Monthly Archives: October 2009

This is one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

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I mentioned the Commitment of Traders data previously in terms of its usefulness for tracking the positions market participants are carrying in the futures market (see Taking the Trader Positioning Data to the Next Level). The action in the British Pound of late provides a pretty impressive example of how you could have seen ahead of time the prospects for a big reversal were you tracking the COT figures.

Take a look at how short the big traders had gotten in BP futures.

Take a look at how short the big traders have gotten in BP futures.

Notice in particular the Bullish column under Large Speculators. See how as of October 13th that group was 88% short (100%-12%). That's a massively lopsided market.  When a market is so imbalanced like that it sets up for some real volatility when things start going in the other direction. We've seen that this week in GBP/USD.

GBP/USD rallied from about 1.5850 to almost 1.6650 in 7 trading days.

GBP/USD rallied from about 1.5850 to almost 1.6650 in 7 trading days. That's nearly 800 pips and a great deal of the action, especial the October 15th rocket ride, was the result of short stops being tripped. Basically, we saw a short squeeze in sterling. Had you been watching how short the big players were getting as per the COT figures you could have at least been alerted to the potential for something like this happening and strategized for it.

Currensee Social Indicators
Now the big drawback to the COT data is that it is reported only weekly as of the previous Tuesday. That means the data is several days old by the time we can view it. We had another tip-off, though. Take a look at what happened in the positioning of Currensee members.

The data shows the percentage of position volume held by members in long positions.The data at right shows the percentage of position volume held by members in long positions. Notice how they started October 13 (the same day as the COT data reported above) very long and by the end of it had gotten quite short.

In other words, the Currensee membership traded the market exactly wrong on net. October 13 was a bullish reversal day. It made a new low early then turned to finish higher. That means the members were long and wrong early, then got increasingly short as the market moved higher.

The argument against using futures data in the Forex market, and one that will naturally extend to the growing Currensee data, is how it only represents a relatively small portion of the market (the above open interest figures amount to only about 7bln GBP, which is only a fraction of the whole GBP/USD action - daily). Still, you use the tools and information available to you, and no position data should ever be ignored even if it’s just a sample. When the Currensee data on retail trader positions is added to the prior week's COT figures showing a very short positioning among the Large Specs we have a situation where one could see things lining up for a meaningful turn higher going against the retail folks and riding short stops by the bigger players.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

This week, we launched our latest response to our salacious Wii Hula Video. We really pulled out the stops this time and decided to include a more artful ending.

In case you missed the controversy, we started with our first video titled Wii Hula, which was met with a bevy of commentary from traders around the world.

So, we decided to get a little more serious and included a well-played economic debate.

As if that wasn't enough, we decided to get a bit more refined and include a more artful ending. Who doesn't love a good paper-mâché sculpture?

No one said currency videos had to be full of charts, graphs, talking heads and trading screens. We hope you enjoy our fun and creative approach to Forex trading and share our love for the art of all things Forex.

Do tell...what's your favorite video?

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

TechCrunch reported today about an interesting new iPhone app they came across in the App Store. It's an official app made by the National Association of Securities Dealers Automated Quotations (NASDAQ), the American stock exchange. In the words of TechCrunch writer, MG Siegler, "That itself is interesting, but perhaps even more interesting is a key functionality of the app is to highlight tweets about various NASDAQ stocks."

The app is called NASDAQ Portfolio Manager and, according to TechCrunch, it's pretty slick. In addition to providing all the real-time quotes and data you'd expect, it also has some pretty cool charting features and, IMHO, the most interesting part of the whole app is that it has a special view that integrates all the latest tweets about that stock, coming in from StockTwits. If you don't know about StockTwits and you're a Forex trader, you need to check it out. The service is organized in "streams" and they recently launched a Forex stream, where you can see all the latest Forex tweets. A Forex tweet is denoted with $Currency pair (i.e. $USDJPY), and what's even cooler is that you can sort the Forex stream by pair. Say you're only interested in tweets about USD/JPY, click on the pair and just see that stream. We use StockTwits with our @Currensee Twitter stream to connect with influential Forex traders from around the world. Many new Currensee members find us on Twitter and connect with other Twitter members on Currensee.

This new NASDAQ app shows the innovation that comes when you blend social data with traditional data. The ability to look at a chart and a price and blend that with what other people are doing right now provides unique new insights and gives traders new decision-making tools. It's reinforcing to see an institution like NASDAQ push the limits on data. I'm happy to be in such good company. :)

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

2 Comments

With this guest post, we welcome Casey Stubbs of Winners Edge Trading.

