Tuesday, January 13, 2015

FX traders and systems use trends for show | OmiCronFX’s Mandelbrot does too, but handles ranges for dough

A paraphrase of the old golfing adage, which has is that the best players “drive for show, and putt for dough”, meaning that the ability to deal with the challenges that occur on the green is more important than making spectacular shots off the tee-box, can be applied to Forex trading.

In this version, while profits that derive from sweeping trending moves, as occurred with EURUSD (above) yesterday, can be spectacular, these do not come about with anything like the frequency of the sideways, oscillating price movements that take up the majority of trading time. Even staying alive, in the sense of not losing, during these up-and-down movements, is an achievement. To rack up profits under such circumstances is the mark of a great trader or trading system.

The key thing is that the pattern of the day’s trading will be never be known beforehand. The successful development of the Mandelbrot algorithmic routine depended on it being equally comfortable whichever type of trading transpires as the trading day progresses.

Mandelbrot handles ranges for dough

Yesterday also saw the above pattern in the price movement of Cable, the GBPUSD currency pair. In this case, Mandelbrot opened a trade to the downside shortly after the start of the London session. The second profit target for this position occurred during the ten minutes after the release of the UK CPI (inflation) figures, which the market momentarily interpreted as a negative for the UK unit.

But, as if we needed to be reminded, the market proved, once again, that it can be more capricious than even the most fickle prima donna. It very quickly decided to reverse in the case of this pair. However, Mandelbrot was up to the occasion, closing the first trade for a profit and entering the next one soon after, in the reverse direction, which also proceeded to success.

The two trades described above represented, for us, the entirety of yesterday’s trading.

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