Currency Trading Signals Prove Accurate on Strong Market Volatility

Forex Trading Automated Systems Outlook

DailyFX+ System Trading Signals – Our trading strategies have had another generally successful week, as strong price moves have favored Momentum and Breakout signals. Yet it is interesting to note that Range1 and Range2 signals have held their own; sizeable trading ranges in key currency pairs have left the strategies relatively unscathed. We continue to favor Momentum2 and Breakout2 trading signals due to the sheer unpredictability of currency trading market conditions.

Our Range systems tend to severely underperform during times of high market stress, as the strategies buy declines and sell rallies. Our Momentum and Breakout systems, on the other hand, benefit from sizeable price moves—thereby erasing any losses incurred through calmer market conditions. Unless we are highly confident that markets will range trade through a given week, we will always lean towards Momentum and Breakout trading signals. A relatively empty week of economic event risk suggests we can expect slower price movements in the week ahead, but breakouts can occur at any given moment regardless of the economic calendar.

DailyFX+ Forex Market Conditions Outlook

NOTE: Methodology has been changed. Percentiles are now measured on a 30-day basis, down from 90 days previously.

Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 30 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range. 

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 30 trading-day range. A very low number tells us that price is currently at or near monthly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s monthly range.

Range High –  30-day closing high.

Range Low  –  30-day closing low.

Last – Current market price.

Strategy – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.