Configurable Currency Strength Meter Flash App
[ if not using dual display setup, utilizing the browser zoom function (ctrl+ and ctrl-) might work better ]
[ some browsers do not expand the actual strength chart properly, the inner-chart portion ]
[ expansion of the inner-chart will not be proper unless your monitor is actually the size listed or greater ]
Strength Chart represents the rate of change price movement for the eight (8) Major Currencies measured against other Majors. App displays rate of change strengthening and weakening in relation to the other(s) as chosen by the user.
Many Traders applying momentum-based strategies prefer matching Currencies that are ‘Strengthening’ and ‘Weakening’ rather than ‘Strong’ and ‘Weak’.
Percentage Change of individual Forex pairs is calculated and then subsequently grouped with like kind. The rate of changes are then aggregated to produce a percentage change for each of the eight groups. These eight (8) rate of change aggregations are then plotted on the chart together which allows both quick comparisons and in-depth analysis to be made of the underlying Currencies.
This page and entry level application here is intended only as an introduction into the measurement and analysis of Currency Strengths.
And as a very quick, no-hassle way of seeing what is happening right now in the total Forex market. For instance at London open, New York open, or upon an economic release.
To get an idea of general flows or drastic sentiment changes (discussed further below under the Slope section). It is really not intended to be analyzed on a minute-by-minute basis.
This ‘Percentage Rate of Change’ method for analyzing strength of individual pairs is different than the standard Currency Strength formula precursor that is used within our New 5NITRO+ / 6NITRO+ Metatrader 4 Meters.
While this percentage change formula used in this Flash-based strength chart on this page might be considered inferior to the formula used within 5N+ that was originally created by Tom Yeomans out of Nova Scotia, it suffices for purposes here. View more info about the standard CSM formula and its precursor integration into 5NITRO+ and the New 6NITRO+.
It is assumed traders that find this type of tool and its type of analysis useful would then seek to graduate into a more robust, full-featured application.
Tom Yeomans’ flagship offering named Accustrength is currently the best available. Sure, there are recompiles of the old XMeter found on the scam MT4 App Marketplace from the scam sellers there. But even Yeomans’ entry level or legacy versions FX4Caster, Forex Grail, and ForexSnap (web based), all far surpass the app on this page or indicators available anywhere in terms of daily usability for the career trader.
Chances are overwhelmingly against you being able to lock down that elusive, fantasy, ‘intraday scalping system’ from either of these strength meters which can then be used to infinitely-repeat your way into The Forbes Billionaire List. But, knowing exactly what is happening in the entire FX Market with just a quick glance should provide infinite realistic dividends.
The value of this total market simplification is difficult to initially measure or project, but it seems this might be a logical investment when beginning a trading career after limitless display space.
Why? Because they both along with 5NITRO+ / 6NITRO+ Heatmap configurations all help to allow the trading and managing of many more FX Pairs, CFDs, Commodities, Indices, Futures, Bonds, Bunds, Traditional Forex Options. Options available @ AvaTrade.
And the diversification, variance, and risk reduction this allows for should truly provide infinite returns.
Take Some Profit | Mean Reversion
Strength Chart also can provide trend length perspective and Overbought / Oversold relativity.
OBOS on lower time frames is often generally too risky as opposite trend entry points, or rather stop and reverse triggers. OBOS on lower time frames is generally best at serving as areas to begin thinking about taking some profit in a percentage of units.
These trend length relative overextensions and OBOS areas on higher time frames serve as possible indications for Mean Reversion strategies or to hedge risks. In-depth observations of Mean Reversion on the Weekly time frame is provided further below in the last sub section.
Chart useful in identifying which related FX pairs have been or are beginning to trend. Matching combinations of Currencies with very recent sharp angle slopes in opposite directions or in the midst of can sometimes produce early warnings for their FX pairs. While these drastic slopes or spikes in a Currency will often parallel spikes in many of the related FX pairs providing very little early warning, it may be that the possible opportunity actually lies in the other correlated FX pairs.
In other words, the first movers are providing a ‘Leading Indicator’ effect. After these first moves of which are often times triggered by fundamental events such as economic releases, arbitrage opportunity seekers inevitably come into the market led initially by computer algorithms.
