воскресенье, 2 мая 2010 г.

Ranking of currency pairs

We all know that the forex market - a huge market with many traders and players around the world, trading privately or professionally.

Over the past few years we have witnessed a strong development of direct sales via the Internet by all kinds of trading strategies using the latest technologies and software.

Only one thing remains unchanged - how to make the best deal.

Many traders are concentrated in deytreydinge only one currency pair, trying to squeeze the maximum out of it with all the power of software, technical indicators, (automated) trading systems and strategies for managing capital.

In this article I would like to show you a very simple way to at least remain in the correct direction of the trend of currency market for the possibility of taking profit from this trend. We will consider not just a few currencies and shall analyze the main pair and the main so-called cross-training.

As you know, the diversification of currencies in the portfolio spreads risk.

For example, in the portfolio, consisting of five currency pairs, the two positions may be currently unprofitable, but the other three may show profit, offsetting losses from the losers.

All graphics and strategy in this article are based on daily data, as well as the closing day on forex is used during the closing Dow Jones on New York (20:00 GMT).

Of course, you can create your own daily data, using a different time of closing, which you like. This feature is built into most programs, technical analysis.

To conduct the ranking basket of currencies, they must be measured the same way. Only then can compare currencies with each other.

Since we do not like to complicate in this article as the main indicator for all currencies in the basket will be used by RSI.

However, by itself RSI on daily data can be very volatile, so we are looking for a more gentle way to track the strength and weakness of each currency.

The next graph in the upper part we show the price of spot EUR / USD, and at the bottom - a standard indicator RSI.
Standard computed RSI bit variable for this analysis, but we would like to measure all the currencies in the same way. To smooth the RSI, we add two simple moving averages. One - a 10-day simple average, and another - a 30-day simple average.

The next step is to use these two averages to create a ratio of strength and weakness of the currencies under study. To do this, divide the 10-day moving average at the 30-day and multiply the result by 100.

The next graph, we see the ratio in the bottom of the chart more smoothly and gently reveals signs of strength and weakness of the market.
All analyzed currencies are measured in the same way, so we can compare them by comparing their relationship.

Now that the software that you are using may simply display in real time all the analyzed currency.

The ratio of RSI gives us a hint about the direction, but we would like to have a second and a hint of the rate of exchange.

Currencies may be long or short that determined by the position the line ratio above or below zero. The question now is this - in any currency is the highest speed or momentum?
It turns out that the ratio of RSI has changed from 112 to 110, and the momentum from 104 to 100, becoming a little weaker, but nevertheless, this is the strongest currency in today compared with yesterday's calculations.

Different colors in the table show the ratio RSI market higher or lower than 100.

Using this table, we get a good glimpse of what the currency markets are strong and which weak.

Depending on the size of your account, every day you have long positions on the four strongest markets and short positions in the four weakest currency pairs of your portfolio by adjusting the position of necessity.

Adjustment is carried out on this day, every day at the same time.


Practically, you hold in its portfolio four strongest currency pairs in long positions, and four weakest - in short, adjusting portfolio on a daily basis as needed.

When trading this way risk is distributed across the portfolio has been significantly reduced compared to trade one currency pair.
Now we add to the calculation of the pulse.

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