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Hello, My name is Casey Stubbs I write a Forex Trading blog and I have been a member of Currensee for a month. So far while being a member of this forex traders community I have payed particular interest to the Social Indicators. Currensee gives Forex traders access to exactly what traders positions are and which side of the trade is profitable and which side is losing money and they call that the Social Indicator. This is not a new idea because this indicator has been around for a while and there are brokers that figure this data and give this to their traders. However Currensee gives this data live real time and changing as the trades take place. You can even see if members of your trading team are long or short for a particular pair.
How can this help my trading?
At first I asked myself how can this help my trading and as soon as I asked that I noticed there was a conversation going on about the social indicator in the members hot topic section. I soon discovered two important factors that could impact trading decisions.

  1. I noticed that usually the greater number of traders in a certain side of a position that was usually the side that was losing money.
  2. I noticed that the side that was losing money was trading against the current trend that the pair was currently trading in.

Look at this picture the there are many more traders going short even though the current trend of the EUR/USD is strongly bullish.
So this became very clear to me that the majority of traders are not trading with the trend but instead are trading against the trend. I have always been taught to trade with the trend and I practice that in my daily trading. What happens is that the price may be changing a trend for a short time and most traders will jump in to get a quick profit but in doing so they will ignore the overall trend. This is my advice to traders on Currensee before making a trade, look at the social indicators see which side is profitable then look at your charts and confirm the overall trend of the pair. This will help you to not just follow your emotions but instead make sound trading decisions based on the current trend.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

This is one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

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One of the complaints I hear fairly frequently about trading, especially for those who do it actively on a short-term basis, is how lonely it can be and how easily one can feel they are going it alone. Trading, after all, is in many ways a very individual pursuit for folks in the retail trading realm.

Things are different on the trading desks of banks and institutions. If you haven't seen the trading floor of a place like Goldman Sachs then think about rows of desks with traders sitting side-by-side. They are generally grouped by market so that information and ideas can easily flow back and forth between the traders, analysts, and salespeople (the latter are responsible for customer-facing activities). Even in places that are smaller operations where there aren't the big trading rooms, like many hedge funds, interaction and exchange between and among the various participants is built in. In other words, no trader operates in isolation.

I personally don't work for a company which actually does trading. We instead focus on market intelligence. The bottom line, though, is that we provide the readers of our analysis and commentary with stuff which is aimed to be actionable. Even here we are set up in a trading room type of environment to facilitate information and idea exchange. I cover forex, but I'm surrounded by bond market analysts and frequently talk with them about things impacting both our markets.

Now individual traders not trading from prop shops and the like don't have the ability to sit in a room full of other traders and have that kind of interaction. Up to this point they have been restricted to exchanges in chat rooms and on forums, but that comes with considerable drawbacks, not the least of which is the inability to know if others are legit. With the introduction of Currensee, however, forex traders now have the ability to interact with each other in a real collaborative way, knowing exactly what the others in their group are doing.

You can work together
Some folks will no doubt be thinking they don't really want to know what others are doing or thinking. I can appreciate that view as I have long found that reading other people's commentary muddles my own analysis. That said, however, I have also found that in some cases I have meshed really well with someone else in terms of technical trading and between us we came up with really good trading ideas.

The trick in developing a good trading collaboration is finding people who compliment your style of trading. Obviously they have to trade what you do in the timeframe you trade. Someone focused on day trading EUR/USD isn't going to do much for someone who swing trades the JPY pairs. Beyond that, though, intermixing different ways of approaching the market can be very rewarding.

For example, you may be very good at fundamental analysis but not so great with technicals. Working with someone who has that complementary skill set could produce a very profitable relationship.

Also, some folks are fantastic market analysts. They can tell you exactly where the market is going on a consistent basis. Maybe they have a problem sticking to a trading plan, though. If they were joined with people who are very disciplined, but not so strong with finding good trading ideas they could developing a good partnership.

Plus the learning
And of course there's the educational angle in all this. It should be obvious to everyone how much more quickly one can develop their trading abilities by watching others in action. It could be as simple as picking up a new way of trading based on Bollinger Bands or price action. Maybe it's the placement of stops. Perhaps it's a way of playing the market in a shorter or longer time frame. There's always something new to learn in the markets for those looking to do so.

Think of collaborative trading as being like a school study group. You each bring something different to the table in terms of knowledge, perspective, and experience. That feeds into the learning of everyone in the group.

So don't be shy!
Get in there and find out what trading collaboratively is all about. Take advantage of the tools and methods of interaction Currensee offers now and will be offering in the future. Make new friends and meet fellow traders from around the world. The more you do that the better your chances will be of finding someone (or several of them) with whom you can talk about the markets and trading and work together toward better trading for you both.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

This is the first in a series of guests posts celebrating Currensee's launch into public beta.  Hillel Fuld is Content Manager of DailyForex.com, an online Forex trading portal.  You can connect with Hillel on LinkedIn and follow him on Twitter.

