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  1. #1
    Mad Scientist Glendoonie's Avatar
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    Jul 2007
    Location
    Wellington, New Zealand.
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    101

    Default Favourite currency pairs

    Hiya

    I'm new to this FOREX lark. Would anyone on this forum divulge their favourite currency pair for FOREX trading and most importantly, why it is their favourite?

    I await your reseponces with anticipation..

    Cheers

    Glendoonie

  2. #2
    Senior Member Toulouse - Luzern's Avatar
    Join Date
    Feb 2002
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    Wellington, , .
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    888

    Smile My quest for the Perfect FX Pair du jour

    Hi Glendoonie,

    As no one else has responded so far here is my opener ...

    Firstly there must be something in the Wellington air...

    I confess to the occasional FX lark myself with an affinity for evaluation of "mad scientist" like concepts.

    Conventional wisdom is EURUSD as a recommended favourite pair.

    Widely traded
    Narrow spreads (usually)
    Volatility
    Big moves often
    Reversals
    Trading opportunities based on TA
    Availability of news, analysis and trader opinion (often best ignored as out of date by the time you read and respond to it)
    Huge initial changes to news eg Non Farm Payrolls, Fed or Euro Bank interest rates announcements on live tv, or minutes

    Sometimes EURUSD can be flat ...

    I currently do not have a permanent favorite FX pair.

    It changes.

    I have a contingent or it all depends on the data approach.

    I believe DYOR.

    My mad scientist moment is a quest for the perfect FX pair du jour.

    I prefer a dynamic approach reflecting the market, right now.

    This approach is not without risk, as things can change.

    As an analogy in rugby/NRL/EPL type competitions it is easy to identify a top of the table team and the bottom of the table team.

    Simplistically most often the top of the table team does better than the bottom of the table team.

    The "Toulouse favourite pair" (TFP) of top of the table/bottom of the table is my optimal pair. No extended analysis is required as secondary sources may be used to identify the table positions at the current time.

    Continuum

    Top of the table......... Bottom
    ------------------------------------------
    #1 #2 #3 #4 #5 #6 #7 #8

    The Toulouse favourite pair (TFP) or optimal trade is #1 with #8. Next best is #2 with #8. If #8 has wide spreads then #7 may reduce risk.

    Applying this simple concept to FX. Most players will agree currency rates are dynamic.

    There are almost infinite influences, interactions, players, supply, demand, FX trade and market news, political and natural world events.

    It follows pairs, prices and relativity may change fast and often. Over time the first may be last and vice versa.

    However currencies have a position on the totem pole at any given time or trade time. Their relative positions may change.

    My current interest and challenge is to identify, right here right now, the top of the table FX currency and the bottom of the table FX currency.

    This is the TFP or optimal pair".

    The concept of heat maps in currency is not new.

    Your chances to identify potential successful trades increases. There seem little point trading #4 and #5 on the continuum as a pair, when #1 and #8 appears a much better chance.

    The screens that I use to find the Toulouse favourite pair (TFP) include:

    http://fxtrade.oanda.com/analysis/currency-heatmap

    http://www.myfxbook.com/forex-market/heat-map

    There will be other sources available just google FX heat maps.

    and I also use CMC markets sorted by % performance report for all currencies or ranked % performance for one of my individual watch lists to assess relative performance and top and bottom.

    I may edit this a bit later as it is dinner time now.

    Now edited:

    I find Oanda is good start point as it provides a quick and simple view. for example of the major 8 currencies.

    Just remember to refresh it often and select a days time range.

    On Friday evening I saw Oanda rankings from top (strongest) to bottom (weakest) as follows:

    #1 AUD
    #2 GBP
    #3 NZD
    #4 CAD
    #5 USD
    #6 JPY
    #7 EUR
    #8 CHF

    So from this AUDEUR was optimal**.

    GBP or NZD paired with EUR or JPY were alternate candidates to consider.

    ** CHF usually has wide spreads.

    Having identified a short list:

    I look for volatility - as your best friend, average trading range, RSI, Parabolic SAR; the trend, 3 x MA lines, support and resistance lines, MACD

    over several time periods

    to confirm the FX pair or pairs to trade - if any - and a suitable entry point for a patient investor.

    FXbook shows multiple time periods for lots of currencies. In both % and pips.

    It clearly shows the complexities and dynamics. It is detailed and almost beyond analysis or intuition unless simplified or filtered.

    CMC provides reports on performance ranked for either all currencies (including all the exotics) or better by your own simpler smaller and targeted watch lists (KISS).

    An exotic best performing pair with wide spreads may not be worth the risk of the trade.

    I am not keen on wide spreads or exotic pairs. Be careful with wide spreads and trading before a market opens = wide spreads. Watch also for spreads widening just as you are placing a trade.

    I find compelling a PHD thesis I read on the theme "the best response to complexity is simplicity". EMC2 anyone?

    It seems to me an FX heat map based approach is an excellent way of identifying the TFP for a positive trade or trades. Your consideration set is the smallest and most likely to reward your investment and risk.

    I liken it to fishing where the fish are. If you look and listen; sea surface, seagulls (best), and other boats and fishermen,or radio chatter will identify optimal fishing spots.

    Then you go there.

    In Melbourne Cup racing terms:

    You have the best chance to win if you eliminate all the likely mid field finishing horses, and eliminate likely tailenders ***.

    This gives you a smaller consideration set where you identify the most likely winners, the first four or five.

    *** based on their most recent actual winning or losing performances.

    I tested the TFP heat map approach on Friday evening with a few low value trades

    Stop losses and take profits were set on entry. Some were market buy or sell entries, others limit entries.

    The results:

    8 successful trades in a row.

    A record for me.

    Further experiments may follow ...

    Caveat:
    Caution, as one swallow does not make a summer.
    Last edited by Toulouse - Luzern; 21-11-2015 at 11:49 PM.

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