Monday, October 28, 2013

A Little Bit Of Magic On The Aussie

As a result of the monitoring that started after our blog post on October 17th (Aussie enters a zone of attrition), we set the OmiCronFX Silver Trigger algorithmic routine to only take short trades during the Asian session on the 23rd October last. Then we went to bed because the Asian session starts in the middle of the night where we live.

We came to the trading platform the next morning to find that not only had the pair in question, the Aussie dollar against the US dollar (AUDUSD), changed direction, as we suspected it might do, but the Silver Trigger routine had entered a trade, price had gone to the first profit level that was programmed in, and it had moved the Stop Loss order to break-even on the rest of the trade.

Since then the trade has progressed further in our favour, to the point where we manually removed another half of the remaining position. This was late on Friday, when it is never entirely satisfactory to leave too much on the table as trading is not possible on Saturday and until very late on Sunday evening , when New Zealand opens for the new week. There could well be a retrace here, even if this new downtrend proves to be a valid one (it could be a retrace itself and it is not at all unknown for China, upon which the price action of this pair is very dependent, to make market moving announcements during the weekend).

On a side note, the entry was on the base of a pinbar (pinbars are explained here) on the four hour chart. The Silver Trigger is not programmed to recognise pinbars but it is of some interest that its algorithm, which is momentum-based, decided to enter a trade at exactly the point where a pinbar watcher would have done so.

Compare the up-to-date daily chart with the one in the post that signaled that a short trade might be imminent, and you will see that while price is now respecting the 200 day SMA, it did not stop its rise at exactly that level. This only goes to illustrate that Foreign Exchange trading is anything but an “exact science”. All strategies must be designed to cater for this fact.

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