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If you have been paying attention to the latest trends that have people talking, you will definitely have heard the words “Social Media”, “Twitter”, “LinkedIn”, and “Facebook” mentioned in one context or another. Unlike many trends which have come and gone, experts believe that not only is social media here to stay, it will soon reshape the future of online and offline communication.

Many international corporations are turning to social media for their customer support, as well as marketing campaigns. The fact of the matter is that traditional marketing tools such as billboards or newspaper advertisements simply do not reach as broad or as targeted of an audience as Twitter does. Using social media, you can distribute an article, a promotion, or any other type of message to an unprecedented number of relevant people, and track precisely how many of them saw it, and what was the result it triggered.

While the hype surrounding these new tools is continuing to grow, so is the number of people who find them overwhelming and are completely lost when it comes to using them. If we are taking Twitter as a case study, the amount of people that create an account, send out one tweet, then never access it again, is disproportionally high.

Even worse than people who do not understand how to use social media, are the spammers who abuse it. Twitter is filled with false accounts that are simply individuals trying to promote and sell their product by sending out the same message continuously. These spammers do not partake in any sort of dialogue, and some of them are actually not even run by humans, but rather by what is knows as bots, that simply send out messages automatically at a certain interval. Clearly, this is not what it is about.

Any Twitter user knows that one of the most common types of spammers, are Forex Twitter accounts. In fact, a quick Twitter search for the word Forex will paint a very clear picture of what kind of Twitter accounts exist that are tweeting about Forex-related topics.

Anyone with a little common sense can put one and one together and realize that the potential for cooperation between traders in the biggest global financial market and the most powerful social tool we have ever known is much greater than this. The problem is most people do not have a clue how to make this synergy work properly.

Moving over to the professional social network, LinkedIn, a different and more subtle problem exists. LinkedIn is not flooded with Forex spammers, in fact, LinkedIn is not flooded with Forex anything. There is close to no Forex presence on LinkedIn. If you search for Forex groups for example, you will find that although Forex has close to 3 trillion dollars traded daily, there are no more than 20 groups for Forex traders on LinkedIn. Very few online Forex brokers take advantage of LinkedIn and the powerful platform that it offers professionals. The same applies to Facebook, the potential is there, but it is not being fulfilled by Forex traders, brokers, or businesses.

Now that we have concluded that the major Forex players are not using social media to its full potential, how can that be fixed? The following is a list of some of the first steps every Forex company should take in order to start realizing the potential social media offers.

  • Full Transparency on Twitter: Create a real account with the name of your company, state who you are and what you represent as part of your Twitter bio, and post a real picture that can be your company logo, but NOT a picture of a fake person in order to attract more followers.
  • Genuine and Relevant Tweets: Do not tweet about getting rich fast, or how much money you have made from Forex. The people following you should already be interested in Forex. Share interesting content whether it be news, market analysis, tips, or interesting trading statistics. Do not tweet the same thing more than a maximum of three times throughout the day. It is true that there are different time zones and people are not going to see all of your tweets, but those that will, will not be happy seeing the same thing tweeted ten times.
  • An updated and informative LinkedIn Profile/Group: It does not matter how you go about it, whether you have a representative of the company create a profile or have a company group, you will need to have a LinkedIn presence of some sort. LinkedIn is where all the professionals hang out, and if you consider yourself a professional Forex entity, you need to be there too.
  • Facebook Page/Group: There is an ongoing debate which is more effective on Facebook, a page or a group. One thing is for sure, not having either one, will get you nowhere. Raise the awareness of your company on Facebook. Create special promotions for your page’s fans or the members of your group. Encourage people to join and communicate with other traders with their level of experience. Make your Facebook group or page into a useful resource for traders around the globe.
  • Stay on Top of New Developments: The social media space is continuing to grow and evolve with new social networks starting all the time. If you intend on participating and being an active part of the online community, you need to keep your fingers on the pulse of the Web 2.0 world at all times. New projects like Curensee might be the perfect community to learn from traders like yourself how to improve your trading skills. With all the lack of transparency caused by the anonymity of the Web, a platform that gives your real time access to the actual trades of your friends might be exactly what you need.

In conclusion, social media is the most game-changing communication tool the world has known since the invention of the telephone. It is now pretty much a given to all online experts that it is in fact here to stay and leave an unprecedented mark on the world of global communication. Forex, which is by far, the largest financial market on the globe, as well as a safe option for many people in today’s troubling financial times, should be maximizing the potential of social media instead of wasting everyone’s time and money spamming users and hoping someone will take the bait. Forex companies should start by implementing the above steps, which will not only bring them positive results, it will improve the reputation of the Forex industry as a whole.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

1 Comment

Ring the bell…The Currensee trader network is open for all Forex traders to join!