For Example: While a spike down in JPY may have been mainly prompted by spikes up in EURJPY and GBPJPY and thus all began at the same exact moment, the real opportunity may lie in CADJPY, AUDJPY, NZDJPY. These pairs may soon follow suit. When sharp slopes appear, this tends to indicate continued strength or weakness. When a Currency is neutral or drifting sideways, often it will do so in patterns that resemble ‘Sine Waves’ or cycles or simply just moving up and down within a hi-lo channel. So, these wave patterns can sometimes present the perfect setups when seeking out FX pairs that may be lagging, such as in the CADJPY example above in which it acts as the ‘Follower’ while EURJPY+GBPJPY are the ‘Leaders’*
*This is only an example. It is not being stated either of those Yen pairs are always Leaders or always Followers. This continually changes and is highly dependent on time frames or the period of time in which pairs are measured, similar to the variability of ‘Correlations’. For more in-depth information and analysis dedicated to Leader / Follower, seek out the research of ‘Forex Automaton’.
Currency Index is also a quick way to view correlations. To view an example of ‘Positive Correlation’, isolate
EUR+CHF from the Hourly thru Daily. Well, up until January 14, 2015 that is.
Can Neither be Created Nor Destroyed
… it can only Transform.
The Strength Index Chart in turn gives us money flow into or out of one Major Currency in relation to the seven (7) others. There is an overwhelmingly high inverse correlation that takes place. This correlation is an absolute 100% in the above strength chart because the strength formula is comprised 100% of the twenty-eight (28) Major Pairs. The same applies to most all other CSMs.
In other words, this formula and most other CSM formulas are not including such pairs as EURHKD, USDRUB, USDCNY, or GBPSGD as examples. Therefore, this perfect inverse correlation and zero sum property do not apply in reality outside of these applications because the world and Forex Market is comprised of more than just these eight (8) major regions and Currencies of course. But in large part as measured in total yearly FX volume, proceeds received from selling a particular Major (8) Currency is immediately used to purchase any combination of other (7) Major Currencies.
Because of ‘Zero Sum’ Theoretical Logic, this type of analysis capability provided by the Currency Strength Meter is unique to the Forex Market. An example to the contrary, when money flows out of a particular Equity Stock this does not necessarily mean those same funds will immediately be placed back into the Equity Market.
Slope and Space
It seems that for the average Momentum or Swing Trader, the angle or slope in combination with available room to move might present the lowest risk, more ideal opportunities over an extended period of time and large enough sample size. Meaning, not any given single trade. But instead, let’s say over the course of one year and 200+ opportunity events.
An extreme, preferably extended sharp angle seems to indicate the introduction of Real Money and Real Money Flow at and from that point. A GANN GRID supplied in all MT4 Platforms is commonly used for angle measurement and relativity on MT4 Strength Meters like our old FlowMeter.
Historically, follow-through and continuation is high probability when these sharp slopes appear. This probability increases as the time frame increases assuming the angle and length of initial sharp slope is equal.
Because of this high probability, scheduling a portion of entries on what is usually an inevitable retracement of at least 50% can often help to reduce that initial entry risk. Or, to re-enter by replacing some units that may have had their Take Profits quickly taken out. The GBP illustration example below shows only about a 23.6% Fibonacci retrace. The illustration looks to also show an equalized Fibonacci Extension from the 0.00% centerline after the initial retrace completion.
GBP ’Rapid Sentiment Change’ - Sharp Slope Example on May 07, 2015
An illustration of this higher probability opportunity for Momentum and Swing Traders is included below. Pointed out with color-coded arrows is an initial sharp angle jolt from the bottom and slightly-sharp turns down from the top.
This illustration below is not the greatest example, it just happened to be the best at this moment of example creation.
This example offers adequate continuation space. Though ideally on a 15min chart such as this example, GBP would have been spiking up from negative 5.00% or lower … rather than only negative 1.50%.
The sharp degree of a slope far outweighs a lack of follow-through space as indicated and displayed on an obscure tool like this. Sharp slope is actually representative of something – Real Money Flow. Which means, it actually means something to nearly all global professionals.
Crossing Currency Lines … mean nothing
This is similar to other vendors and people in FX Discussion Forums advising that users “Take Action When Currency Lines Cross”. These crossing lines, regardless of actual degree angles they form, are being promoted as some sort of magical phenomena. The software sellers and well-respected, highly-thanked FX Forum ‘Elite Members’ – recommend using this as a main or only strategy. Presumably intended to be repeated using the same crossing cues each day. What?
What in the world does lines crossing on an obscure CSM Indicator of which uses a uniquely-proprietary strength algorithm with calculation settings that can be changed by each user…. even indicate? Nothing. It is indicative of nothing to global traders as a whole.
It is a chance happening representative of nothing. At least nothing substantial to where trading careers should be reverse-engineered around it, as many advise. The unique, one-of-a-kind strength formula in a commercial strength chart randomly happened to graphically-output lines that crossed.
