SaigonFX's Daily Short-term Momentum Strength Scores

[bcarbon]

SaigonFx,

Can you tell me how do you decide which currencies are competing currencies.

Also, I assume that you are using a momentum indicator. Can you share it?

"Here are the short-term momentum strength scores for July 18, 2012 as of 00:30 GMT:

USD - 7
JPY - 6
CAD - 5
CHF - 3
EUR - 2
NZD - 2
GBP - 1
AUD - 0"

Your system looks very interesting. Are you giving more information on the mechanics? I hope you do.

[saigonfx]

SaigonFx,

Can you tell me how do you decide which currencies are competing currencies.

Also, I assume that you are using a momentum indicator. Can you share it?

"Here are the short-term momentum strength scores for July 18, 2012 as of 00:30 GMT:

USD - 7
JPY - 6
CAD - 5
CHF - 3
EUR - 2
NZD - 2
GBP - 1
AUD - 0"

Your system looks very interesting. Are you giving more information on the mechanics? I hope you do.

I use MACD for momentum readings, though you could also use RSI. I use the standard MACD settings (12, 26, 9).

Each currency of the major 8 (USD, JPY, NZD, AUD, CAD, GBP, EUR, CHF) competes against the other 7 in the same group. Therefore each currency has 7 competitors in my system. I suppose one could adapt this system to work with some of the exotic currencies like NOK or ZAR but I just don't trade those currencies due to the high spreads and lack of a complete set of crossrates for them.

I will be posting a PDF here illustrating how I use momentum, but basically I am just looking for standard (or "Type I") momentum divergences, meaning, situations where price is making higher highs and higher lows but momentum is making lower highs and lower lows, or alternatively, situations where price is trending lower and momentum is trending higher.

I do not attempt to identify things like signal line crossovers or center line crossovers using MACD.

I anticipate having the PDF up by August - it will give lots of examples and show how to deal with the messy reality of real-life charts. I hope that document will allow anyone who wants to, to be able to do this at home.

[bcarbon]

SaigonFx,
Thank you for your answer.
Here is my next question. Since forex comes in pairs how do you come up on the strength of a single currency . Is it by comparing each pair that contains that currency? Can you post some charts and examples?
Thanks you for your time

[Jamzz]

The trade with aud/usd is still on?

[saigonfx]

Here are the daily momentum strength scores for July 20, 2012 as of 2:30 a.m. GMT:

(Please note all scores are out of a possible seven points)

USD – 5
CHF – 4
EUR – 3
GBP – 3
JPY – 2
CAD – 1
NZD – 1
AUD – 0

The main thing to take away from today's results is not so much the idea of USD strength (while it had the highest total, the USD turned up neutral against the EUR and GBP and looks particularly vulnerable against those currencies), but the continuing signal of AUD weakness. All week long, the AUD has been signaling that a trend change is imminent and when it occurs, I expect the retracement to be deep and at times very rapid.

Nonetheless, the AUDUSD's ability to climb higher in the face of waning momentum has been impressive and, as I mentioned yesterday, this pair might be aiming for Fibonacci resistance at 1.0491. I took advantage of the higher price to add to my short position (according to the entry levels mentioned yesterday) which now stands at 1.0347 net.

[saigonfx]

Here are the daily momentum strength scores for July 20, 2012 as of 4:00 GMT:

USD – 6
EUR – 5
CHF – 5
GBP – 2
CAD – 2
JPY – 1
NZD – 1
AUD – 0

Overall, this looks like a heavily polarized market which is likely to produce big moves over the next 2 to 3 trading days. Once again, the most polarized pair is AUDUSD, suggesting to me that the short trade I entered on this pair will turn out all right if I just allow price to take its course.

My entry strategy included 3 entry points staggered about 55 pips apart. As price has risen, my second and third entries have been triggered, giving me a net short position at 1.0391. Price is getting close to my stop, but I expect the advance to stop before the Fibonacci resistance just shy of 1.0500 is reached.

More broadly, it looks like the USD has been slowly but steadily gaining steam this week for a sustained period of strength while the AUD is approaching overbought levels and should lead the decliners down over the next week.

[saigonfx]

Here are the short-term momentum strength scores for July 23, 2012 taken at 3:00 GMT:

CHF - 6
EUR - 6
JPY - 5
GBP - 3
CAD - 3
USD - 2
NZD - 1
AUD - 0

The message I take away from today's action is that momentum is telling me to look for sustained downward movement in AUDCHF. This is a pair that has generated three previous sell signals in the month of July, however, and I've been stopped out twice during AUDCHF's seemingly relentless climb higher. As yunny, MontyJB, and others have mentioned over at http://forums.babypips.com/other-pai...t-audchf-today, however, there are strong fundamental forces that make shorting this pair a risky proposition.

I report these momentum scores as raw data and for me, they must be taken into consideration alongside other technical factors such as wave structure. I can see a bearish wave count for AUDCHF but until USDCHF reaches a near-term high (a pair I'm following at Time to build short positions in USDCHF), I would like to sit on today's momentum readings and see how price and momentum change in this pair over the next day.

Similar to the situation in AUDCHF, today's momentum data also suggest EURAUD may also be preparing to turn higher, but this is a pair that has been locked in a relentless downtrend and I'd like to see a firm short-term bottom in EURUSD before considering a trade in EURAUD.

[saigonfx]

Here are the short-term momentum strength scores for July 24, 2012 as of 3:45 GMT:

(Please remember all scores are out of a possible 7 points)

NZD - 5
EUR - 3
CHF - 3
AUD - 3
GBP - 3
CAD - 2
USD - 1
JPY - 0

Today's quick glance at short-term momentum suggests a muddled market for today, with the AUD correcting higher and the CHF losing some of the strength it showed (especially against GBP, AUD and CHF) yesterday. However, I expect the bearish trend in AUD and the bullish trend in CHF to continue by Wednesday.

Our most polarized pair for today is NZDJPY, which I am expecting to head higher to at least 62.21 over the next 24 hours. However, I don't see NZD strength or JPY weakness at the higher time frames and so I am not looking at this as a trading opportunity.

[saigonfx]

Here are the short-term momentum strength scores for July 23, 2012 taken at 3:00 GMT:

...

The message I take away from today's action is that momentum is telling me to look for sustained downward movement in AUDCHF. This is a pair that has generated three previous sell signals in the month of July, however, and I've been stopped out twice during AUDCHF's seemingly relentless climb higher. As yunny, MontyJB, and others have mentioned over at http://forums.babypips.com/other-pai...t-audchf-today, however, there are strong fundamental forces that make shorting this pair a risky proposition.

I report these momentum scores as raw data and for me, they must be taken into consideration alongside other technical factors such as wave structure. I can see a bearish wave count for AUDCHF but until USDCHF reaches a near-term high (a pair I'm following at Time to build short positions in USDCHF), I would like to sit on today's momentum readings and see how price and momentum change in this pair over the next day.

I now believe that USDCHF has little further room to travel to the upside, having hit my target range of .9920-.9976 and, I can see a clear five waves down in AUDCHF on the 15-minute chart. I would therefore consider yesterday's sell signal on AUDCHF to be operational at the current price of 1.0200. My target is .9950. Stop: 1.0310.

[mimmi]

Hi,
This looks so interesting, hope you explain more!
Thank you!