This strategy is developed based on the analysis of the relative strength between 6 currencies usd, eur, gbp, jpy, chf and aud. Thus combining all, we get a maximum number of 15 currency pairs.
In the forex market, I believe that the analysis should be done in terms of negotiation, can not be made the same way that the analysis is done to the stock quote market or products that derive from the stock quote market.
In the stock quote market is expected that a favorable global economic environment, a properly diversified portfolio of stock quotes, can achieve positive results. Similarly, it is also expected that in a period when the overall economic climate is unfavorable, it will result in losses.
That means that we always have a stock quotes market to follow the dominant trend, with no limit to the periods of ups or periods of decline.
In the case of forex, and a view of the relationship between currencies, the situation can not be judged the same way. In the case of portfolio of six currencies to negotiate, and the relationship between them, so that certain currencies may appreciate, others will have to devalue.
Say it's possible to make an arbitrage between currencies, ie, we can never say that a perspective of economic growth all currencies appreciate, or otherwise they all devalue.
We also can not identify, based on historical data, that in situations of economic expansion is well defined, there are currencies that are equivalent in terms of performance, we can not even identify which currencies benefiting from a favorable global environment to the detriment of others.
Over time we found that although there are certain periods in currencies that demonstrate great strength or weakness when compared with the other, we also found that they relate within limited ranges, the time frames used in the analysis that underpins this strategy .
Based on this perspective, consider that each currency, which show strong relative to others in a given period, will at a later time, a moment to lose the rest.
So I think the best option to trade in forex, it will be always in the direction of negotiating the balance between currencies, that is betting on further weakness of the currencies that have strong and future strength of the currencies that have low within each timeframe analysis.
The strategy that set, I analyze the relative strength of currencies eur, usd, gbp, chf, jpy and aud at 3 different timeframes, 3 months, 20 days and 4 days.
For each timeframe identify the strongest currencies and weaker in the analyzed time period, and I believe that in future this ratio will be reversed.
This analysis incorporates some indicators (indicators used anything on the market) to detect movement of retraction on the relationship between currencies.
Accordingly, I determine a relative ranking among the six currencies and combining them all, get a set of 15 currency pairs, and in case of equality between currencies in global ranking, the pair formed by these currencies are not traded.
This assessment always results in enhancement of retracement and devalue existing trends. This situation will be sustainable given that we are aware that over 70% of the time, there are no well defined trends in the market, so prices vary within certain ranges.
For these reasons, I consider that the forex market has to be seen differently from the stock quotes market.
Thus, this strategy assume that just keep 1 open position in each currency pair.
The assessment will be made every day at the close of the market, adjusting the portfolio of forex in relation to changes that may exist in the classification of currencies, compared with the previous day. That may occur during the day to close any open position, but never opens the new position before the assessment at the close of market.
In the event of an equal rank between two currencies, I can not take the close position that may have open in this pair, before opening a position contrary to that held by this relationship does not change. Then when there is a sign of openness in a particular direction simply close the opposite position in the pair. The operations are always the same, close and then open a position or a position contrary to open and then close the other.
In any event the number of contracts for each currency pair should be adjusted for capital investment for each person. Also the risk assumed by each trader should be adjusted so that the number of contracts for each currency pair falls within the parameters set for the risk.
This strategy fits the characteristics of traders who meet the following principles:
1 Traders who have a high propensity to stay on the market, since with this strategy there will always be open positions;
2 Traders who opt for open positions regularly trying to find high and low, looking ahead to a change in trend;
3 Traders who for whatever reason can not follow the full time evolution of the market, since in accordance with this strategy only in the daily close of the market, an assessment is made to the portfolio, to determine adjustments in the portfolio of forex;
4 Traders that aim to realize a large percentage of business winners, in the entirety of the portfolio. It is expected a rate of over 70% of deals closed with gains;
5 Traders who do not have a great concern about the possible and foreseeable losses on positions held open. This strategy always favors the closing of winning positions, keeping the losing positions, will always be expected that at the end of the day, to evaluate the performance of the portfolio close to winning positions that represent a higher monetary value than those that are close to losing positions. It follows from the mean, that after the daily rebalancing of the portfolio is expected that the balance of open positions will become more unfavorable. This situation, in terms of drawdown will have its repercussions and that DD is not real, just as they always portray the open positions, however they do not reflect the positions closed. So Drawdown may present high ceilings, but that does not correspond to a real situation ever.
In conclusion can I assume that I follow trading patterns that have nothing to adjust with the principles followed by great experts in the market. But we also know that less than 30% (not to mention other value much lower) of forex traders win consistently in this market, so each person must establish his or her way to negotiate, given its own personality and its behavior towards risk.
This is how I fit in the market, which has given me results that I consider very positive. I will not talk about results of the past, since I am too lazy to show them, so do not even have to do, so the purpose of this BLOG is to show the results in real time so that each person who will accompany the strategy can develop your own opinion.
My goal is to negotiate a portfolio of forex, but express my daily ratings on all currencies, this will determine my position on all currency pairs involved (15).In direct comparison of two currencies that make up a given pair, it is always assumed that that is the highest ranked will appreciate what I consider to be the next day.
For now I can not even share the account data I created for this operating strategy, and what I said in previous post, since it is only publicly visible after they are closed at least 30 positions, a situation that has not been the case.
I'll let the graphs showing the relative strength index among the currencies considered in the strategy for the period of 3 months, 20 days (one month) and 4 days.
Based on the analysis determined the following classification of currencies:
1 AUD
2 GBP, JPY
4 EUR
5 USD
6 CHF
This will be reflected in the portfolio of forex, the market opening on Sunday, introducing changes to the portfolio they hold today.
I can say that will close three positions that have won (at the beginning of the market on Sunday will see whether this situation will remain).