We should not underestimate the power and reliability of the ‘Self-Fulfilling Factor’ within our own internal decision making algorithm. When we try to use technical trigger points from proprietary tools with black box formulas and settings, we are completely removing arguably the most important equation factor. Such as when trying to rely on technical points that are very specific to a specific tool like ‘Crossing Lines’.
Some will no doubt debate this with “Well what about 5NITRO+ / 6NITRO+? They are obviously proprietary and somewhat black box.”
Sure, but 5N+/6N+ are generally outputting a ‘Momentum Aggregate’, intended to confirm + present current Inertia opportunities.
Inertia is the greatest self-fulfiller of them all …. going back 2200 years.
Crossing of Currency lines …. is not.top
Expand Chart to Maximum Size After Popping Light Boxes
Opera Browsers – It was noticed the other day some sort of issue when clicking the ‘ExXpand Box’ if already at its maximum state. The white icon Opera ‘Next’ is fine. The Red icon Opera ‘Stable’ and Blue icon Opera ‘Developer’ have issues. These new Operas use Blink or Web-Kit, a form of Chrome … which is also fine.
If you are viewing on a smaller monitor, the Light Box will automatically overly under-size and crop the meter. Click the grey expand button in the upper right hand corner to maximize the currency chart to its intended size: [see pic to left]
Using the browser zoom [control+][control-] actually works good on single display setups. Might work even better on Internet Explorer as I think zoom can still be custom. But on dual display setups that require a reconfigured horizontal size before zooming the entire chart equally, you will need to use one of the ‘Dual Monitor’ options offered first. Then after popping the lightbox, utilize the browser zoom to fine-tune the size within these dual displays.
Maintaining Visual Scale Relativity
As the number of currencies that are selected increases, the MAX + MIN visual scale relativity as a whole expands by the furthest outlier. Unless your trading or analysis specifically only calls for the same one or two Currencies to be measured, the max number of currencies selected is recommended to provide full and consistent relativity. Over time, this will prove beneficial by eliminating what can appear to be extreme moves of which may cause unjustified resulting action. This assumes that the most popular method to analyze these strengths is by constant visual comparison of the lines in relation to each other and in relation to the top and bottom boundaries of the chart box. Rather than constantly comparing the numerical percentages.
Minimal Currencies are set here by default to help minimize initial page load speed. However, the opted formula here always uses all (28) Pairs worth of Data available regardless of how many Currencies are selected by you. This helps to retain familiar relativity when making visual comparisons and provides a consistent visual scale. Always selecting ALL Currencies will retain more consistent relativity because the MAX + MIN remains more static. In other words, the vertical scale is variable. The vertical scale of the chart is always set by the strongest Currency for the chosen period of time and the weakest Currency.
Supposed Repainting of History
There is a fairly large group of Currency Strength Meter Indicator users who use it every day, and have for about 1-3 years. We began including it here sometime in 2011. After about six months we began to receive emails claiming that the Weekly time frame is repainting. That the values and line levels had changed since the initial viewing 5-6 months prior. The same goes for lower time frame users that have sent emails noticing the history of the M15 time frame, for example, has changed.
Notice how the strength of all the Currencies always begins at 0.00%?
All Currencies showing 0.00% strengths at the very beginning of the charts to the very left is indicative of strengths being computed across a static look back period. Regardless of which size chart is chosen to view, the total look back period remains the same.
So for example when H1 is chosen, strength is always measured across a rolling thirty (30) trading day period or about (720) rolling hours. When D1 is chosen for example, strength is always measured and displayed across a rolling (365) trading day period.
Chart history is changing after periods of time because the starting point at which strength is measured from has changed. Why? Because the total look back period has remained static.
Trouble Identifying Time Frame Selected?
Users are having troubles identifying which time frame is selected. This remains true even directly after pressing one of the time frame buttons.
Notice how the button becomes smaller once pressed?
The time frame selected is a tad shorter vertically. Once a time frame is selected, it will become a tad shorter vertically as illustrated in the pictures below and as seen on the actual strength chart. The top picture has the 15 Minutes button pressed. The lower picture has the Daily time frame button pressed.
15 Minute Time Frame Selected
Daily Time Frame Selectedtop
Weekly Mean Reversion Observations – General Thoughts and Ideas
Zero Sum + Balance Points
FX, above all other markets, is reliably susceptible to Daily, Weekly, and Monthly Mean Reversion of both buy side and sell side due to Zero Sum theoretical logic with Week and Monthly presenting lowest risk.
