FX TRADING SYSTEMS
It is said that the top ten funds in the world use systems which are 70% accurate and that their business models absorb the 30% losses because overall the systems are profitable. But it also appears that there are an increasing number of funds who are admitting to the fact that their systems deteriorate over time, and what was a 70/30 winning paradigm at inception becomes a dinosaur five years or so down the track and then they call in legions of consultants to try and resolve the predicament.
It would appear that predictive maths is not a useful tool
The filling of the orders is either a Buy function or a Sell function. In my mind this would account for the turning points on the chart. So how to prove it?
Price action categories
Looking at the price action, we know that there are various functions
After many months analyzing historical data I eventually identified 6 categories of Price Action in live price feeds. The next step was to match market functions to each category. Endless hours of Excel spreadsheet analysis ensued, but after another several months I was able to identify a Price Action type as being Order Fill and it made up the majority of the market – but I learned it has no informational value what so ever.
While on the track of the Price Action categories I
started for
defining our rules. Tey do not explain the reasons driving the market moves nor how and why the turning points come about. In my mind a quantifiable approach was needed.
An increasing number of funds are admitting to the fact that their systems deteriorate over time
It is public knowledge that the market is an auction driven beast – so at the heart of it lies a Pricing Machine. In order to evaluate the Market Price the machine has to gather in orders and it is the filling of the orders which drives the price moves.
76 FX TRADER MAGAZINE April - June 2016
buried in that activity. One is Order Filling – the other is Order Gathering. Martin Coles does a series of youtube videos on this subject and to me his approach and vocabulary has merit – so I have adopted much of his point of view, but what I found was that there is more in the Price Actions than just Order Fill and Order Gathering.
analyzing the overnight market moves
and by
accumulating a pattern of Price Action I was able to
at a Buy value and a Sell value which ultimately
enabled me to project the high and the low values of the market between 07:00 and 17:00 each day.
You might think wonderful - this is amazing. I know I did. All you have to do is trade this using OCOs. It’s simple.
What happened next was painful. arrive
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