The Hidden Patterns Behind 15 Forex Pairs
Fundamental analysis and statistics create a unified area of researching and analyzing the behavior of global financial markets. Fundamental analysis investigates the ‘Cause’ of macroeconomic events, while statistics and technical analysis examine their ‘Effect’ on the global financial markets.
Trading statistics is the business of analyzing past price data and identifying recognizable price patterns which may lead to high-probability trends. The book aims to reveal major seasonal and momentum patterns in the Foreign Exchange market, behind 18.5 years of daily data. Due to the nature of the global monetary system, currencies tend to follow seasonal patterns. The dynamics of demand/supply change in accordance with time. There are certain months of the calendar year when specific trends tend to emerge. This happens as large institutional investors do the same thing every single year. The book reveals patterns for 15 Forex pairs: EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD, NZDUSD, EURGBP, EURCHF, EURJPY, EURCAD, EURAUD, EURNZD, GBPJPY, and GBPCHF.
Through extensive data analysis, a new indicator is introduced (ΔMP). This indicator is formed by summarizing the historical divergence between closing rates and intraday ranges. The mission of ΔMP is to measure and illustrate the historical momentum of each Forex pair. ΔMP charts are drawn, including Linear and Polynomial trendlines, plus R-Squared (R˛). Overall, there are more than 100 charts presenting seasonal and momentum trends. The book also contains other useful trading resources such as best times to trade, and historical correlations between Forex pairs. Correlation analysis measures the relationship between two numerical variables. In our analysis, these variables are the daily closing rates of 15 Foreign Exchange pairs for two periods: 18.5 years and 5 years.
Information is power when trading Forex, and seasonal and momentum analysis creates an important piece of information, offering extra probability points. Adding seasonality to the trading process can provide trading ideas, confirm trades, and assist in better timing trades.