“Trade crosses successfully, and you won’t want to do anything else!”
Before I get to the FX crosses, directly below this week’s 20 Day Range MA’s of
selected market pairs.
Three things stand out here from the table … 1) the “VIX Genie” in FX is out of the
bottle, and not likely to go back in anytime soon, even with summer upon us
… 2) crypto right now is a nightmare of low VIX, and global interest rate hikes
[except Japan of course] have put the space in deep bear market territory … and
3) remember Libtards when “Taliban Joe”, after starting sanctions on Russia
quipped, “I’m gonna turn the Russian Ruble into rubble”? … should have
mortgaged the house to BUY RUBLES WHEN IT WAS OVER 100, given Biden’s
track record of NEVER, EVER BEING RIGHT ABOUT ANYTHING IN HIS ENTIRE
LIFE … “who’s laughing now dumb ass”?
Back in 2014, I published a document about making money for life in FX crosses,
specifically EUR & GBP in the numerator, and AUD & NZD in the denominator, and
with the caveat that if the YEN could ever get its shit together, it could be in the
denominator as well … and at that time in trading history, excluding YEN based
crosses, the other four had daily ranges that were “out of the ballpark” … this
was, in retrospect, the “highwater” mark of the last decade, cuz at the start of
2015, FX had its “Waterloo” with the EURCHF debacle in January, and the FX
space has never been the same since … out went market based pricing and in
came central bank intervention like never before seen … and immediately after
that clusterfark, VIX started dropping in FX crosses faster than Biden’s cognitive
ability on a good day … and at the start of 2020, right before the COVID hoax
pandemic, one wondered if FX could ever move again … and concurrently with
the slide in VIX, came fatter FX cross bid/offer spreads, and the “slippage meter”
on fills at the scumbag bank LP’s adjusted to MAX … before 1/2015, spreads in
GBPAUD were routinely UNDER 2 PIPS, and in GBPNZD UNDER 3 PIPS, and
that’s with enormous daily ranges and volatility … and the EUR cross pairs were
right around 1.5 PIPS … where the Hell is that since then and now? … right, in the
dustbin of history! … in addition to that, banks have spent millions upon millions
upgrading computer networking and operate in nanoseconds [that’s billionths of
a second for you Biden voters], while even the fastest systems we can get
without going broke operate in milliseconds [thousandths of a second] … with
wider spreads and more slippage, and given their inherent advantage in speed,
there’s no way in Hell anybody is gonna beat any of these LP banks to the punch
when it comes to fills … quite frankly, in the crosses we have to be EARLY to the
trade or we get screwed … we don’t have to be early by much, just seconds, but
if we’re 1 second late before “liftoff”, they are gonna bend you over the fence for
your fill!
There’s no question that the trading algorithm for USD pairs, or markets that are
EUR denominated like DAX40, need some room to fluctuate in, in the normal
course of trading … the trading algorithm as presented in the manual works
BEST in pairs that “stand alone” … don’t get me wrong, it works very well in FX
crosses, but is it optimal? … is there something I’m missing with crosses that is
not present in standalone pairs? … and the answer is, I THINK SO.
Consider the following … in any FX cross, there are ONLY 4 MATHEMATICAL
PERMUTATIONS … these 4 make up 100% of available market moves … when
analyzing the MFI, it represents not only “dumb money” at the extremes, overall it
represents buy volume versus sell volume in an oscillator ratio … and when it’s
right around the 50 level buy volume and sell volume are about equal … that’s
fine for SP500, USDJPY, GOLD, and every other pair that stand by itself as a
market … but in a cross WE DON’T HAVE THAT SET OF CIRCUMSTANCES … if
both the numerator and denominator go UP or DOWN by the same number of
PIPS, the cross still moves .. if you don’t believe me, do the math and see for
yourself … if their respective volumes are equal as both rise or fall, the MFI will
not register correctly and give “false positives” … this happens far more
frequently in crosses than in standalone markets! … therefore, the obvious
conclusion is don’t use MFI in FX crosses … do any of us who trade FX crosses
care which element of the cross moves it UP or DOWN? … I sure don’t, all I care
about is making money from the trade … and given the scope and nature of the
way FX moves these days, crosses move very fast, with volumes coming in
quickly on one side or the other and “juicing” the cross UP or DOWN depending
on the day … and Bingo!, Bango!, Boom!, the cross moves 10 - 20 PIPS faster
than you can shove Benji’s down the toilet! … and so often, those moves only
get the cross to the “buy or sell” signal … CLEARLY, as last week pointed out
in both EURJPY & GBPJPY, particularly on Thursday & Friday when both
moved violently at times and had ranges well above their 20 Day Range MA’s,
THREE things need to be done with respect to FX crosses [nothing else]
… 1) they have to be FASTER TO THE BUY / SELL SIGNAL … 2) the MFI needs
to be replaced with something more appropriate for FX crosses … and 3) we
need to LOWER “FALSE POSITIVES” that lead to losing trades, with MINIMAL
give ups of GAINS! [you don’t get something for nothing in trading … EVER!]
… a tall order, but it has been done successfully I THINK! … giving up
occasional minimal gains to avoid a shipload of losers that “net” close to
ZERO ± a few dollars is “OK” by me, especially in crosses that can be as mean
to a trader as a tree full of hornets!
