Tag Archives: forex trading strategies

A few weeks ago, one of our contributing writers, John Forman, posted on when the best time of day to trade Forex was. The question was inspired by the Q&A session of our last Trade Leader webinar featuring Currensee’s Taylor Growth, who explained the benefits of using a conservative Forex trading strategy.

Recently, we were able to get some insight on this question from another Trade Leader; Gabor, Asirikuy Trading. Gabor trades using a technical strategy based on indicators such as Chart Patterns, Bollinger Band, RSI, Stochastics.

Gabor says:

“It depends on the currency pair. The rule of thumb is that the bigger the liquidity of the market, the better to trade it. Liquidity is changing during the day even for heavily traded pairs. E.g. the London session is considered to be the best time to trade the European majors (EURUSD, GBPUSD, USDCHF). Big liquidity does not necessarily mean directional price movement - we can experience the formation of congestion zones many times during liquid hours. But when balance between bulls and bears is broken during a highly liquid period, chances are that it is going to be a meaningful movement, the beginning of a trend.

To support my statement, I examined one of the short-term trend following systems that I trade at Currensee.

It's a momentum-based strategy, which trades the H1 EURUSD. If price momentum reaches a certain threshold, the system opens a market order in the direction of the momentum. In other words, if the open/close of the hourly candle is bigger than a preset % of the daily volatility, we enter the market. I ran a simulation of 12-year price data and then grouped the market entries by hour. The result is shown on the chart.



As you can see, most entries are in the overlap of the European / US sessions which starts in the range of 1 p.m. GMT (New York) - 2 p.m GMT (Chicago). This lasts to the last hour of the London/Frankfurt session,  5 p.m. GMT. The Asian / European overlap is the second most busy period from 8 a.m to 10 a.m GMT.”

It is interesting to compare this response to that given by Trade Leader Taylor Growth. Since he is a range trader, he feels that the lower trading volume in the NY afternoon, Asian, and early-European sessions yield the highest success rates. He explained that the best time of day to trade really depends on the strategy the trader is using. Since his conservative strategy is very technical, it fares better in Asian sessions when trading European pairs. Since it’s nighttime in Europe while the Asian markets are most active, no European news releases are making their way out and influencing trades.

To see how these two Trade Leaders’ trading strategies have been working for them, check out the Leaderboard.

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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.

We are now more than two weeks into the new year and the currency markets remain rangy and searching for a trend. This goes not only for the USD but the Euro, Gbp and Yen which have all been oscillating in ranges thus far. Is this really all that surprising? Probably not given the issues on expected global banking regulations, global tax hikes, the slow G7 economic recovery and the US health-care/political landscape. Toss in a few holidays and many of us can’t wait for these ranges to give way and for the next trend to develop.

Others may not agree though. Some would argue that knowing levels that will act as strong support and resistance or finding divergences is far more important to a trader. For example if you dive into the Strategy section on Currensee the ‘MACD Strategy’ works off 5 minute charts and uses MACD readings for signals. It doesn’t get much more straightforward than that and it has been able to boast positive return since May, 2009.

Others would prefer to scalp the markets and not worry about whether we are trending or oscillating. Just looking at the cumulative return of the ‘Channel Scalping’ strategy used by one trader does not show the entire picture of this strategy. Digging deeper shows that when this trader is scalping EUR/GBP on a 5 minute basis it reveals a 77% win-to-loss ratio. The return is a handsome 13.6% as well. This isn’t the only currency pair that shows strong win-to-loss ratios for this trader as AUD/USD, USD/CAD & USD/JPY all boast ratios of over 50%.

Still others may prefer trends and being able to buy the dip or sell the rally with confidence. I have a daily model that I utilize for EUR/USD; it produces a signal about 2/3rds of the time and utilizes very simple inputs to receive its signal. It went from Long to Neutral in early December and has been idle ever since (snooze). Back in the Strategy section though shows that others have been able to produce models that are a bit more active. The ‘Simple EMA Cross EA’ utilizes 30 minute time-frames and is being used, profitably, on the 4 major dollars.

Interestingly the top performing currency pair in the ‘Simple EMA Cross EA’ happens to be GBP/USD. The length of the average trade is just under 1 hour and it has widely outperformed EUR/USD in closed P&L.

I’m sure though if you or I looked for strategies that favored another currency such as the Yen there would be strategies in the Strategy section on Currensee that are worth taking a look at. This may be of interest for those that trade during Asian hours or want less sensitivity to economic sensitive news (with zero interest rates).

Point being that if you are trying to build a model of your own or just trying to find the right currency pair to trade then you may want to dig a little deeper than scanning the targets and cumulative returns. Sometimes not all currency pairs trade in a similar fashion therefore finding the right pair for you may make all the profit and loss difference in the world.

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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.

What is the hardest part of trading?  For traders new to foreign exchange it may be finding the right currency pair to trade.  For others it may be figuring out which time horizon to trade or learning which economic indicators have the ability to make markets move in rapid fire fashion.  Even for experienced traders that are used to hitting the “mine” and “yours” buttons it may be the technology needed which may require VPS access.  For me it has been the transition from running models in Excel with DDE feeds to learning MT4 and developing code.