Today, we announced that our Currensee trader network – the first-ever Forex trading social network – is open to the public. For those of you who have been following our journey, you know that we spent eight months in our invitation-only private beta stage. Here in startup land, eight months seems to fly by more like eight weeks, especially when you are building the types of technology and collaboration features that take mere mortals years to build.

As I thought back to where we started, it seems like forever-ago that we invited 25 brave beta testers to try out our new idea for a trader social network. Our founders, Asaf and Avi, had a strong vision – they wanted to build a place where Forex traders could collaborate based on real trades and real data – but it’s hard to cook up a social network with only 25 people.  So we started inviting more, a few hand-picked Forex traders at a time.  And we started adding features and tuning our performance and analytics. We were lucky to have loyal and vocal members who spoke up when things weren’t working they way they expected or when they had a feature idea or suggestion they wanted to share. The product became more and more robust and more and more traders starting requesting invitations.

The Currensee team kept cranking out new features, programs, promotions, controversial videos and other Forex trader goodies. And, in just eight months, things are very different than they were on that chilly day back in February.  We have almost a thousand people trading together. We have an innovative product that combines the fun of a social network with the unique insights of strategies, performance and sentiment data…all based on the trader network. We started with members from two countries and supporting two brokers. In just eight short months, we have members from over 64 countries and support close to 40 brokers.

On behalf of the Currensee team, I want to thank all of our private beta members that joined before there was even a real product. We could not have come this far so quickly without your help and dedication to making Currensee a special place for Forex traders.

Today we leave the invitation-only private beta behind us and throw the doors open to the world.  We invite you to join our unique trader network and see for yourself what makes Currensee the place to trade together.

When my friends ask me about what makes Currensee so great, I always talk about the open collaboration we bring to the world of Forex. That we’re changing the game by giving all types of Forex traders the ability to connect with one another, see live trades and positions and share strategies, ideas, victories and their losses. We call it transparency and Trading Together is how we make it happen.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Up late working on some cool stuff you'll see soon at Currensee, I happened to check in on the Asian session.  We checked up on the Aussie Dollar last week and this time I bounced off a post by our buddy Casey on the EUR/JPY.  Given all the chatter about the weak USD, it's nice to look at a pair that doesn't include the greenback.

Casey notes that the EUR/JPY is "testing a downward trendwall on the 4hr chart and that could be significant change in trend" and posits a resistance point at 133.77 after which he says, "we could see a reversal of the current down trend and that could bring new highs."

EURJPY support and reistance via Currensee Community Volatility widget

Over at the Currensee dashboard, we can see that the community predicts similar Resistance points, but most of the Currensee traders have so far guessed wrong on this pair.

EURJPY on the Currensee market watch widget

As the sun rises on the US trading day, we'll see what develops.  I hope you'll join the discussion on Currensee.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

The Currensee Market Watch widget indicates how the membership of the trader network is positioned. This is both in terms of long/short as well as in the money or out of it. The further the bar goes to the left of the central line the larger the number of shorts, while the further right the other bar goes the more longs there are in that pair. When the bar is green it indicates those traders are in the money. When it's red, the traders are underwater on their positions.

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This is one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

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Using EUR/USD as an example, we can see in the graphic at left how there are a lot of shorts, with relatively few longs. The longs, however, are profitable at this point in time while the shorts are in losing money. This is all based on the average entry price for those trades.

Now, it's early days yet. The number of traders included and the amount of volume covered in the Market Watch figures hasn't reached a critical mass as yet. Once it does after the site goes live, however, this widget could provide some very interesting insights.

The most obvious analysis of this data is to use the Currensee trader bias as either a contrary or confirming indicator. Generally speaking, retail traders are not very good when it comes to being right about market direction when taken as a collective. We'll see whether that holds true with the Currensee membership, though. Volume weighted social indicators may end up being a better confirming than contrary reading.

currensee-market-watch_2
There's more to it, however.

What I'm going to be very interested to see is whether the figures are going to be useful in a convergence/divergence sort of fashion, and also in a leading/lagging manner. By that I mean if there is a disagreement between the positioning of EUR/USD traders and USD/JPY vis-à-vis their dollar bias what does it mean? And which pair tends to lead the way when the market changes course? And what does the cross tell us?

Let me tell you, as a professional market analyst I spend a lot of time looking at what is going on around the pair I'm focused on at the given moment. I don't just look at it's price action and news events. If I did I'd miss what's really going on. In particular, I look to see if there's an element not in line which might tip me off that something new is about to happen. Differences in positioning among related pairs could be one of those tip offs.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.