Well actually, while Week and Monthly offer the lowest risk as it is defined here because we are specifically discussing the above strength chart that includes a fixed-width property, this is not necessarily true of time frames in general. It is not the action of increasing time frames that reduces risk linearly. Risk is reduced when we are taking action in and around EXTREME support or resistance areas. Accordingly then, the support and resistance levels with the longest lookbacks offer the lowest risk. So, if the chart or your view of the chart has a fixed width, like in the above index chart, you are more likely to see the highest resistance and lowest support if the time frame is higher and the zoom is the least. Hence, higher time frames present us with the lowest risk opportunities.
Since I do not personally intend on holding positions for 7 years to 20 years, let us consider the Weekly time frame as the highest rather than the Monthly. Weekly is also the highest option for the Strength Meter on this page. Also with many Brokers providing MT4, their Monthly data tends to be severely lacking. We are lucky if we can get 150 bars, even in USDJPY. Amount of Weekly history available usually gets us back to at least 1995. But, while your Weekly charts beginning some time in the 1990s should be sufficient in establishing Highs and Lows, I still have a library of Max charts from other online sources like from Google Finance and CME. This is definitely suggested before ever building Mean Reversion positions at what appears to be absolute highs or lows.
While this strength chart is a good introduction tool into Mean Reversion methods and a nice, quick reference to get a general idea of possible opportunities in the underlying currency as a whole, it is obviously recommended to study actual individual pair charts before making any decisions. Somewhat because of what was just noted. But primarily, because once we start analysing extreme support and resistance levels like this that may be 3 year, 5 year, 7 year, 10 year, or even 15 year highs and lows – they actually tend to hold up fairly well regardless of the actual pair.
Meaning, exotic pairs such as GBPZAR tend to comply with multi-year support and resistance levels as well (or good) as GBPUSD, GBPJPY, EURUSD, EURJPY, AUDUSD, USDJPY, as an example. But on lesser-lookback highs and lows such as one month or even one year, I am often cautious and leery about relying on and creating huge blocks of Limit orders at these support and resistance levels to build a position from. Now, adding to an in-the-money, multi year position on a retracement to these levels? Sure. Taking some profit at these levels? Of course.
Inflation is a Sell Side Problem
I never apply Mean Reversion techniques to Commodity, Equity, or Equity-based CFD SELL SIDE due to Inflation Factoring.
Inflation destroys the Zero Sum equation and directly disproves the theory of “… can neither be created nor destroyed”. The Inflation variable is like an impurity that can never be filtered out or neutralised. This is actually a good property though when it comes to BUY SIDE Mean Reversion techniques of Equities and Commodities. It is like having the wind at your back. Though at only about 3 kilometers per hour, it is more like a light breeze. Better than a vacuum though … pulling you in the wrong direction.
Inflation, and other non-Zero Sum variables, render multi-year resistance levels unreliable. And when creating huge blocks of limit sell orders in and around and up to these levels with huge blocks of stop losses then just above, reliability is a necessity. Likewise then, support levels need to be adjusted up when buying. Longer lookback levels need to be adjusted the most, recent not as much. This causes much less potential for position establishment issues however. Because I never actually move support levels up, it tends to mean that I will just not end up with as many units as preferred, rather than having an entire position stopped out immediately which would happen often if selling.
Keep in mind, positions with the possibility of lasting up to 3 – 5 years are being referred to here, not swing trades. The intended hold times of positions does not matter however. It is about the reliability of support and resistance levels that have not been inflation adjusted that are the limiting issue. Even if 0.25 to 3 month Swing Trading was being pondered, the resistance level being used to establish a short position – may be a 20 year high, for example.
Also keep in mind, Weekly Mean Reversion is not being recommended as a primary method. On average since 2008 when I began to Mean-Revert, total net profit (or net loss) has only comprised about 17% of overall yearly gains (or losses). It pushed 40% in earlier years as many Equity based CFDs reverted from ridiculous lows, such as DOW 30 components American Express, Bank of America, JP Morgan Chase, General Electric, Procter & Gamble, Caterpillar, Microsoft, Cisco, Intel.
The actual number of opportunities within a ten year period can be slim. Although, this past decade presented above average number of opportunities in comparison to past decades and presumably future decades. Primarily because this past decade included that 2008-2009 Financial Crisis and its extended distancing from the Mean in nearly all markets.
