Sunday, January 11, 2015

Mandelbrot scores on Non-Farm Payrolls day | Chicago futures traders show their power

The OmiCronFX “Mandelbrot” algorithmic routine is designed to limit losses on those occasions when the Forex exchange rate behaves in a contrary manner, and to maximise the profit when it goes in the right direction for that particular trade.

The Non-Farm Payrolls report release is one of the most notorious for the level of short-term volatility that follows it, which can cause extreme damage to trading accounts, if not handled properly. Many traders simply stay out of the market on that day, and for them it is a wise choice.

Last Friday was NFP day. Mandelbrot was configured to deal with it and it did so in the manner shown in the attached chart (EURUSD, 10 minutes), and as explained below:

The timing functionality in Mandelbrot was set so the trades would not start until short-term volatility had died down after the NFP release.

Initial reaction to the release was, as usual, followed by extreme short-term volatility, but the bias was determinately to the downside. Mandelbrot entered a trade accordingly, in proper time.

Chicago futures traders show their power

At 15:00 GMT, which corresponds to Central Time Zone opening time of the Chicago Futures trading day, price reversed. Chicago sometimes has this effect, but it can also reinforce an existing trend in the same direction, so a reversal is not a given.

The trade was stopped out by the Mandelbrot trailing price-based stop, for a very small loss.

A new long trade was entered shortly afterwards.

This trade went enough into profit for half the position to be taken off at 1% equity growth, and half of the remainder at the 2% level.

The trade was finally stopped out by the time and price based stop loss mechanism when the exchange rate had levelled out.

The eventual behaviour of the pair was given as a possibility in the OmiCronFX commentary on Friday morning (Non-farm Payrolls today better be good), when it was stated that the US dollar was overbought, and ripe for a correction.


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