Posts Tagged ‘pairs’

Spread Trading Positively Correlated Forex Pairs EURUSD & GBPUSD

Using the Franklin Forex Indicator Set for Classic Spread Trade Set ups between Positive Correlated Currency Pairs franklinglobalcapital.com
Video Rating: 5 / 5

Forex Pairs Daily Range – How to Create a Forex Strategy for Different Currency Pairs

Forex Pairs Daily Range

While we recommend traders always use a protective stop when in a trade, identifying that stop level can be a daunting task for new traders.

One thing we do not recommend is using a fixed amount to risk on each of your trades. An example would be risking 25 pips on every trade, no matter what pair you are trading. The reason we don’t recommend this is that the daily range of two currency pairs can be very different. The daily range of the EUR/GBP over the last month has been about 50 pips. That means the high and low of the day are about 50 pips apart. However, the daily range of the GBP/JPY over the last month has been about 300 pips. So using the same arbitrary number of pips to risk in both pairs may mean a profitable trade in one pair and a losing trade in another. Forex Pairs Daily Range

We recommend the use of support and resistance to determine your initial protective stop placement. If you buy on a bounce off of support, place your stop below that support level. If you sell on a bounce off of resistance, place your stop above that resistance level. This way your risk level is automatically adjusted to the volatility of the market you are trading. If you are using a 1:2 risk:reward ratio where you look for twice your risk in potential profit. Your risk and reward are now both adjusted to the pair you are trading. This will keep you in more trades which increases your chance of success. Forex Pairs Daily Range

Forex – Learn How Curreny Pairs Corelations Profits You!

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Pairs Trading Strategy and Statistical Arbitrage

Pairs trading strategy is a market neutral strategy which enables traders to profit from virtually any market condition; uptrend, downtrend or sidewise movement. Although introduced in early 1980’s the strategy became popular among retail traders only after the introduction of online trading though sophisticated trading systems. Opportunities of pairs trading usually last for only a short-period of time thus quick response to market movements is required, which can only be achieved by high degree of automation.

The first and most important step in pairs trading strategy is to find pairs. Pairs are trading instruments (stocks, options, futures, currencies, bonds, etc.) which show great correlation; that is the price of one move in same direction of the other. For stocks, pairs can be shares of two companies in same (or related) industry. For options, it can be options on highly related stocks. For futures it can be mini and full-size contract or can be futures of related (same) industries. And for forex it can be currencies of countries having good trade relations. Traders should use various fundamental and technical analysis tools to find these pairs. Once pairs are identified the strategy is simple.

Pairs traders look for divergence of correlation between shares of a pair. When a divergence is noticed, traders take opposite positions for instruments in a pair. For stocks, currencies and futures, the trader takes long position for under performing instrument and short position for over performing instrument; for options, the trader writes put option for underperforming stock and call option for outperforming stock. In most cases cost of taking one position is compensated by the revenue from the opposite position. Trader is profited when the divergence is corrected and the instruments are brought to original (near original) correlation by market forces.

Pairs trading strategy demand good position sizing, market timing and decision making skill. Although the strategy does not have not much downside risk there is a scarcity of opportunities and, for profiting, the trader must be one of the first to capitalize on the opportunity.

Statistical Arbitrate, popularly called StatArb, is the broad scale application of Pairs trading strategy. The strategy is to profit from pricing inefficiencies in the market and to make profit by tracking divergences from correlation. But unlike pairs trading, the StatArb include downside risk.

In statistical arbitrage, traders constitute portfolios consisting of a number of different stocks, which are carefully matched for reducing market risk and stock beta. Stocks are carefully screened using fundamental and technical tools; this includes industry, beta, volume, growth, value and performance history. Usually the stocks in the portfolio are scored using mean-diversion principle and other mathematical models. Usually the stocks which are underperforming receive high scores; and outperforming stocks receive low scores. The strategy is to take long position on high score stocks and take short positions on low score stocks.

With both pairs trading and statistical arbitrage continuous data mining, market and price analysis and price matching are important. High position sizing, low trading costs and better trading platforms can offer better profits.

Lesson 27 – Trading The Exotic Pairs Part 2

Forexearlywarning has free webinars on Wednesday nights and this series of videos will contain up to 40 free archived webinar lessons. This video describes Lesson 27 Trading The Exotics . www.forexearlywarning.com Link to view during the video: viewer.zoho.com

The Forex Heatmap ™ – JPY, GBP, AUD, CAD, NZD Pairs

This is The Forex Heatmap ™ This is a real time visual map of the spot forex and it tells you what pair is the best to trade and which direction. This unique forex trade entry management system organizes a vast amount of data from 8 different individual currency families and the data is presented as a simple visual map to provide forex trade entry management for 25 currency pairs. It is live in the market all of the time from Sunday night through Friday afternoon and is always available. It verifies your trade entries and tells you when NOT to enter a spot forex trade. The Forex Heatmap ™ – Version 2.0 works in all market conditions and it is a strong pip producer. Learn to enter forex trades without any technical indicators. A free 30 day trial is available at www.forexearlywarning.com

The Forex Heatmap ™ – USD, CHF, EUR, JPY Pairs www.forexearlywarning.com

This is The Forex Heatmap ™ This is a real time visual map of the spot forex and it tells you what pair is the best to trade and which direction. This unique forex trade entry management system organizes a vast amount of data from 8 different individual currency families and the data is presented as a simple visual map to provide forex trade entry management for 25 currency pairs. It is live in the market all of the time from Sunday night through Friday afternoon and is always available. It verifies your trade entries and tells you when NOT to enter a spot forex trade. The Forex Heatmap ™ – Version 2.0 works in all market conditions and it is a strong pip producer. Learn to enter forex trades without any technical indicators. A free 30 day trial is available at www.forexearlywarning.com or www.theforexheatmap.com

The Forex Heatmap ™ – JPY, GBP, AUD, CAD, NZD Pairs www.forexearlywarning.com

This is The Forex Heatmap ™ This is a real time visual map of the spot forex and it tells you what pair is the best to trade and which direction. This unique forex trade entry management system organizes a vast amount of data from 8 different individual currency families and the data is presented as a simple visual map to provide forex trade entry management for 25 currency pairs. It is live in the market all of the time from Sunday night through Friday afternoon and is always available. It verifies your trade entries and tells you when NOT to enter a spot forex trade. The Forex Heatmap ™ – Version 2.0 works in all market conditions and it is a strong pip producer. Learn to enter forex trades without any technical indicators. A free 30 day trial is available at www.forexearlywarning.com or www.theforexheatmap.com

What is the best way to buy options on EUR/USD or other forex pairs?

I’m currently buying options on the FXE currency fund (I think it’s a Rydex fund). That works, but the spread is pretty high. Is there a better way to buy options on EUR/USD or other forex pairs?

The Forex Heatmap ™ – USD, EUR, JPY Pairs www.forexearlywarning.com

This is The Forex Heatmap ™ This is a real time visual map of the spot forex and it tells you what pair is the best to trade and which direction. This unique forex trade entry management system organizes a vast amount of data from 8 different individual currency families and the data is presented as a simple visual map to provide forex trade entry management for 25 currency pairs. It is live in the market all of the time from Sunday night through Friday afternoon and is always available. It verifies your trade entries and tells you when NOT to enter a spot forex trade. The Forex Heatmap ™ – Version 2.0 works in all market conditions and it is a strong pip producer. Learn to enter forex trades without any technical indicators. A free 30 day trial is available at www.forexearlywarning.com or www.theforexheatmap.com