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Forex Report - Predicting Price Movement, gielda walutowa, Angielskie
[ Pobierz całość w formacie PDF ]The Forex Report – DATA BRIEF
NOVEMBER 2004
Predicting Price Action
By Scott Owens with Omer Lizotte
Price action is the foundation of all technical
indicators, yet most traders do little to
understand it. Within trades, price action
creates the most important element of context,
defining inflection points that affect market
entry and exit. The sophisticated investor
understands price action and uses it to frame
every trading decision.
ANALYSIS
•
How likely is a price move continuation given varying conditions?
DATA
•
See the probability of price move continuation in assorted tables.
ACTION
•
Use breakouts to incorporate price action probabilities.
•
Implement price action informed strategies in your trade exits.
RELATED MATERIAL
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ABOUT THIS REPORT
The Forex Report is a periodic publication that investigates advanced strategies
for superior trading performance in the foreign exchange markets. These
reports utilize advanced statistical and econometric modeling techniques to
create new insight into the trading strategy of the average trader. This Data
Brief, Predicting Price Action, is intended for traders with moderate forex
trading experience and technical analysis understanding.
www.fxengines.com
To learn more about The Forex Report or to register for delivery of all future
reports by email, including Case Studies & Data Briefs, please visit
The Forex Report November 2004
ANALYSIS
What happens when one of the major currency pairs moves 10 pips? 25
pips? 50 pips? How likely is it that it will continue for 10 more pips? 20
more? 50 more?
To find out, we took tic data for the four majors and analyzed it by trading
interval and breakout level to see what the probability of these price move
continuations would be.
The results of this study are insightful, but they do not substantiate any
particular trading strategy specifically. Although we believe the price
action of a particular currency is a major element of every trade, we leave
it to each trader to determine how, if at all, these results are to be
integrated with his/her trading strategy.
The goal of this study is to arm the trader with more information about
price action than is currently available. When a trade has moved 10 pips
in your favor, what is the general probability that it will continue to
another level? We believe this
formation for all traders.
However, there are a number of caveats that we feel compelled to state:
•
These probabilities are by no means hard and fast rules for trading.
They represent a snapshot of data, some longer than others, and
employ a very specific entry strategy which may be difficult to
replicate in live manual trading.
•
These probabilities are affected by seasonality and many other
statistical conditions that may render them inaccurate in specific
trading situations. In general, the shorter the interval, the greater
the chance for these anomalies to occur.
•
No representation is made regarding the accuracy of the prices used
in this study or the probability values that result. We reiterate: this
report is intended to enlighten the trader’s “sense” of the market,
not inform any specific trading application.
©
2004. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free subscription visit
- 1 -
The Forex Report November 2004
To create this brief, we employed the following assumptions:
•
The data is tic data from January 2000 through May 2004. Day
intervals include data through October 2004.
•
Each interval includes at least 5,000 observations except the day
interval. In that case, we included each daily closing price from
January 2000 through October 2004.
•
We studied the following intervals, in minutes: 5, 30, 60, 120, 240,
1440.
•
We studied the four major currency pairs: EURUSD, USDJPY,
GBPUSD, USDCHF.
•
We used a “trigger value” to set the entry condition for each
simulated trade. To do this, we took each interval close and
observed the next 24 intervals. If the trigger was hit in either
direction, we entered the market. From that point we measured the
probability of hitting our continuation price targets within the 24
periods.
•
We employed a stop value of 20 pips for every simulated trade.
•
No spread is taken into account.
RELATED MATERIAL
For other advanced studies on the forex market, go to
and see:
The Forex Report: The Six Forces of Forex
The Forex Report – Data Brief – When to Trade
©
2004. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free subscription visit
- 2 -
The Forex Report November 2004
DATA
The tables below show the probability of price move continuation
according to the trigger used to create entry.
See the notes and examples
in each section for more information.
PREDICTING PRICE ACTION: EURUSD 10 pip trigger
When price moves 10 pips in either direction, what is the probability that
it will continue to the following values with the currency and interval
shown?
For example, when EURUSD moves 10 pips up or down on the 60 minute
interval, the probability that it will continue to +80 (+70 net) is 32.4%.
PAIR: EURUSD
INTERVAL: 5 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
47.5% 21.9% 12.8% 7.0% 3.7% 2.0% 1.6% 1.5% 1.2%
INTERVAL: 30 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
83.8% 66.7% 52.7% 38.5% 28.7% 20.5% 16.1% 12.3% 9.2%
INTERVAL: 60 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
87.5% 77.6% 67.9% 57.6% 48.3% 39.9% 32.4% 24.5% 19.8%
INTERVAL: 2 HOUR CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
89.8% 81.5% 75.1% 67.8% 62.2% 55.6% 50.2% 43.7% 38.5%
INTERVAL: 4 HOUR CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
91.4% 85.3% 79.8% 74.8% 70.8% 66.6% 63.3% 58.7% 54.7%
INTERVAL: DAY CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
94.1% 88.3% 83.3% 78.1% 74.5% 71.6% 68.4% 65.4% 61.4%
©
2004. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free subscription visit
- 3 -
The Forex Report November 2004
PREDICTING PRICE ACTION: USDJPY 10 pip trigger
When price moves 10 pips in either direction, what is the probability that
it will continue to the following values with the currency and interval
shown?
For example, when USDJPY moves 10 pips up or down on the 30 minute
interval, the probability that it will continue to +40 (+30 net) is 35.7%.
PAIR: USDJPY
INTERVAL: 5 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
41.6% 17.5% 9.8% 6.9% 4.5% 3.1% 2.5% 2.2% 1.8%
INTERVAL: 30 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
74.1% 50.8% 35.7% 25.7% 18.5% 14.0% 10.6% 8.3% 5.7%
INTERVAL: 60 MINUTE CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
85.4% 68.0% 55.0% 44.7% 34.9% 28.4% 22.7% 17.8% 14.1%
INTERVAL: 2 HOUR CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
89.4% 80.1% 71.7% 63.4% 53.8% 47.0% 41.2% 35.1% 29.7%
INTERVAL: 4 HOUR CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
93.6% 87.5% 82.7% 77.7% 71.8% 67.1% 61.2% 56.4% 51.4%
INTERVAL: DAY CHART
+20 +30 +40 +50 +60 +70 +80 +90 +100+
94.6% 89.8% 85.5% 80.6% 75.5% 71.2% 67.3% 64.5% 61.7%
©
2004. FX Engines, Inc. Reproduction or modification prohibited. For more information or a free subscription visit
- 4 -
[ Pobierz całość w formacie PDF ]