Even with all those potential obstacles trading the Forex markets does offer opportunity and reward.  I’m not trying to sound like a commercial there but any market that has seen its top traded security, EUR/USD in this case, trade up more than 20% in 6 months with generally little risk of that security going to zero offers some value.  Yes there have been some emerging market currencies that have caused major pain for investors but the Forex market wasn’t alone in suffering trading and investing losses in those instances.

One of the beautiful offerings on Currensee is the “Strategy” section.  Here traders that opt to offer their strategy, and many do, show the strategy they use.  Not only is the strategy description offered but their performance is broken out by currency pair and other behavioral metrics such as the average duration of a trade is displayed.

Where else will you find such valuable insight?  You can have this work two ways for you as well.  Especially if you are inquiring about a strategy that you may want to use and want to see if someone else is already using it.  For example what if you think that "trading the (economic) numbers” is a useful strategy.  Or how about “chart pattern recognition."  There certainly are no guarantees that the trader using the strategy is making the right decision every time but certainly this is a valuable warehouse of information.

Let’s take an example.  Have you traded “Cable” or the “Loonie” before?  That is GBP/USD and USD/CAD respectively.  In my experience Cable tends to be a very choppy currency.  It doesn’t move from 1.50 to 1.60 in a straight line very often, its more like a major zigzag formation between the 2 figures.  Some counter-intuitive thinking may be needed every once in a while.  The strategy “CB Counter Trend” shows an accumulated 614.14% gain by the trader that posted this strategy.  Its description says that it is a “a counter trend system” using 5 minute charts and their target is 20 pips per trade.  For more details on this particular strategy please visit the Strategy section.

I have not used this exact system myself but it sounds perfect for GBP/USD and some other pairs.  Of course this isn’t the only strategy that shows merit and from my account there are over 160 strategies that post returns and even more strategies that showcase their description.

If you are looking for strategies and more trading ideas then you may want to visit the Strategy section 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.

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I love to see partners, like IBFX, putting social media to work for Forex traders. Today, IBFX announced a pretty cool new Facebook app that they'll be showcasing at the Traders Expo in Las Vegas later this week.

According to the press release, "Available through the Interbank FX Facebook page, this new application will facilitate Micro Mini Picture 42Challenge participants to connect with Interbank FX and their fellow traders through Facebook—allowing winners to tag and share their photos and winning certificates."

The Facebook app is a great idea. Why? Well, Facebook is all about leveraging your social graph, an intricate map of how people are related (socially, that is). People typically connect with other people on Facebook based on a common thread. For some it might be friends they went to high school with, others might be family dispersed all over the world, still others business groups and colleages. That's the power of a social graph. It can combine all of these different people based on how they're related.  These IBFX traders all have a few things in common - 1) they're Forex traders 2) they won this contest and 3) they use Facebook. The idea of giving these traders a fun and unique way to communicate and collaborate is what makes social media such an exciting strategy for brokers and financial firms alike.

“Our Micro Mini Challenge is a fun way for traders to engage in friendly competition,” said Marilyn McDonald, Vice President of Customer Experience at Interbank FX. “We at Interbank see the growing trend for traders to incorporate social media into their trading strategies, and we’re excited to facilitate a social connection between our Micro Mini Challenge participants and our Facebook page.”

We are excited to have hundreds of Forex traders and members as Currensee fans on Facebook and an integration with Facebook in the Currensee dashboard. It's an exciting way to connect with other Forex traders and we give the new IBFX app two thumbs up.

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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.

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Last week, Currensee was honored to present veteran trader and educator Toni Hansen in an informational Webinar called, "Is the Trend Your Friend?" in which she gave the eager audience of hundreds of Forex traders an entertaining and contrarian view of some common Forex trading strategies. Watch a short clip here:

After the presentation, Toni took some questions from the audience and talked about her Market Timing course.  You can learn more about Toni's webinar and see other Currensee Forex webinars featuring Jamie Coleman, Shaun Downey, John Forman, and Boris Schlossberg at www.currensee.com/webinars.  We're always looking for ideas for topics and speakers, so drop us a line with your ideas!

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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.

There's been  an interesting thread going on in Currensee's community over the last week or so.  In part,

About 3 years ago, 1 year after I started rewiring my brain to comprehend 4X, I was watching a tick chart while waiting to enter a trade, when I had an ePIPhany. What if the ticks were put to music. If it made sense then instead of laboring your eyeballs to decipher chart patterns, it would be much easier to listen for your "Favorite" chord progressions. [Currensee member Darryl W.]

You can log in to view the thread or apply to join Currensee's private beta here.  You can also read about music and fx trading at Darren Tseng's blog.  Many forex traders use different forms of Technical Analysis to discern patterns in the currency markets, such as Fibonacci, Coppock curves, MACD (Moving Average Convergence Divergence), Parabolic SAR (Support And Resistance) and more.  We see a lot of different trading strategies in the Currensee community, but so far none based on music.  Maybe Darren and Darryl will cook something up, so keep your eyes on your charts and your ears open to the music of the markets.  Until then, at Currensee towers, we're listening to hip-hop artist Curren$y.

