FXCM Speculative Sentiment Index-based trading
, 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
trend trading strategy.
trading system is our purest trend-trading strategy.
We need to emphasize that past performance is
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
: 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.
: 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.
does not use stock-still profit targets. Instead the organization takes profits via a trailing stop loss.
Calculate the Average Truthful Range (ATR) on the past
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
: If SSI shows there are more than 1.5 traders long for every curt,
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.
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
strategy looks to take advantage of this pattern
and become confronting crowd
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
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.
: Take the daily Boilerplate True Range (ATR) of the currency pair for the by
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.
uses no hard profit targets and instead relies on a trailing stop loss to ultimately have turn a profit on its trades. Why?
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
simply trails its stop lower or higher with strong market place moves.
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
Strategy Tips and Resources
Not all market place weather adapt the Momentum
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
volatility and/or powerful currency trends.
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 “
indicator for individual currency pairs.
Momentum1 tends to do
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%.
also shows that volatility and trends are quite correlated. Thus
strongly volatile markets
may also encourage us to select
the Momentum1 strategy
Forex Technical Analysis
folio shows a daily update of our
Volatility Percentile figure
as well every bit our
Past performance is
indicative of future results
, just our experience shows that using the
Volatility Percentile and Tendency indicators
performance of the Momentum1
Automate our SSI-based
trading strategies via Mirror Trader complimentary of charge
View Previous Manufactures on Automating DailyFX and DailyFX PLUS Strategies
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Trading System via our previous article
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Trading organisation via our previous article
DailyFX Breakouts on Volatility
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Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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