Range-Bound Price Action Favors Range Trading Strategies

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near quarterly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s quarterly range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

Strategy – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.
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Just the other day I thought of the idea of combining Foresight A.I. with Vantagepoint. I have been experimenting with Vantagepoint since around March 06 when I bought it. What I have been backtesting recently is the idea of using Vantagepoint's Predicted Next Day Highs & Lows and plotting them on Foresight's prediction. The results have been quite promising. Below are two examples....

The first example is from the EUR/USD 12/28/06 Foresight A.I. prediction. Vantagepoint predicted a high of 1.3159 which was already blown out of the water by the beginning of the Foresight forecast which could then recommend to stay out of the EUR/USD for that trading day.

The second example is from the USD/JPY 12/20/06 Foresight A.I. prediction. Vantagepoint predicted a high of 118.56 and a low of 117.56. In this example, the price in the beginning of the Foresight prediction is well below the predicted high of Vantagepoint and well above the predicted low. Foresight is projecting a pretty solid trend for the trading day from the start, signaling a possible buy opportunity since both indictators are in somewhat of an alignment.

Again these are really basic examples with a lot more research and testing to be done. And as I'm sure you all know, Vantagepoint's forecasts are far from perfect but they do give a pretty good general idea of where the market is going and will be the next day. I currently do not own Foresight A.I. and am interested in meeting up with some Foresight users online who currently use the software. Thoughts?

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Forex News letters: Ed ponsi

Ed Ponsi is a globally recognized name as a lecturer and teacher and is the former Chief Trading Instructor for Forex Capital Markets. An experienced professional trader and money manager, Ed has advised hedge funds, institutional traders, and individuals of all levels of skill and experience. Ed has appeared on CNBC, CNN International and TheStreet.com

good amazon blog on forex

article Archives dated back to 2005 to see how Ed Ponsi forecasts worked.


The Four Horsemen, Revisited
No matter which vehicle you choose to trade, a trend is still a trend, a reversal is still a reversal, and a double-top is still a double-top. This also means that if you understand technical analysis and how to apply it correctly, you can trade most financial markets.

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Identifying Trending & Range-Bound Currencies
by Boris Schlossberg,

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http://www.bktraderfx.com/site/members-benefits

2 to 3 Signals a Week ;
asr: this newslette is from BOris guy of investopedia and GFT
asr: said jan 2009 return is 2k , so avg. month must be 1/3 of it that is $700 , our VP dolllar index DX can return this in a week , so forget this $200 month letters , in a year it costs 2500 you can get 3 VP categories

Option Idea: Long Call in the Dollar Index

main quote and news page for US DX -

- DX call/put data - click on links
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Option Idea: Long Call in the Dollar Index

the picture shows JULY 31, so October 2007 contract is 2.5 months away , DX is trading at 81 , so 2.5 months away CALL of 250 is very cheap . It seems DX option far out of money are less expensive given time 2.5 months.

asr: we can buy these kind of options for 1 month period ahead , out of money seems for $500 which can be used as insurance.
- 2/10/09 DX traded at 86 , March 85 strike call ( in the money ) is 21.00 as per LInd that is $2100
- seems good since 85 strike call is in the money by $1000 ( 86 -85 ) , so prerium is only $1100

- GBP currently at 1.44 , CALL option is 30 that is $1900 - volume 22
- GBP 1.56 strike ( out of money ) CALL is 19 that is $1300 - volume 87 , highest strike volume as per Lind
- EURO 128 strike ( at money) CALL 300 => $2700
- EURO 136 strike $740

Market: October Dollar Index (DXZ7)
Tick Value: 1 point = $10
Trade Description: Long Call
Option Expiration Date: 11/09/07
Max Risk: approximately $250
Max Profit Potential: Target is 200% of the risk.

Buy an October 2007 Dollar Index 82 call for approximately 25 points ($250) to open a position.


Profit Goal
Or profit goal is to catch a move above 82.50 on the Dec. Futures contract. Break even point is 82.25 assuming a 25 point fill. 100% gross profit would be realized at expiration if the market is at 82.50.