Our approach then in FX crosses has to be “PRICE” based [just move baby!], and
NOT “VOLUME” based for CONFIRMATION, cuz we don’t care which side of the
equation moves the cross with volume … AND, WE NEED THE TRADING
ALGORITHM TO BE FASTER IN THE CROSSES, cuz when they move too often
we’re left standing at the rail station when the train says, “All aboard, here we go!”,
and we’re sitting there sucking our thumb waiting for a signal that comes 10 - 20
PIPS AFTER BUY OR SELL FUEL IS EATEN UP! … and if you trade crosses, you
know exactly where I’m comin’ from … therefore, what we need in FX crosses is
… 1) a TEMA OF 8, AND A VIDYA OF 8 WITH A SMOOTHING OF 3 … and
2) replace MFI with CCI [Commodity Channel Indicator] PERIOD 8 WITH MEDIAN
PRICE [HL/2] … CCI is already loaded into MT4 automatically, so look in “Insert >
Indicators > Oscillators > Commodity Channel Indicator” and put it onto your
m1 candlestick … below are the PARAMETERS & LEVELS BOXES FOR THE CCI
THAT I USE … change colors to your preference if desired.
We desire a crossover of the TEMA [Yellow] OVER VIDYA [LIME UP, RED DOWN]
FOR BUY SIGNALS, AND TEMA UNDER VIDYA FOR SELL SIGNALS … THE HULL
200 EMA DOES NOT CHANGE … HOT PINK FOR INTERMEDIATE DOWNTREND
AND BLUE FOR UPTREND. For aggressive traders, buy signals can be taken
when the HULL is pink, but they must be scalps … ditto for sell signals when sell
signals are taken when the HULL is blue. WHEN YOU APPROACH A SIGNAL, THE
CCI MUST BE IN THAT -35 TO + 35 ZONE … the CCI measures price momentum,
without regard to VOLUME, and is thus what we desire.
Over in “DOWNLOAD LINKS”, entitled “ALGORITHM FX CROSS EXAMPLE.pdf”
is a screenshot of EURJPY from Friday, June 10, 2022 with the trading algorithm
and CCI. Note the comments in the chart. I put it here so 1) it’s easily accessible
in the future for study without having to come back to this blog update post, and
2) it’s in Adobe PDF, which means it can easily be “zoomed in” and studied in
detail online, or downloaded, whichever you prefer … as with everything I share,
it comes from my shared file folder at “box.com” and is guaranteed virus free
and available to everyone FREE … Google blogspot tends to not reproduce charts
very well, so I want everyone to have access to good chart copy for viewing.
A similar chart would look almost the same from GBPJPY … what’s interesting
about this EURJPY example is that 1) the HULL is pink, so the trend is down, and
the “algo no trades” from the buy side are all very short in duration and scope
… it would be tough to scalp these given spread + commission [if any] … on the
other hand since HULL is in a downtrend, the sell side “algo no trades” have 2 that
are winners and 1 that was a “false positive” … for now, I’m gonna keep
recommending “no algo trade” for both sides when the CCI does not confirm, cuz
that is the prudent thing to do … however, I’m going to be doing research into
“no algo trade” signals [both buy and sell] when the HULL is on the same side as
the trade … I’ll more than likely do more than 100+ examples from multiple pairs
over the next week, that accurately can represent the entire population of ALL
SIGNALS with a very high probability “confidence interval”, and then I’ll make
a final recommendation. This upcoming next blog update [June 19] I’ll have the
trading manual updated into “Version 2.0” and it will include all of the info in this
blog post plus more … when I’m done with that and have concluded to my
satisfaction concerning “no trade signals” with the HULL on the same side as
the trade, I’ll have that research included in “Version 3.0” of the trading algorithm.
As you can see from the EURJPY example when you view it, algo signals against
the HULL 200 EMA are generally short and dangerous … it’s a coin flip
determining whether or not you can successfully scalp some of these, but after
significant declines, these long signals tend to be OK for scalps in a general
sense … for most traders, if you choose to trade FX crosses, and specifically now
those to consider would be EURJPY, GBPJPY, AUDJPY, & NZDJPY, I generally
recommend you stay on the side of the HULL 200 EMA … it’s up to you of course,
but just keep in mind what can happen when you pee into the wind when it’s
gusting … I’ll leave it at that.
For other markets where you have good spreads and minimal slippage, and
aren’t at Turnkey, use both MFI & CCI for “double confirmation” of a good signal
… MFI measures VOLUME FLOW, and CCI measures PRICE MOMENTUM … they
aren’t measuring the same thing, which is important, but understand they have
to be correlated for markets to move.
One other thing I wanted to mention before I wrap this up … and that’s using
different time periods with the algorithm … NOT RECOMMENDED cuz it’s
designed for the m1 … you simply CANNOT dissect algorithm parameters along a
linear scale, cuz markets are “fractal” in nature and scope … that means they
move in different time frames utilizing a nonlinear exponential function … e.g., if a
chart is “X” and you move up or down time frames, what’s the nonlinear exponent
and how do you calculate it? … is it X to the power of 1.65, or maybe 0.83?
… dunno, but you’re looking at a helluva lot of research work to find out, I can tell
you that … so, while coin flips work often, putting the algorithm on an m5 or m15
candlestick chart might work or it might not.
Coming into this week, I’m gonna give EURJPY another shot at Turnkey for the
PAMM … my gut tells me we should be OK with latency and slippage, and you
can’t argue with the ranges and the trading action of late … “risk on / risk off”
has taken a back seat to interest rate differentials, and with the “hot mess”
inflation numbers seen on Friday [thanks Biden], and the FED coming on
Wednesday, a 50 bps hike is baked in, and I’m wondering if the FED Lounge
Lizards want to do “shock & awe” and go for a 75 bps hike … given the awful
dynamics of both EUR & JPY, for many reasons, I can’t see this cross slowing
down … so, back to EURJPY for the start of the week and let’s see where it
takes us.
Enough for a Sunday … outta here … “The future’s so bright I need 2 pairs of
sunglasses 😎😎, and my own Brinks armored truck” 💓!!
… Onward & Upward!!
-vegas
No comments:
Post a Comment