As outlined in other parts of this site, a separate Broker (or separate account) is used only for Mean Reversion. If an additional Broker is not the solution, a spouse or corporation can be used to create an additional account within the same Broker and a separate MT4 instance on separate machine. This will help tremendously in keeping methods and your daily trading activities separate. Expanding the pool of instruments traded will greatly increase opportunities while reducing risk. All 225+ symbols offered by this particular Broker in its Market Watch window are all being sifted through for possible upcoming opportunities. All of them.
But what about high spreads in some of those exotics and EuroZone CFDs? Well, with potential actual and equivalent gains in the 500 to 8 000 pip range, spread costs are seldom dictating any decisions. Neither are carry costs.
Many instruments and thus lower capital used per will lower risk by allowing for much more patience. More patience to endure the often grueling wait until extreme levels are tested. Patience to then meticulously build positions at these extreme levels as consolidation forms bases. Or in addition, the confidence and increased risk threshold to have large pre-built blocks of Buy Limits and Sell Limits patiently waiting there for when a quick spike down to or up to, and maybe not all the way to … is the only opportunity actually provided every 5 years or so.
Spreading this method across as many instruments and different markets as possible allows the core theory + probabilities to eventually play out in our favor. It gives the theory room to breathe and room to eventually reward our patience and longer-term capital investment.top
Looking for Mean Reverting Opportunities – Using GBP as the Candidate
[ 2013-04-03 ] Can GBP Finally Break Up Out of Consolidation?
JPY finally reverted sharply for us late 2012 and into 2013. Could it now finally be time for GBP to attempt a revert back Home after this multi-year grueling period of consolidation down at the Weekly bottom? A push down to -35% prior to GBP reverting remains a risk, albeit low. Although there is sizable resistance around June 2009. Enable all on the Weekly for proper perspective and view Larger Chart
[ 2013-12-23 ] Yes. GBP Looks Good, So Far.
GBP finally broke up out of the consolidation it had been in since 2010** Historic Mean Reversion probabilities tell us GBP is more likely to continue towards the 0.00% Mean now – rather than retracing back 100% to its consolidation, or anchor, area of -27% or breaking lower and testing the previously feared -35% area. The risk appears low of this retracement occurring from a historical Mean Reversion technical basis and fundamentally low risk due to an overwhelming majority of top world economists agreeing that the BOE is leaning towards rate increases by the end of 2014 or into 2015. All the while, most other countries except the United States are said to be showing very little growth. With the EuroZone in particular hinting of negative growth and a fear of deflation. Enable all on the Weekly for proper perspective and view Larger Chart
Fixed-Width Maybe Not So Ideal
**At least it appeared to break up out of consolidation at that time in December 2013. One of the caveats of using a fixed-width tool like this is that the past can change sometimes drastically. Now almost one year later, there is a different set of of parameters that recent rate of change is being compared to. It now appears almost one year later that GBP remains trapped in the same consolidation it has been in since 2010. This ‘repainting’ of the past is discussed in that sub section above.
I think rather that is just the perfect example of why, while this fixed-width Strength Chart is a good introduction and somewhat serves its purpose here of being able to show live real time Weekly levels and to gain a general perspective, using a non fixed-width chart is obviously more ideal to make actual weekly mean-reversion decisions.
I believe one of Tom Yeoman’s CSM software versions, either Accustrength or FX4Caster, does have the ability to show a wide view of history amounting to what would be a Weekly or Monthly view? Maybe not, but I would think this is possible through the settings. I am currently using our old FlowMeter Currency Strength Meter for MT4 on a daily basis for Weekly, Daily, and H4 based position trading. Like noted above, the pair charts themselves are used as main reference and last step decision making. Because I have been cycling through every pair known to man on a daily basis since about 2005, I already had a general idea that GBP had been consolidating at lows without the need for a CSM to tell me this.
Aggregation and Relativity
This legacy CSM with smoothing mechanism is named FlowMeter. I and many customers dating back to around 2008-2009 are using it. FlowMeter is being re-coded and improved for the new MT4 600+ and released as FLOW+. It is being partially integrated into 7NITRO+ and made available 2015 or 2016 (well at least before 2020) (NITRO+ customers will all receive the 45% to 55% Loyalty Discount Code and download link)
While these types of meters using the standard CSM formula including Accustrength and FX4Caster can provide some insight for higher mean-reversion, they are best suited for distinguishing slopes or simply providing an aggregation of the twenty-eight (28) major pair charts for very quick market analysis, in my opinion.
The informational benefits of a tool that aggregates twenty-eight (28) charts should not be overlooked.