Risk Analysis
Max risk, before commissions and fees, and assuming the above mentioned fill would be $250. The full premium paid for the option is lost at expiration if the market expires below 82.00.

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http://www.tigersharktrading.com/authors/41/Jamie-Saettele

5/11/2008 - DX options sample

Hello Everyone.

Welcome to The J.E.D.I. Trader.

To learn more about my Stocks, Options & Options on Futures Trading Service, click here.

INTERMEDIATE TREND OF THE U.S. DOLLAR MARKET: UP

STOCK/OPTION/FUTURE UNDER ANALYSIS: JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION

TICKER SYMBOL: DXM874.00C (Note: For some firms the ticker symbol may be different)

4/26/2008 ENTRY ALERT: Buy one DXM874.00C (June 2008 74.00 U.S. Dollar Index Call Option)

4/26/2008 CLOSING PRICE OF JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION:

$.555 ($555.00)

5/4/2008 (WEEK 1) CLOSING PRICE OF JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION:

$.680 ($680.00)

5/11/2008 (WEEK 2) CLOSING PRICE OF JUNE 2008 74.00 US. DOLLAR INDEX CALL OPTION:

$.430 ($430.00)

OUR BREAK EVEN OPTIONS POINT: $.585

DOLLAR GAIN/(LOSS) ON JUNE 2008 U.S. DOLLAR INDEX 74.00 CALL OPTION FOR THE FIRST WEEK ENDING MAY 4, 2008:

$95.00

DOLLAR GAIN/(LOSS) ON JUNE 2008 U.S. DOLLAR INDEX 74.00 CALL OPTION FOR THE SECOND WEEK ENDING MAY 11, 2008:

($155.00)
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Pricing U.S. Dollar Index Futures Options: An Empirical Investigation

This paper develops a pricing model and empirically tests the pricing efficiency of options on the U.S. Dollar Index (USDX) futures contract. Empirical tests of the model indicate that the market consistently overprices these options relative to the derived model. This overpricing is more pronounced for out-of-the-money options than for in-the-money options and more pronounced for put options than for call options. To validate the above results, delta neutral portfolios are created for one- and two-day holding periods and consistently generate positive arbitrage profits, indicating that on average the market overprices the options on the USDX futures contracts. Copyright 2003 by the Eastern Finance Association.


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asr: for somebody intersted in forex fundamental analysis , you can get this FXCM analyst articles 95 pages see next/prev and see how good he is .
- it seems this site has in general good authors in all categories currencies, options, stocks etc..
Jamie Saettele
Jamie Saettele is a Technical Currency Analyst for Forex Capital Markets (FXCM).

Dollar, Yen Rise as Geithner’s Plan Spurs Demand for Haven

By Ye Xie and Molly Seltzer

Feb. 10 (Bloomberg) -- The dollar and yen rose versus most of their major counterparts on bets Treasury Secretary Timothy Geithner’s financial recovery plan will fall short of reviving lending, increasing demand for a haven.

The yen advanced more than 6 percent versus the Australian dollar, the biggest intraday gain in more than two months, on speculation investors reduced holdings of higher-yielding assets as Geithner pledged financing for programs that may grow to $2 trillion. The dollar increased for the first time in three days versus a gauge of currencies of six major U.S. trading partners.

“It’s classic risk aversion as the market expresses its disappointment to the Treasury’s plan,” said Adam Boyton, a senior currency strategist in New York at Deutsche Bank AG, the world’s largest foreign-exchange trader. “Geithner’s plan lacks a lot of details.”

The dollar gained 1 percent to $1.2870 per euro at 2:54 p.m. in New York, from $1.3003 yesterday. The yen strengthened versus the euro for the first time in four days, appreciating 2.3 percent to 116.22 per euro from 118.94. Japan’s currency advanced 1.3 percent to 90.31 per dollar from 91.46.

The yen advanced as much as 6.1 percent to 58.50 versus the Australian dollar and 4.5 percent to 130.36 against the pound on speculation losses at financial firms will deepen, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan. The Bank of Japan’s 0.1 percent target lending rate compares with 3.25 percent in Australia and 1 percent in the U.K.

