Forex Trading Strategies That Work 2013

In our

guide to

FXCM Speculative Sentiment Index-based trading

strategies

, we discussed the “why merchandise against the crowd?” with a specific look to our SSI. This commodity covers the “how can nosotros merchandise against the oversupply?” with a closer look at

the Momentum
1

trend trading strategy.

The

Momentum1

trading system is our purest trend-trading strategy.

We need to emphasize that past performance is

non

indicative of future results,

simply the system has

historically done well

in times of long-term currency trends.

Trading Rules for the FXCM Speculative Sentiment Index-Based Momentum1 Strategy

Automate our SSI-based

trading strategies via Mirror Trader gratuitous of charge

Buy Dominion
: If the Speculative Sentiment Alphabetize shows

in that location are more than 1.5 traders short for every one that is long (60% of traders are short), buy ane unit.

Sell Dominion
: If the Speculative Sentiment Index shows

there are more than 1.5 traders long for every one that is short (60% of traders are long), sell one unit.

Profit Targets
: Momentum
1

does not use stock-still profit targets. Instead the organization takes profits via a trailing stop loss.

Stop Losses:

Calculate the Average Truthful Range (ATR) on the past

fourteen

daily bars. Set a trailing end i ATR away from entry price. If short, this means placing a trailing end above entry cost and will motility lower if and when the currency moves lower. If long, the organisation places the trailing stop beneath cost and moves college if and when the currency pair trades higher.

Reviewing and Agreement the Logic of the Momentum1 System

Entries
: If SSI shows there are more than 1.5 traders long for every curt,

sell. If

SSI shows at that place are more than 1.5 traders short for every long, buy.

: This is a trend trading system that looks to take advantage of what we know about forex trading oversupply behavior. Put simply: when

everyone is buying or selling, information technology is ofttimes advantageous

to go in the contrary direction.

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Our data shows that the

trading crowd is really successful in most of their trades
, only when unsuccessful their losses outweigh their gains. Most traders tend to purchase weakness and sell strength, and this approach works well in placidity markets. In

times of potent trends, all the same, our

SSI data shows that most are unprofitable
.

The Momentum

1

strategy looks to take advantage of this pattern

and become confronting crowd

sentiment extremes.

There is an important distinction in both trading logic and historical operation betwixt this strategy (Momentum1) and our

Momentum2 trading system
. The first is obvious: Momentum1 looks at the absolute level of oversupply ownership/selling, while Momentum2 trades the

shifts

in oversupply sentiment.

In practise, this means that Momentum1 tends to enter trades less frequently and more than slowly than Momentum2. Yet it is far less likely to modify directions rapidly during one-sided market trends. It will tend to stay long or short for more extended periods of time than Momentum2.

Exits
: Take the daily Boilerplate True Range (ATR) of the currency pair for the by

fourteen

days. If short, place a trailing end ane ATR in a higher place entry price which moves lower if and when cost declines. If long, identify stop one ATR below entry toll which moves college if and when toll advances.

Momentum
1

uses no hard profit targets and instead relies on a trailing stop loss to ultimately have turn a profit on its trades. Why?

The

system does best during times of strong market place trends
. In trend trading, it is important to not limit profits when the trade is in your favor. Thus Momentum
1

simply trails its stop lower or higher with strong market place moves.

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This system is based on a strategy that did not use profit targets or cease losses at all, and the ATR-based cease can thus serve every bit a general guide instead of a hard level. In other words, we believe the system can work best when

we manually set up profit targets and end losses

based on our own take chances parameters.

The mix of hard profit targets in our

Breakout2 trading system

can serve every bit an bonny template to managing Momentum1 trades.

Sample Trades from Momentum1

every bit shown on a EURUSD Daily Chart

forex_automated_trading_speculative_sentiment_index_body_Picture_6.png, Trading Against the Crowd - Automate the Momentum1 Trading Strategy

Strategy Tips and Resources

Not all market place weather adapt the Momentum
1

trading strategy, and equally such in that location are definitely

factors to continue in mind before taking whatsoever of its trade

ideas. Our research on

crowd behavior shows that most do poorly

during times of

stiff market

volatility and/or powerful currency trends.

In our

Weekly Strategy Outlook

written report, we cover market atmospheric condition with a special focus on volatility and prices in forex options markets. We report the “

Tendency


indicator for individual currency pairs.

Momentum1 tends to do

amend

when


a currency pair continues to striking fresh highs or lows.

Equally such, we’ll tend to adopt trend trading when that Trend indicator is below 25% or to a higher place 75%.

Our research

also shows that volatility and trends are quite correlated. Thus

strongly volatile markets

may also encourage us to select

the Momentum1 strategy
.

Our

Forex Technical Analysis

folio shows a daily update of our

Volatility Percentile figure
as well every bit our

Tendency

indicator:

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forex_automated_trading_speculative_sentiment_index_body_Picture_7.png, Trading Against the Crowd - Automate the Momentum1 Trading Strategy

Past performance is

non

indicative of future results

, just our experience shows that using the

Volatility Percentile and Tendency indicators

helps improve


performance of the Momentum1


trading system.

Automate our SSI-based

trading strategies via Mirror Trader complimentary of charge

forex_automated_trading_speculative_sentiment_index_body_MirrorTrader0.png, Trading Against the Crowd - Automate the Momentum1 Trading Strategy

View Previous Manufactures on Automating DailyFX and DailyFX PLUS Strategies

View how to automate the

Breakout2

Trading System via our previous article


and

webinar recording
.

View how to automate the

Momentum2
Trading organisation via our previous article

and

webinar recording
.

Automate the

DailyFX Breakouts on Volatility

System


article,

webinar
.

Take reward of forex intraday seasonality via our

DailyFX

Asia RSI Trading organisation
, view

archived webinar
.

Why practise virtually forex traders lose
? How can we avoid common mistakes?



Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail,

sign upward for his

distribution list via this link
.

New to FX markets? Learn more in our

video trading guide
.

Contact David via

Twitter at

http://world wide web.twitter.com/DRodriguezFX

Facebook at

http://world wide web.Facebook.com/DRodriguezFX

http://world wide web.fxcmapps.com/trading-station/momentum1/http://www.fxcm.com/products/specialty-platforms/mirror-trader/dailyfx-trading-signals/

DailyFX
provides forex news and technical analysis on the trends that influence the global currency markets.

Source: https://www.dailyfx.com/forex/technical/trading_strategies/trading_strategies_explained/2013/02/27/forex_automated_trading_speculative_sentiment_index.html




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