Wednesday, February 25, 2015

The OmiCronFX Mandelbrot algo routine | The importance of Moving Averages

Among many other things, the OmiCronFX Mandelbrot routine uses Exponential Moving Averages (EMAs) in its selection and management of trades. This is done in conjunction with prudent risk management techniques, profit retention policies and timing considerations.

As well as active trading, the software is also utilised to inform on possible subtle changes in price action in the market place, so that these can be accommodated in the algorithm.

The importance of Moving Averages

The chart at the top shows what happens on occasion when a significant Exponential Moving Average gets in the way of price movement. A LONG trade in EURUSD was developing nicely recently when it got itself tangled up in the 200-period EMA indicator. This held the development of the trade to such an extent that the software decided on the precaution of taking some of the position off the table. In the event, this was a wise move because, as can be seen below, things went into reverse soon after. The position was eventually stopped out at break-even for the remainder of the trade stake.

The work that we do is therefore an iterative process, comprised of three separate elements: trading, software coding, and research into the factors that go to make up the patterns that are found in the Forex market in practice, so that they can be used to inform the continuous development of the trading and coding, all for the betterment of the profitability of the OmiCronFX Mandelbrot routine.

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