Basic forex strategies - page 6

There is a considerable body of research on relative strength price momentum but much less on absolute momentum, also known as time series momentum. In this paper, we explore the practical side of absolute momentum. We first explore its sole parameter - the formation, or look back, period. We then examine the reward, risk, and correlation characteristics of absolute momentum applied to stocks, bonds, and real assets. We finally apply absolute momentum to a 60/40 stock/bond portfolio and a simple risk parity portfolio. We show that absolute momentum can effectively identify regime change and add significant value as an easy-to-implement, rule-based approach with many potential uses as both a stand-alone program and trend-following overlay.

How stocks are traded in the United States has been totally transformed. Gone are the dealers on NASDAQ and the specialists at the NYSE. Instead, a company’s stock can now be traded on up to sixty competing venues where a computer matches incoming orders. A majority of quotes are now posted by high-frequency traders (HFTs), making them the preponderant source of liquidity in the new market.

Many practices associated with the new stock market are highly controversial, as illustrated by the public furor following the publication of Michael Lewis’s book Flash Boys. Critics say that HFTs use their speed in discovering changes in the market and in altering their orders to take advantage of other traders. Dark pools – off-exchange trading venues that promise to keep the orders sent to them secret and to restrict the parties allowed to trade – are accused of operating in ways that injure many traders. Brokers are said to mishandle customer orders in an effort to maximize the payments they receive in return for sending trading venues their customers’ orders, rather than delivering best execution.

In this paper, we set out a simple, but powerful, conceptual framework for analyzing the new stock market. The framework is built upon three basic concepts: adverse selection, the principal-agent problem, and a multi-venue trading system. We illustrate the utility of this framework by analyzing the new market’s eight most controversial practices. The effects of each practice are evaluated in terms of the multiple social goals served by equity trading markets.

We ultimately conclude that there is no emergency requiring immediate, poorly-considered action. Some reforms proposed by critics, however, are clearly desirable. Other proposed reforms involve a tradeoff between two or more valuable social goals. In these cases, whether a reform is desirable may be unclear, but a better understanding of the tradeoff involved enables a more informed choice and suggests where further empirical research would be useful. Finally, still other proposed reforms are based on misunderstandings of the market or of the social impacts of a practice and should be avoided.

The Dodd-Frank Act was the most far-reaching financial regulatory reform in the U.S. since the nation emerged from the Great Depression in the 1930s. The act aims to limit systemic risk, allow for the safe resolution of the largest intermediaries, submit risky non-banks to greater scrutiny, and reform derivative trading.

The public debate is often highly politicized and opinionated when it comes to Dodd-Frank. With that in mind, this paper seeks to assess Dodd-Frank implementation with respect to its initial goal of building "a safer, more stable financial system", where proprietary trading and the business of banking are separated, and where taxpayers and small business will not have to bail out failing large financial firms. To make the assessment, the paper first establishes a timeline summarizing the Dodd-Frank final-rule milestones and then compares their implementation to the initial goals.

lynntee:

Hi Guys, 

For basic Trading most widely uses

1) trend trading

2) Support resistance breakout 

 - Pennant . flags recognition  

3) fibonaci entrancement 

4) candle Sticks recognition

5) Moving averages cross ( EMA/ Maverage )

4) Strong understanding of divserse environment in trading fundamental 

 

Personally this is my MUST have Indicators ( I am a very EA and Indicator Person) sorry Naked Chart ain't my style 

1) Average Day Range 

2) Currency Meter 

3) Currency Scanner 

4) Trader Dynamic Index 

5) Bull and Bear signals 

6) Flags and Pennants 

7) Education Modules and Indicators Manuals 

8) Candles Recognition  

lynntee:

Hi Guys, 

For basic Trading most widely uses

1) trend trading

2) Support resistance breakout 

 - Pennant . flags recognition  

3) fibonaci entrancement 

4) candle Sticks recognition

5) Moving averages cross ( EMA/ Maverage )

4) Strong understanding of divserse environment in trading fundamental 

 

Personally this is my MUST have Indicators ( I am a very EA and Indicator Person) sorry Naked Chart ain't my style 

1) Average Day Range 

2) Currency Meter 

3) Currency Scanner 

4) Trader Dynamic Index 

5) Bull and Bear signals 

6) Flags and Pennants 

7) Education Modules and Indicators Manuals 

8) Candles Recognition  

We evaluate the robustness of momentum returns in the US stock market over the period 1965 to 2012. We find that momentum profits have become insignificant since the late 1990s partially driven by pronounced increase in the volatility of momentum profits in the last 14 years. Investigations of momentum profits in high and low volatility months address the concerns about unprecedented levels of market volatility in this period rendering momentum strategy unprofitable. Past returns, can no longer explain the cross-sectional variation in stock returns, even following up markets. Investigation of post holding period returns of momentum portfolios and risk adjusted buy and hold returns of stocks in momentum suggests that investors possibly recognize that momentum strategy is profitable and trade in ways that arbitrage away such profits. These findings are partially consistent with Schwert (2003) that documents two primary reasons for the disappearance of an anomaly in the behavior of asset prices, first, sample selection bias, and second, uncovering of anomaly by investors who trade in the assets to arbitrage it away. In further analyses we find evidence that suggest three possible explanations for the declining momentum profits that involve uncovering of the anomaly by investors, decline in the risk premium on a macroeconomic factor, growth rate in industrial production in particular and relative improvement in market efficiency.

We use industry data to determine whether crowding of the investment space is caused by portfolio construction processes typical to the investment community. In particular, this paper examines the extent that transaction cost models cause crowding of the investment space, even when the investment models are completely unrelated to one another. We find that as transaction costs become more significant in the portfolio creation process as portfolios increase in size from \$500 million to \$5 billion, crowding actually declines for long-only portfolios and mainly declines, but sometimes increases for market neutral portfolios. This research sheds more light on how crowding develops through actions by players within the financial system

Integrated Trend Analysis is an attempt to study and analysis the diverse forces which affect the price of a security with the help of Triple Trend Oscillator (TTO). TTO is a trend following oscillator devised to identify the exact technical strength of a stock or indices over multiple timeframes and can also be used as a trend and momentum indicator. It incorporates trend oscillators which mimic the trend momentum across three timeframes, plotting them simultaneously, thus giving an overall view of the trend position.

There are numerous possibilities of using TTO alongside and in conjunction with the Elliott Wave theory. TTO can be used in all time frames for equities, indices, commodities and forex for short terms, positional and swing trades as well as for long term investing.

seekers:

reversing_momentum_-_the_optimal_dynamic_momentum_strategy.pdf