Let me understand above paragraph in my terms.
asr: so some UK/AU firm can sell assets in their country and pay back their loan JAPAN. since assets are perceived to decline selling them now is higher prices . Once you have money from asset sales , you wanted to pay back Yen LOAN for that you need to convert AUD->Yen , GBP->yen so everybody is buying YEN so YEN raises against GBP/AUD.
Emerging Markets

Mexico’s peso, Brazil’s real and South Africa’s rand depreciated more than 1 percent against the dollar on reduced demand for emerging-market assets. The peso lost 1.6 percent to 14.4325 versus the dollar, the real declined 1.4 percent to 2.2910 and the rand weakened 2.1 percent to 9.8436.

The ICE’s Dollar Index, which tracks the greenback versus the euro, the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc, rose 1.2 percent to 85.76 today. It lost 0.8 percent last week in its first weekly drop this year on speculation the bank-rescue plan would reduce demand for the world’s reserve currency.

The Australian dollar lost 3.6 percent to 65.39 U.S. cents today after gaining 5.9 percent versus the greenback last week, the biggest rally since the end of October.

“The market had been buying risky assets in the past several days in anticipation that we may get some more specifics,” said Steven Englander, chief U.S. currency strategist at Barclays Capital in New York, of Geithner’s plan. “What came out was not consistent with the buying of risky assets. We are back to where we were a week ago.”

Public-Private Fund

The Treasury is creating a Public-Private Investment fund, with an initial capacity of $500 billion that could grow to $1 trillion, to provide financing for private investors to buy distressed securities, Geithner said in a speech in Washington.

The department will also work with the Federal Reserve to finance as much a $1 trillion in new consumer and business loans. The new Consumer and Business Lending Initiative is modeled on an earlier program to support new credit.

“Nothing new,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. “It’s not meaty in terms of getting lending out there now.”

The U.S. Senate approved a separate $838 billion economic stimulus package today, clearing the way for negotiations with the House over a compromise plan lawmakers said they want to send to President Barack Obama quickly.

Senate Vote

The chamber today voted 61-37 to approve the measure. It provides $293 billion in tax cuts and more than a half trillion dollars in new spending that lawmakers call critical to preventing the economy from sinking deeper into recession.

U.S. stocks plunged today, with the Standard & Poor’s 500 Index losing 4.6 percent, the most since Obama was inaugurated, on concern the government’s bank rescue won’t work.

“There’s still room for equities to decline,” said Dustin Reid, director of currency strategy in Chicago at RBS Global Banking & Markets. “If that’s the case, then the dollar bid will last longer and the yen will also benefit.”



The euro weakened earlier as much as 1.5 percent versus the dollar after the Nikkei newspaper, citing an interview with Russian Association of Regional Banks head Anatoly Aksakov, reported that Russian banks and businesses may ask foreign lenders to reschedule loans worth $400 billion.

asr: what this mean in my terms of above. If russian banks/biz ask to reschedule loans meaning they postpone loan payment ( which is mainly EURO ) so purchase of EURO is delayed ( to payback loan is ) so market perceives less demand for EURO ...


Russian Debt Burden

The 16-nation euro pared its loss against the greenback after Aksakov told Bloomberg News that banks such as London- based HSBC Holdings Plc suggested meetings with Russian companies concerning their ability to meet obligations.

“Several western banks asked about holding discussions,” Aksakov said in an interview with Bloomberg. “It was their initiative to have talks on this topic to look at restructuring the debts of several companies.”

Kazakhstan’s banks may have their ratings cut as the devaluation of the nation’s currency makes it harder for them to repay foreign debt and “substantially increases” credit risk, Moody’s Investors Service said yesterday.

“Central and Eastern Europe, Russia, Turkey and South Africa will underperform for some time, not boding well for the long-term euro outlook,” analysts at BNP Paribas SA led by London-based Hans-Guenter Redeker wrote in a note today. “Bear in mind that most Central and Eastern European countries hold 100 percent of their currency reserves in euros, suggesting a further liquidation of local assets held in foreign accounts implies currency reserves will shrink.”

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Molly Seltzer in New York at mseltzer4@bloomberg.net
Last Updated: February 10, 2009 15:00 EST