques.
Mecrandie
  • #9
  • Oct 27, 2016 10:27am Oct 27, 2016 10:27am
show me how you do it..with charts...if you want
  • #10
  • Oct 27, 2016 12:03pm Oct 27, 2016 12:03pm
Quoting ruma29
show me how you do it..with charts...if you want
also please show to us

regard
what we want:1+1+1+1+1+1+1+1=8 what market delivers:1+2+8+7-4+0-5+8-4-5=8
  • #11
  • Edited 4:43am Nov 1, 2016 3:11am | Edited 4:43am
HOW I RANK CURRENCIES
Click on the link below to see a sample Forex watch list
Quoting adelzadeh
{quote} also please show to us regard
http://www.netdania.com/quotes/forex-majors

Take a look at the percentage changes on 11/01/16 at 01:48 AM for
EUR/USD +0.19 %
EUR/GBP + 0.02%
EUR/JPY + 0.47 %
EUR/CAD - 0.02%
EUR/AUD - 0.55%
EUR/NZD - 0.07%
A positive change places a currency above EUR in rank order, while a negative change places the currency below EUR in rank order. The ranking changes with percentage changes in each EUR-based currency pair price.
JPY with + 0.47% change ranks highest, followed by USD with + 0.19% change in price, and GBP with + 0.02 % price change
CAD with -0.02 % change ranks right below EUR, followed by NZD with - 0.07 % change in price.
AUD ranks lowest at this moment with -0.55% change in price.

CURRENT RANK ORDER (Using the 30m window and SMV-7) at http://www.netdania.com/currencies/eur-usd-chart
JPY
USD
GBP
EUR
CAD
NZD
AUD

Based on this rank order, and the fact the stronger currencies push the base currencies down or top currencies up.
AUD/JPY should be trading short
NZD/JPY should be trading short,
CAD/JPY should be trading short
EUR/JPY should be trading short
USD/JPY should be trading short
AUD/USD should be trading short
NZDUSD should be trading short,
USD/CAD should be trading long because of stronger base pair
EUR/USD should be trading short
GBP/USD should be trading short
GBP/CAD should be trading long
GBP/NZD should be trading long
GBP/AUD should be trading long

Avoid using currencies below EUR as base pairs, because they are too weak to be effective base pairs. Use them only for top pairs.

Use this matrix to quickly double check your current trades and let me know if they agree or disagree.
Mecrandie
  • #12
  • Nov 2, 2016 4:02am Nov 2, 2016 4:02am
HOW I RANK CURRENCIES
Click on the link below to see a sample Forex watch list
Quoting adelzadeh

{quote} also please show to us regard
http://www.netdania.com/quotes/forex-majors

Take a look at the percentage changes on 11/02/16 at 01:00 AM for
EUR/USD +0.1099 %
EUR/GBP + 0.05%
EUR/JPY -0.30 %
EUR/CAD + 0.06%
EUR/AUD + 0.31%
EUR/NZD - 0.58%

A positive change places a currency below EUR in rank order because it allows EUR price to appreciate, while a negative change places the currency above EUR in rank order, because it causes EUR price to depreciate. The ranking changes with percentage changes in each EUR-based currency pair price.

NZD with - 0.58 % change ranks highest, followed by JPY with -0.30 % change in price, and EUR with + 0.00 % price change
GBP with + 0.05 % change ranks right below EUR, followed by CAD with + 0.06 % change in price, and USD with + 0.09 % change in price.
AUD ranks lowest at this moment with 0.31 % change in price.

CURRENT RANK ORDER (Using the D, W1, M1 windows and SMV-7) at http://www.netdania.com/currencies/eur-usd-chart
NZD
JPY
EUR
GBP
CAD
USD
AUD

Based on this rank order, and the fact the stronger currencies push the base currencies down or top currencies up.
AUD/JPY should be trading short
NZD/JPY should be trading long,
CAD/JPY should be trading short
EUR/JPY should be trading short
USD/JPY should be trading short
AUD/USD should be trading short
NZDUSD should be trading long,
USD/CAD should be trading short
EUR/USD should be trading long
GBP/USD should be trading long
GBP/CAD should be trading long
GBP/NZD should be trading short
GBP/AUD should be trading long

Look for chart alignment in D1, W1, and M1, so that there will be no need for using 'stop loss'.

