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How to Read SSI

By , Forex Trading Instructor
10 June 2013 15:57 GMT

Article Summary: SSI is a proprietary sentiment tool offered by FXCM. Learn the basics of how to read and use SSI in your Forex trading.

Regardless of your trading experience or trading style FXCM and DailyFX.com have many resources available to help get you started in the world of Forex. SSI (Speculative Sentiment Index) is a proprietary tool offered to FXCM clients that can be worked in to virtually any trading strategy. Essentially SSI is a ratio that gives us a picture of trader positioning. SSI reveals trader positioning by determining if they are net long or short, and if so by how much.

Below we can see the current SSI ratios posted on DailyFX.com. If clients are net short a currency pair SSI will be negative, and if clients are net long the number will be positive. As of today, we can see that SSI for the AUDUSD is currently set at +5.01. This ratio means that trader’s positions are net long at a rate over 5 to 1 when compared to all open selling interest.

So now that we know how to read SSI, let’s discuss how these numbers can be used in our trading.

Learn Forex – Current SSI Readings

How_to_Read_SSI_body_Gold_Prices_Look_Vulnerable_as_Crowds_Buy_Declines.png, How to Read SSI

Trading SSI

SSI is a strong trading tool due to the nature of most traders. Traditionally most Forex traders look to pinpoint a market top or bottom while fading market trends. That means that more often than not, we see most traders place sell orders into extended rallies, and buy into market declines. Because of this, SSI is often considered a contrarian indicator. Savvy traders that review SSI can then proceed to look for busy signals when SSI is net long or buy when SSI net short for a specific currency pair. Let’s take a look at an example of SSI at work.

Below we can see a prime example of SSI at work again on the AUDUSD. Going back to the start of April, we can see that positioning was continually net long. However when compared to the price graph, we can see that the pair has fallen over 1000 pips for the same time period! The current reading of SSI stands at 5.01. As more traders continue to buy into this market decline, SSI data suggests that the AUDUSD may continue to print lower lows.

Learn Forex – Current AUDUSD SSI

How_to_Read_SSI_body_Picture_2.png, How to Read SSI

Automated SSI Trading

For those that are seeking a trading strategy using SSI, FXCM offers a variety of automated trading applications. Whether you trade trends, breakouts or momentum there is a system available for all market conditions. The easiest way to get started trading a SSI system is through our Mirror Trader Platform (Free with an FXCM Account).

Using the Mirror Traders software, Traders can select from a variety of automated strategies. This includes SSI strategies provided by DailyFX which includes the Momentum 2 and Breakout 2, and Tidal Wave strategies. These strategies can be applied at any time, while allowing traders the ability to customize position size and currency pair selection.

Learn Forex – SSI & Mirror Trader

How_to_Read_SSI_body_Picture_1.png, How to Read SSI

---Written by Walker England, Trading Instructor

To contact Walker, emailwengland@fxcm.com. Follow me on Twitter at @WEnglandFX.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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10 June 2013 15:57 GMT