Friday, December 6, 2013

A day for keeping our powder dry | New algo routine progresses well

The Foreign Exchange markets are in a state of decided uncertainty this morning and as a result of this our situation in the market is flat. We hold no positions.

The beauty of the Technical Analysis (chart-based) approach to trading is that if the fundamentals are telling you one thing but price is doing the opposite, then you go with what the price is saying. Right now the fundamentals (revised GDP figures in the US that show much greater than expected growth, high ADP jobs report outcome, better than expected official jobless claims) are indicating that the end of Quantitative Easing (QE) should be just around the corner. The logic of this, and experience from the past, is that the Euro and the Yen should be weakening against the US currency, but in the past few days this did not happen.

Perhaps there is end-of-year positioning going on. Perhaps previous moves on tapering fears mean it is largely priced-in. Perhaps participants are waiting for the Non Farm Payrolls report later today and we have a thin, unreliable market as a result. Perhaps, perhaps… In the meantime we keep our powder dry, noting that certain of the pairs we watch, most notably the gold and the dollar / Yen pair, are on the point of attacking significant support and resistance levels respectively.

The Mandelbrot algorithmic routine

The new trend management software has reached an important milestone in its development. The main algorithm is now perfected and coded, and all that remains is to exhaustively test the outcome on historical data, over as many instruments as possible. We will be writing more about this.

No matter how technologically brilliant this piece of software is (and we all love our own offspring the best) the fact of the matter is it has to assist us in  making  consistent profits in order to be acceptable, and its ability to do this must be proven in an objective, scientific and totally unbiased manner.

Watch this space.

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