Avoid using currencies below EUR as base pairs, because they are too weak to be effective base pairs. Use them only for top pairs.

Use this matrix to quickly double check your current trades and let me know if they agree or disagree.
Mecrandie
  • #13
  • Edited 4:45am Nov 5, 2016 4:26am | Edited 4:45am
Quoting mecrandie
... Avoid using currencies below EUR as base pairs, because they are too weak to be effective base pairs. Use them only for top pairs. Use this matrix to quickly double check your current trades and let me know if they agree or disagree.
Thank you.

can you give example please:
...Avoid using currencies below EUR as base pairs, because they are too weak to be effective base pairs. Use them only for top pairs.....
Where is EUR/CHF?
When two pairs have same change how you rank it? for D1 you look changes for previous day?
  • #14
  • Edited 1:14pm Nov 7, 2016 12:54pm | Edited 1:14pm
Quoting ruma29
{quote} Thank you. can you give example please: ...Avoid using currencies below EUR as base pairs, because they are too weak to be effective base pairs. Use them only for top pairs..... Where is EUR/CHF? When two pairs have same change how you rank it? for D1 you look changes for previous day?
JPY-BASED CURRENCY RANKING

When currencies are tied in EUR-based currency ranking you use the JPY-based ranking system to clearify.
As of 10:28 AM PST the currency ranking based on the relative strength of the JPY to other currencies is:

AUD +0. 68 % (+ sign means stronger than JPY, while - sign means weaker)
USD +0. 42 %
EUR +0. 15%
NZD + 0.065
JPY + 0.00 %
CAD - 0.02 %
GBP - 0.08 %

The farther apart the currencies are in rank the sharper their their directionality

I will avoid CADJPY or CAD/USD and GBP/JPY GBP/USD for now that NZD, CAD and GBP are below JPY.

Preferred entry trades for now would be:
Sell GBP/AUD
Sell CAD/AUD
Buy AUD/NZD
Buy AUD/JPY
Buy USD/CAD
Sell GBP/USD
Sell NZD/USD and
Buy USD/JPY
Buy EUR/GBP
Buy USD/JPY

If your current trade lines up with the current ranking on the weekly window, you don't need a stop loss.
If your buy price is giving you a positive PnL you leave it alone regardless of the opposing trade direction.

Let me know if this is making sense.
Mecrandie
  • #15
  • Edited 3:19pm Nov 7, 2016 2:48pm | Edited 3:19pm
Quoting mecrandie
{quote} JPY-BASED CURRENCY RANKING When currencies are tied in EUR-based currency ranking you use the JPY-based ranking system to clearify. .....
Thank you for reply. I believe you chose EUR as base for ranking instead USD. Why? Now back to your latest post: yes, I had today problem with direction of NZD and JPY:

in comparison EURNZD and EURUSD it came that NZD was weaker then USD and direction to be down but all day long NZDUSD maintained move up. In your analysis wit JPY base you got same and also comes to short NZDUSD....still maintaining up? AUD was strongest currency today.

Similar was for JPY which initial went up then stay sideways and expected to go up, probably later on when volatility pick up...
now you said with EUR ranking base need to confirm with JPY meaning on both ranking should give same conclusion for example AUD + CAD- etc?

What about timing of ranking? for intraday trading check it often and prior to trade , check the charts? for swing(H4, D1) 1-2 times per day?
Thank you, you brought to attentions valuable tool for trading.
---------------------------------------------------
NZDUSD is tricky at the moment, china effect... I don't know...
  • #16
  • Nov 7, 2016 8:40pm Nov 7, 2016 8:40pm
hello mecrandie,

can you post screenshots? want to make sure I am looking at the same netdania chart with same settings.

thanks.

