The Speculative Sentiment Index (SSI) continues to prove to be a reliable forecasting tool in the forex market. This unique innovation of FXCM Inc. (NYSE: FXCM) reveals where FXCM’s forex trading crowd is positioned, helps traders create powerful trading strategies, and provides traders with insight where the market might potentially move.
The SSI Diary on AUD/USD - March 2011
March 15- The SSI suddenly goes positive for a short period as the AUDUSD broke below 1.0000. It looks like short traders took their profits and exited the market. There are now more longs than shorts at FXCM. It looks like the relief rally will be short-lived. The SSI is signaling a further drop in the AUDUSD, so there could be a trading opportunity in shorting (selling) the AUDUSD. The 0.9850 support is unlikely to hold.
March 17- The SSI is negative again (-1.31), which means there are more accounts short the AUDUSD than long. The SSI is a contrarian indicator and signals more AUDUSD gains—there could be a trading opportunity in going long (buying) the AUDUSD.
March 21- As the AUDUSD breaks 1.00, the SSI gets more negative, signaling that AUDUSD is likely to continue rallying further. The ratio of long to short positions stand at -2.60 as nearly 72% of traders are short. It is still not too late to go long AUDUSD.
March 25- The ratio of long to short positions in the AUDUSD stands at an extreme -8.16. Nearly 89% of traders are short. Yesterday, the ratio was at -6.50, as 87% of open positions were short. The SSI is a contrarian indicator and continues to signal more AUDUSD gains.
March 28- Nearly 87% of traders are still short AUDUSD, so the SSI continues to signal AUDUSD gains. We may be headed back to 1.03.
March 30- Same as yesterday, the ratio of long to short positions in the AUDUSD stands at -6.92 as nearly 87% of traders are short. The SSI is a contrarian indicator and signals more AUDUSD gains going into April. The SSI has not yet signaled for a top, despite being at record levels.
AUD/USD Rate, SSI, Long/Short Amount 2/18/2011 – 3/31/2011
In March, the SSI tells the story of how the currency trading crowd acted and reacted to the volatile AUD/USD, as seen in the chart above. It provided indispensible insight as the successful AUD trader would have been the one who followed the SSI signals and went against the crowd.
The SSI tracks positioning in eight currency pairs, providing signals for all the majors.
Increase Your Chances for Profit through SSI
When markets are trending the majority of retail forex traders sell into rallies (when the prices go up) and buy into declines. The historical data at FXCM Inc. shows that many of the most successful traders are actually the ones who move against the crowd. They can use the SSI to see what the crowd is doing and trade the markets as a contrarian.
FXCM has one of the largest cross-sections of forex traders in the world and, therefore, has a credible amount of client data from which to draw the SSI. As of February 2011, FXCM’s total retail trading volume was 250 billion.
About FXCM Inc.
FXCM Inc. (NYSE: FXCM) is a global online provider of foreign exchange (forex) trading and related services to retail and institutional customers worldwide.
At the heart of FXCM's client offering is No Dealing Desk forex trading. Clients benefit from FXCM’s large network of forex liquidity providers enabling FXCM to offer competitive spreads on major currency pairs. Clients have the advantage of mobile trading, one-click order execution, and trading from real-time charts. FXCM's UK subsidiary, Forex Capital Markets Limited, also offers CFD products with no re-quote trading and allows clients to trade forex, oil, gold, silver, and stock indices on one platform. In addition, FXCM offers educational courses on forex trading and provides free news and market research through DailyFX.com.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. DailyFX has taken reasonable measures to ensure the accuracy of the content herein, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content and your use of the charting indicator and EAs herein. In addition, the content herein, including but not limited to the charting indicators and EAs, is provided as general market commentary, and does not constitute investment advice.
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