The informational benefits of a tool that provides relativity of these twenty-eight (28) charts should not be overlooked. [shown below]
Because this standard CSM formula peaks out at (9) and bottoms out at (0), it seams there might be a false sense of security generated because of these virtual tops and virtual bottoms.
This leads almost to an inevitable forced Martingale strategy to be deployed more often than not as strength readings hover horizontally along the tops and bottoms for extended periods of time. Price continues to move against us. Then, continues and continues and continues ….
This Martingale nightmare is why only ‘Weekly’ mean-reversion is recommended in the first place using extreme highs and lows. This nightmare is why we also need the definitive guidance of actual price support and resistance levels, rather than the ‘virtual’ guidance and ‘virtual’ limits of nine (9) and zero (0) from an obscure tool that the majority of worldwide professional traders are not looking at.
Though like the ‘Self-Fulfilling Inertia Effect’ discussed further above, everyone is staring at extreme support and resistance levels, including both Institutional and Retail. The entire market has plans in place to take action once approached. These extreme levels are always pre-disseminated by everyone. Everyone and their computers. Obscure CSMs do not lead to this same self-fulfilling type of response from the markets. Nine (9) and zero (0) are only pre-disseminated by a handful of people, mostly Retail.
In other words, analysts do not come on CNBC or Bloomberg advising viewers:
“Be on the lookout this week for JPY hitting zero (0) on the AccuStrength Currency Strength Meter!”.
More details about FlowMeter and FLOW+ further below.
[ 2014-10-03 ] Goldman Foresees BOE Increasing at Slower Pace than The U.S. Fed.
But, BOE is still expected to initialize first.
This is noteworthy as it relates to the GBP momentum being able to continue towards the Mean. The largest immediate impact of this report will be felt directly by the GBPUSD pair itself. We have already seen hard retracement prior to this report, primarily due to USD strength.
Well, I guess mentioning this retracement is redundant anyhow since we know Goldman established their and their clients’ Short positions well before this ‘for public consumption’ analysis was given freely to the public.
The probability of or the speed at which the other six (6) countries increase or further decrease rates will obviously have a greater combined impact on GBP as a whole than only what this Goldman report projects.
It is not necessarily specifically about Goldman Sachs or the other Money Changers. It is not about the uniqueness of how Goldman goes about getting the herd to follow suit. It’s about trying to recognize and parallel REAL MONEY positions. And like noted in The 5NITRO+ Trading Pages, it’s about trying to recognize and decipher what Goldman’s algorithms and fundamental research are indicating to them.
We will never, as Retail Traders, have access to all necessary data for algorithmic trading. Especially not using only the data supplied through our Metatrader platforms, which of course is only price at a specific time.
How insane is it to actually believe some ‘Rogue Russian Programmer’ has cracked The Forex Code with his new $97 ClickBank EA? An EA that has access only to the price and time data of only the instruments displayed in our Market Watch window, absolutely nothing else.
We will never have adequate IT resources. We will never afford our own economists and international research team. Well once we do or can … presumably Metatrader, TradeStation, or NinjaTrader will not be the platforms of choice.
So, we are left only with a few options:
One of these options is just to cheat off of the
Smart Student’s ‘Student who steals the answer sheets’. But first, we need to actually be taking the same test.
Increasing our risk threshold per pair will allow us to trade more in sync with these larger ‘Insider’ firms. Longer term outlooks are mandatory along with reduced effective leverage. And once we start to trade in sync, knowing that we have these large entities fighting for our positions right alongside allows for confidence, patience, and brings clarity. It allows us to begin making more decisions in a relaxed environment based purely on Logic + Probabilities.
[ 2014-10-13 ] What About GBPCHF? Isn’t this a Low Risk Buy?
A question was asked about going Long GBPCHF on a retracement. The Weekly Strength Chart seems to be saying this is the lowest risk Mean-Reversion trade at this particular moment? Possibly also the lowest risk trade looking forward until the end of this trading year? [ until May 2015 presumably ]
Again, the largest factor might be fundamental. When will BOE begin. And when they do begin, what will their forward guidance indicate about the pace. Also, what will the EuroZone look like, since EUR and CHF are highly correlated and currently pegged.
[ 2015-01-14 ] Looks Like GBPCHF was Not a Low Risk Buy
I guess #1 from above was actually on the high side of probability, rather than low side. Well, I guess evident from CHF spiking up enough to push a few stalwart Brokers like FCXM towards the brink of bankruptcy.
As we all know by now, the Swiss National Bank decided on January 14 2015 to stop printing franc to buy euros. They foresaw an inability to keep pegging EURCHF @ 1.20 with continued ECB QE forecasted. They gave up and threw in the towel – even though they stated two days prior that the 1.20 pegging would continue.