- guan

Quoting mecrandie
{quote} JPY-BASED CURRENCY RANKING When currencies are tied in EUR-based currency ranking you use the JPY-based ranking system to clearify. As of 10:28 AM PST the currency ranking based on the relative strength of the JPY to other currencies is: AUD +0. 68 % (+ sign means stronger than JPY, while - sign means weaker) USD +0. 42 % EUR +0. 15% NZD + 0.065 JPY + 0.00 % CAD - 0.02 % GBP - 0.08 % The farther apart the currencies are in rank the sharper their their directionality I will avoid CADJPY or CAD/USD and GBP/JPY GBP/USD for now that NZD, CAD...
  • #17
  • Nov 22, 2016 1:37am Nov 22, 2016 1:37am
Quoting guandi
hello mecrandie, can you post screenshots? want to make sure I am looking at the same netdania chart with same settings. thanks. - guan {quote}
Just click on this link to see the live chart
http://www.netdania.com/currencies/eur-usd-chart
Mecrandie
  • #18
  • Dec 8, 2016 5:15am Dec 8, 2016 5:15am
Quoting mecrandie
{quote} Just click on this link to see the live chart http://www.netdania.com/currencies/eur-usd-chart

Click on this link to see the watch list for comparing the daily % change of different Forex Pairs at any point in time.

http://www.netdania.com/quotes/forex-majors

Compare EUR/AUD, EUR/CAD, EUR/GBP, EUR/JPY, EUR/NZD and EUR/USD

OR

Compare AUD/JPY, CAD/JPY. EUR/JPY. GBP/JPY, NZD/JPY and USD/JPY

The relative strength of each currency determines its ranking for that moment.
Any currency can be the challenger or challenged depending on whether the trade is long or short.
For EUR/USD, EUR is the challenged, resisting an uplift by USD in long trade, and the challenger in short trade, trying to lift up USD on the scale.
All pairs are traded long for EUR-based ranking, while they are all traded short for JPY based comparison, to ensure that the other currencies are trying to lift them up on the scale.
All pairs are either going long or short for proper comparison
The challenger in a long trade is always on the right side of the scale. If it is stronger it pulls the scale downward clockwise and produces a negative % change.
The challenger in a short trade is always on the left side of the scale, and pulls up the scale if it is stronger. But if it is weaker, it is lifted up by the opposite currency.
However, if it is weaker, it is lifted upward by EUR anticlockwise, producing a positive % change.
Weaker currencies are ranked below EUR according to the value of the positive % change
Stronger currencies are ranked above EUR according to the negative value of the % change.
The farther apart two currencies are ranked, the more significant their % changes and the clearer and more prolonged their directionality.
Choosing two adjacently ranked pairs produces a sea-saw chart pattern that tends to go sideways most of the time.
Weak currencies are generally the challengers
Mecrandie
  • #19
  • Edited 10:17pm Dec 9, 2016 9:56pm | Edited 10:17pm
[quote=guandi;9240182]hello mecrandie, can you post screenshots? Want to make sure i am looking at the same netdania chart with same settings. Thanks. - guan
USD - Red and Green
JPY - Purple
AUD - Blue
CAD - Red
GBP - Grey
NZD - Yellow

The charts show visually how pairs rank in comparison to EUR/USD (all trading long). Those above EUR/USD are weaker while those below it are stronger than USD. The lower the chart, the stronger it is against USD. The lower the EUR/USD chart itself, the stronger is USD against EUR. Only Ameritrade ThinkorSwim chart has this comparison study tool




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Mecrandie
  • #20
  • Dec 9, 2016 10:21pm Dec 9, 2016 10:21pm
With proper alignment, no need for stop loss

Attached Image (click to enlarge)
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Mecrandie
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