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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.

Remember the old saying “tis better to give than to receive?”  This is the entire basis for how Currensee works.  Strangely, it is a beautiful thing. We are completely dependent on traders sharing their real trades, strategies, and even their performance.  I guess we run into a person now and then who says, "Why should I share? What am I going to get out of this ?" (I guess those traders have figured out how to make money on their own – LOL) but the vast majority of our community just gives and gives and gives.  And they  get quite a bit back.  The more friends they make, the more trading ideas they see in their position table.

The Currensee position table

All the details -  the pair, entry position, entry time, margin used, stop loss, take profit, the strategy behind the trade and any charts that back up the trade and even if the position is winning or losing. This picture shows only half the information that's available in the live platform.

The magic is that the more people you invite to share your trading information, the more trades you see and the more people you can collaborate with.  Because if any of these positions change you are immediately notified and that is pretty handy when you have opened a similar position and you are away from your trading platform.  You can talk to the trader you re sharing with via chat or Skype and really work as a team to determine if it's time to get out or holding on is the right thing to do.

So why are hundreds of traders sharing like this?  Is it because the service is free or we found all the good people in Forex….or is it because we are all social animals?  We need to express ourselves and connect with one another and what better way than thorough a common interest, whether it's the way we supplement our income or make a  living or with something we just love to do.  So if someone asks you why would you share your trades on Currensee….just smile and ask them what they would like for Christmas or Hanukkah, or Kwanzaa….

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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.

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Automated Adam, Discretionary Derrick...meet Team-trading Tom.

There are many types of traders on this earth. Regardless of whether you trade forex, futures, or equities, you understand one thing. Your success depends on your long term ability to determine accurately which securities to play in, how much you enter a position with, and when you enter and exit a position.

For automated system traders, the initial parameters of mixed oscillators and indicators can be a large determinant to how you perform even after you've optimized it. You understand the market can be bipolar and act completely irrational and work against your system when you least expect it. You make money from the market largely due to the statistical edge you've gained through proper back testing and scrutinizing the losses far more than your possible winnings. Even then, you realize that not all systems will be forever profitable for the lone reason that the market is essentially human and no mathematical model can accurately and fully describe human behavior.

If you are the discretionary trader, then you realize what the automated trader does but you also see patterns; some may even "feel" them. Profitable intuitive traders can "feel" the current of the market's waves much like a surfer "feels" the ocean's flow. Discretionary traders are also adept with support & resistance, chart patterns, candlestick patterns, Elliot wave theory, and Fibonacci points - on top of risk management theories and the usual list of indicators and oscillators.

Now. There is a third type of trader. One who can be one of the aforementioned types of traders on top of being a team player. This trader is capable of gauging support and resistance without needing to draw a line at all. This trader is capable of connecting to those which are better than them, those who are equal to them, and those who want to be as good as them. This ability to collaborate adds a "whole 'nother way of lookin' at the game." This trader realizes that this information resource is invaluable since they realize that they can see what most others cannot. They may have the insight of a discretionary trader or the discipline of a automated trader. However, with this new level of analysis, traders will have the ability to filter out their methods of trading with social indicators and can see the community bias on the balance of the market.

Years ago when I starting doing forex, since it was all new to me, I spent a lot of time just reading website after website looking for information and learning everything I could get my hands on. It was to the point that I woke up every morning and immediately starting thinking forex. I was not trading live yet, but I learned everything I could. This included risk management involving gambling theory, chart patterns, various indicators, and trading systems. I starting getting into it, digging myself a hole until I was buried. Why was I drawn to it so much? It was a few things: I liked how everything could be visual on graphs, the way money exchanges hands has mesmerized me since I was in elementary school, it involves technology, but most of all it involves people. People watch birds; I watch people. Not in a creepy way but to observe human social interactions and motivations. I think I've always been like this. So, when I had the chance to jump on board with Currensee, I was all over it.

This opportunity lets me see things in a completely new way. If I had to describe myself, I'd be mostly an automated trader. I like developing a mechanical means of reading the market where discipline is absolute and it can work for me non-stop. At Currensee, I'm a bit of all these types of people. I've taken it upon myself to beat my biggest weakness, discretionary trading and discipline. I've narrowed it down to the necessity for me to follow my rules and to learn from my mistakes. And, now, I'm teamed up with other people. I can trade real-time with them while messaging, posting and starting new discussions. I can even make strategies around them if I care to. I can also learn from traders who are better than me and teach traders who don't know as much as me. All while getting information on the community's trades and opinions on fundamental news and currency pairs.

If you asked me a few months ago if I thought I'd mix up my automated trading approach, my answer probably would have been "hell no." It works and why change something that's not broken. I've gotta say that team trading has opened up a whole bunch of new ideas and strategies for me. I've connected with people around the globe - people who trade differently than me. And I'm challenging myself by using several different approaches - something that's hard to do with a machine.

So, that's my take. I'm curious to know what you think. Is your trading style open to some team spirit?

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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.