TRADING SYSTEMS
FX
Marney Indicators
As this is the last article in the series, I ’d like to introduce the proprietary Marney Indicators™, which have helped me to create profitable trading strategies by identif ying and exploiting non- random behaviour.
Having learnt a great deal from other traders, sharing their insights on the markets, I hope that they will serve as a worthy contribution.
The indicators illustrate a lot of the research that has been discussed in the previous articles ; the commonality of currencies as well as their unique differences, how increasing volume and range confirm a trend, as well as the importance of time as an indicator.
I was surprised not to have found these indicators already written elsewhere, as research and back testing has shown that they provide a significant edge, in exploiting non-random and therefore predictable behaviour.
Research with EBS data has shown that the number of price updates per unit of time, correlates very highly to actual volume traded. Therefore, while
actual volume is not readily available for FX, many data providers now include the number of price updates, so that they can be plotted, as a proxy for volume and this can be exploited using the Marney Volume Indicator™ (MVI).
Marney Volume Indicator
The MVI plots a time-adjusted profile of volume, throughout the twenty-four hour trading day. An example of the Marney Volume Indicator™ is shown below, applied to a 60min chart of EURGBP.
I have used MultiCharts to illustrate and code the examples and Olsen Financial as the data source, as they have one of the longest historical databases available for foreign exchange, together with the number of price updates, as a proxy for volume.
The histograms show the hourly volume, via the proxy of price updates. If the corresponding hour was an up event then the bars are coloured blue and red for a down event.
The vertical dashed yellow line is a session break, showing 0000hrs GMT.
FX TRADER MAGAZINE July - September 2010 13
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