[further discussion of this day and the ongoing repercussions in the section below the break]top
Rise of The Machines – High Frequency Terminators
Retail FX Should Have Imploded in the Weeks Following January 14, 2015
This CHF Flash-Gap discussed in the GBPCHF section above was not good for this industry. Technically, it should have collapsed the entire Retail market.
How could any sane Retailer continue to participate now that this new reality exists?
Continue to participate using the same 100:1 leverage with their same sole Broker that only provides about 22 FX Pairs, maybe some Gold, maybe some Silver, nothing else, no CFDs? Continue to participate in a market that exposes probably 95% to 100% of their total available risk capital to something that has the potential to not only take all of that capital within a few minutes even while stops are being diligently used, but could even take more … leaving an unresolved negative balance equating to a lawful debt obligation?
These stats are the speculated vast bulk of all FX Brokers globally and their clients, expressed on whole. So then, this computes to CHF comprising about 11% to 12% of the global FX offering available to most Retailers.
So with these likely statistics noted, why is there not a new article on FinanceMagnates.com each new day chronicling the fall, inevitable, and ultimate bankruptcy of yet another FX Broker / Bucketshop? I mean, there are about 400+ of them.
Add to it, we all know how the bulk of Retailers actually trade.
Inexplicably, they are loading up in a few pairs and gambling with their single entry, single take profit, and single stop loss using short time frames on an intraday basis. Inexplicably, their lot sizes are insanely out of proportion to their available account capital.
In other words, Opposite of diversification. Opposite of variance creation. Opposite of risk reduction. Opposite of reasonable exposure. Opposite of disciplined. Opposite of logical. Opposite of sane.
Mutual Assured Destruction
These ‘Gambler’ properties of the average global Retail client combined with the average global Broker marketing and catering to this non-risk-averse group should have mutually assured both their collapse in light of this new SNB-created paradigm.
Technically what this CHF event should force is an industry wide Leverage reduction to about 4:1. If a gap move like this in this brief amount of time is possible in a Major Currency no less, then how could Leverage greater than 4:1 ever be used again? By the bulk of industry participants?
Logical Solution? Daily Limits
Commodities in the United States on the CME and CBOT like Corn, Soybeans, Wheat, Beef, Pork Bellies, and the like have had Limit-Ups and Limit-Downs for decades. These Limits are actually fairly tight. But it works.
After the US Equity Flash-Crash led by that PG tick in 2010? … they did something. I think if a stock moves greater than 5.0% in 25 minutes then trading is halted for 5 minutes. I think this 30 minute process can continue throughout the day or infinitely, idn?
These proposed Daily Limits in FX do not need to be restrictive and I realize a non-centralised exchange is the real issue for imposing any regulations. But just something, anything to help prevent this new technology-fueled glitch that did not exist of this magnitude 15-20 years ago.
Live Human Traders making decisions and performing physical actions were always an inherent speed bump since the beginning of Markets. Now in recent years, that inherent Human speed bump variable has been mostly removed during high impact events such as this. It is only logical to replace or supplement this loss.
That speed bump still needs to exist. If nothing else then to prevent The HFTs from destroying this market at-will, whenever they so choose to.
Maybe instead of Daily Limits there are ’12 Hour Limits’. Going by the current EURUSD price of about 1.10, how about a limit of 500 pips or 5% per every 12 hours?
Something, Anything to Slow Down these Computer Death Matches
Just something, anything to help prevent gaps of that magnitude. We need something, anything to ultimately help slow down the computers from cannibalizing each other like that so quickly within minutes, seconds.
Without something, I don’t see how this industry exists one year from now. It will exist one year from now of course … but it shouldn’t.
This event will have little effect on Retail volume going forward because the client turn-over is far too great. There will be enough new accounts even just this year who will not be aware that this event ever took place. But even if their 1minute and 5minute charts do scroll back that far, it won’t affect behavior in the least.top
Future MT4 Currency Strength Meters
FLOW+™ A new currency strength meter for the new Metatrader Builds 600+ named FLOW+ has to be recoded from the beginning. Coding the 3NITRO+, 4NITRO+, and then 5NITRO+ upgrades for customers was the priority once this new MT4 600+ had began to roll out in February 2014. I have been using one of our older graph-output CSMs on its own dedicated spare 18.5″ monitor utilizing the MT4 compatibility engine (I assume), so F+ is still not really a priority. Other than Weekly Mean Reversion opportunities which can easily be gathered from the CSM on this page, I personally utilize CSMs as more of a 28 chart aggregation tool. I need to get a general idea of the entire FX market in one spot with just a glance, so the older FlowMeter suffices. I know what is in the code, so I know the output is perfect. Perfect enough. But a new CSM will get done eventually. Just not right now.
