A significant US Dollar rebound suggests we may be at a potential
turning point for key US Dollar trading pairs, pointing to volatile
and eventful trading conditions in the week ahead.
DailyFX+ System Trading Signals – Quick-moving systems such as
Momentum2 and Breakout2 saw strong performance through the past 7 days
of trading, benefiting from pronounced moves in US Dollar pairs and
other key currencies. Volatility expectations have dropped noticeably
as the European Central Bank interest rate choice and the US Nonfarm
Payrolls report have come and gone. Yet this only just guarantees
volatility will slow in the days ahead as we are arguably at a
potential turning point for the Greenback. We favor Breakout2 and
Momentum2 on most currency pairs in the days ahead. Slower-moving
Momentum1 could falter unless we see pronounced price trends across
the board, while Range1 and Range2 strategies look attractive only on
key range-bound currency pairs.
To gain a superior understanding of all six trading systems, view my
recent presentation on SSI and the trading signals on our FXCM Digital
Expo page.
DailyFX Individual Currency Pair Conditions Synopsis
Volatility expectations have dropped near their lowest in quite some
time. Yet much the same could have been said just two weeks ago, and
we have since seen sharp moves across major currencies through that
stretch. We seldom want to spot ourselves against FX Options market
volatility expectations. Yet they seem relatively underpriced given
the possibility we may be near an vital turning point in pairs such as
the Euro/US Dollar.
Benchmark Trading Systems
Data and Backtest Results Generated using FXCM Strategy Trader
Range and Breakout strategies saw strong performance while Trend
suffered, as the benchmark Moving Average Crossover system remains
small USD. A right reversal would likely hurt Trend systems further
while benefiting Channel Breakout and Range systems accordingly.
Written by David Rodríguez, Quantitative Strategist for DailyFX.com,
drodriguez@dailyfx.com
To be added to this author's distribution list, send an e-mail
subject line "Distribution list" to drodriguez@dailyfx.com
Definitions
Range Strategy – The benchmark range trading system shows the
hypothetical performance of a simple Relative Strength Index strategy
on 60-minute EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, and
NZDUSD pairs. It sells when the 14-period RSI falls below 70 and buys
when it crosses above 30. No other trading rules are used.
Hypothetical results are generated using FXCM Strategy Trader.
Trend Strategy – The benchmark trend trading system shows the
hypothetical performance of a simple Moving Average Crossover strategy
on 60-minute EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, and
NZDUSD pairs. It buys the currency pair when the 50-period Simple
Moving Average crosses above the 100-period and 200-period averages.
It sells when the 50-period crosses below the 100-period and
200-period averages. No other trading rules are used.
Breakout Strategy – The benchmark breakout trading system shows the
hypothetical performance of a simple Channel Breakout strategy on
60-minute EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, and NZDUSD
pairs. It will set a buy order at the highest high of the previous 20
bars plus one pip and a sell order at the lowest low of the previous
20 bars minus one pip. No other trading rules are used.
Volatility Percentile – The higher the number, the more likely we
are to see strong movements in price. This number tells us where
current implied volatility levels stand in relation to the past 90
days of trading. We have found that implied volatilities tend to
remain very high or very low for extended periods of time. As such, it
is helpful to know where the current implied volatility level stands
in relation to its standard-term range.
Trend – This indicator measures trend intensity by telltale us where
price stands in relation to its 90 trading-day range. A very low
number tells us that price is currently at or near monthly lows, while
a higher number tells us that we are near the highs. A value at or
near 50 percent tells us that we are at the middle of the currency
pair's monthly range.
Range High – 90-day closing high.
Range Low – 90-day closing low.
Last – Current market price.
Bias – Based on the above criteria, we assign the more likely
profitable strategy for any given currency pair. A highly volatile
currency pair (Volatility Percentile very high) suggests that we
should look to use Breakout strategies. More moderate volatility
levels and strong Trend values make Momentum trades more attractive,
while the lowest Vol Percentile and Trend indicator figures make Range
Trading the more attractive strategy.
Source: Dailyfx.com
No comments:
Post a Comment