Multiple display configurations and output types is the goal. Ease of use and RAM CPU friendly is a must. Constant position changing Dynamic Rankings to instantly identify strongest vs. weakest is a necessity.
These Dynamic Rankings are trying to be modeled after LeverageFX’s Currency Strength Rankings in Block form …. the App with Green and Red blocks in which the colors are variably weighted dependent on rank. Sort of like a Heat Map.
For anyone who has used this Top Gun software on eSignal in particular that specific CSM template, then you know how useful these instant rankings can be. This information can be especially useful for short term, intraday Traders constantly seeking to match strongest versus weakest as soon the opportunity presents itself, namely following fundamental events such as NFP.
Metatrader 4 coding logic, such as “A single indicator can only occupy one chart location, either the main chart, or a bottom indicator window” in addition to only one output type – increases the coding limitations. However, once the base meter is split into a series of indicators – the possibilities for display combinations is increased.
Will probably be a simple multiple time frame meter marketed initially as an add-on to the bottom or top of New 7NITRO+ or 8NITRO+ Meters … sort of like pictured to the left and to the right of the working alpha with the older NITRO+ Original
Bookmark this page and check back in 2015 / 2016
Sizable Machine Resources Required
These tools are not like Stochastics or the ol’ MACD loaded on one single TF. These tools are complex and resource intensive.
It was roughly calculated that 5NITRO+ alone, utilizing one of its 28 pair multiple meter templates, might be performing up to 15,000+ calculations per second during such times as NFP on a multi-decimal Broker. This is assuming about 2 ticks per second on average over that entire 15 minutes following release. As we all know, the initial 1-3 minutes can produce as many as 3-5 ticks per second on pipette Brokers.
These are only the parameter calculations done by the 5N+ meter itself across the 28 pairs over the up to 7 total time frames*. This does not include the additional, whatever automatic internal calculations that are performed per each new tick by the 24 internally-aggregated Indicators themselves such as ADX, Alligator, Accelerator, Awesome Oscillator, etc, etc. These calculations are done automatically within your Metatrader Platform, but only when they are instructed to do so. Such as is what happens when 5N+ is loaded.
*Maximum time frames calculated by 5N+ is 7.0. Mean time frames calculated by 5N+ is about 4.7. Median time frames calculated is 5.0. Minimum time frames calculated is 3.0. The Minimum of 3.0 is when loaded on the Monthly periodocity. Number of time frames used for calculation is dependent on time frame in which the meter is loaded or time frames that the User has selected from the drop down list from within the settings. The influence that each other additional time frame has on the ultimate GLOBAL% is non-linearly variably-weighted. 5NITRO+ automatically adjusts MTF influence / weightings. There is now the option to either ‘quicken’ the response of the entire meter or to ‘smooth’ the response. This new feature is called ‘Time Outlook’. Strength Lookbacks can also now be adjusted which will also have an affect on the response.
Full breakdown + explanation of 5NITRO+ calculations and aggregations, including weightings of all used time frames – can be found here
Yes, there will be some calculation-per-tick redundancies when adding a CSM, making it similar to that 28 pair template used in the example above. But, we have to plan for Users wanting to run both at the same time, and possibly on a different set of pairs. A User may want to use the CSM to calculate Forex pairs, while using a multiple meter 5NITRO+ configuration on Exotics, CFDs, GOLD, SILVER, OIL, and Equity Indexes or Futures. In doing so, a multiple 5N+ setup could include 50-60 meters, depending on how many Exotics and different CFDs are offered by the particular Broker. This then would push calculation-per-second into the about 25,000-30,000 range.
So then, “Per-Tick Performance” has become an obstacle. Features and number of calculations per tick will need to be eliminated or reduced to
allow for DLL calls (the new MT4+ Builds 600+ may have killed DLL calls to who Metaquotes considers “untrusted 3rd party sources”. which of course means everyone except metaquotes.net is untrusted). Not really sure what this means yet.
Commercial Tools cannot be created only for those with 24GB RAM and Xeons. We are forced to create them for 32bit 2005-2006 1280×720 15.6″ Laptops runnin’ Windows XP with a max of 3.63GB usable RAM. Because if you are trading Retail Forex in 2014 and do not reside in the United States, these are your most likely machine specs.