Donchian channels are a measure of market volatility, much the same as Bollinger bands
and are about as simple as you can get:-

Take the highest period maximum and the lowest period minimum for last n periods, and produce an area. So, a stable price over preceding period will squeeze the Donchian channel, a more volatile price range will expand it.

Never much used in forex trading, and why, when Bollinger bands have superseded this approach…

Download the indicator:- donchian_channels

The anti-Martingale is exactly as the name suggests, the Martingale in reverse, and again it comes out of roulette ‘theory’ – any game where there’s roughly a 50/50 win/lose. Instead of doubling up on your lot size following a losing trade, you double on a successful trade. Continue the doubling and watch the money mount up.

First, with the antimartingale set-up you have to decide when you’re going to stop the madness – because there has to be a stop, the final take-profit from that round of trades or in this case, bets… else the inevitable loss will come. Commonly, 4 successive trades are used as a stop – so that’s 1/16 probability, with everything else equal….

There’s a few added complications with withdrawing a percentage of your equity at certain points in the chain, which is essentially scaling your winners, but that’s the basic scheme.

The plus side
Using this strategy, you have the potential to make a great return from a small starting stake. With all the odds against, as mentioned above. The only logic for applying the system might be in stocks during a sustained bullish market, where successful trades are as guaranteed as they’re ever likely to be.

The minus side
What you aren’t getting are the smaller successful trades, and these tend to be what keeps an account going. You’re committing to slowly and steadily wasting your account, with the possibility that you might get the occasional huge win. So that’s using your head…

In the UK, other indices, for example, Mortgage Approvals, the Halifax House Price Index m/m also play a major part in the fundamental strength of GBP.

Ripple Effect
Unlike the situation a couple of years ago, (when, as always in a bubble, people got a bit silly), home-builders aren’t going to be starting up unless they are fairly confident of the end market and actually selling the units when they’re built.

And it’s not just the construction industry – the ripple effect is all the growth that goes with a new house – household appliances, furnishings all have to be bought, which acts as a multiplier across the wider manufacturing economy – which the markets are going to take notice of… So while commodities such as lumber are maybe most directly affected by Housing data, the ripple effect follows all the way through the economic fundamentals to reach the forex market.

Forex News Indicator
As a news indicator, Housing Starts data are definitely to be kept a close eye on.
In the present circumstances, with volatile markets across the board and the general air of pessimism, for example, Housing Starts figures less disastrous than expected in the forecast will certainly move USD in its pairs – so worth looking out for…

But, as it so happens, unless you’ve been the first one to buy a very unpopular piece of software – a few other copies of this EA have been sold.

Let’s just run through this scenario:
20,000 trades get placed simultaneously – or 20,000 attempts are made to get the same trade placed. Online brokers do tend to notice these things, and so what happens, even if you do get filled, the spread rockets up, and there is nearly always comeback on it.

Mass produced EA’s tend to have a life-cycle – they work for a while, they produce a ROI, even 30% or thereabouts, and then they gradually start not working. They get updated, not quite so good, and the pips trail away, until you’re left with very little return on your investment.

Maybe if you’re keen to use an expert advisor, you could learn to write one yourself – it’s not the most complicated thing ever, (if you have done a bit of programming before). Then – and this is about the only way – you’ll know that you’re the only one placing the trades in that exact pattern.

Be a trader – don’t be one little sheep in a large flock….

Despite forecasts for a depreciation of the Dollar, many economists are now saying that the negative housing data released from the United States yesterday may actually bolster the USD.

Let’s state the effect in the simplest possible terms.

Bad news for the US economy, lower jobs, lower GDP, leads to lack of confidence
Which leads to a rush towards safe haven currencies…
Which leads to buying USD – because USD is in itself, considered a safe-haven currency…
So bad US news leads to USD going up.

This rush to a safe haven, any safe haven, after every news announcement is creating some weird effects. It flies in the face of logic, well, simple logic anyway – and is a sign of the present dominance of USD

No, I don’t know of any name for this upsidedown, wrong-way-round, echo, reverb effect – but it certainly ought to have a name…

It’s all about safe havens

The USD appears to be the safest investment, as traders are moving en masse to buy into the greenback.

Some people reckon that (if the entry point is right) currencies such as AUD or NZD might turn out to be the better safe havens during the present financial crisis – maybe… CHF has always had a lot to recommend it. And the irony is that while it certainly isn’t borne out with pair prices at their present levels, as a long-term safe haven, the US dollar might not turn out to be that safe a haven after all…

US Dollar dominance
This effect, whatever it’s called, is certainly a sign of the overwhelming domination of the forex trade by the US dollar. From memory, about 85% of the traded volume in the whole forex market, involves the dollar. Structurally, this is always going to bring problems in practice. Excessive dominance? Not for us to say – the situation is as it is, for as long as it stays that way…

If we were serious economists, interested in fundamental analysis for its own sake, the theory of market movements, etc. we probably ought to be worried – but we’re just common, vulgar forex traders, all we do is operate the system for what it is…

But what to call the actual effect? Any ideas?

Please note – I’ve said USD throughout this – not USA, necessarily…

You’ll need to download audioplus.mq4 file below, and save to your MetaTrader\Experts\ directory.

You’ll also need 2 .wav audio files serving as the signal to tell you either profit or loss.
These go in your “\MetaTrader\Sounds\” directory.

The inputs to be coded are :

Distance – distance of profit (not pips) for when the Expert Advisor sound is triggered
AudioPlus – the name of the sound file played when the price reaches set profit
AudioMinus – the name of the sound file played when the price reaches set loss

Compile (see add ea to metatrader, if you’re not sure) and everything should work fine.

Download:
audioplus.zip

8 levels, 4 of resistance, 4 of support, are produced, using High, Low and Close data for a preceding time period.

R4 = (H – L) x 1.1 / 2 + C
R3 = (H – L) x 1.1 / 4 + C
R2 = (H – L) x 1.1 / 6 + C
R1 = (H – L) x 1.1 / 12 + C

S1 = C – (H – L) x 1.1 / 12
S2 = C – (H – L) x 1.1 / 6
S3 = C – (H – L) x 1.1 / 4
S4 = C – (H – L) x 1.1 / 2

(There are other recipes for the coefficients to be found…)

Usage
The critical levels are the L3 and L4 levels. The standard method is to expect reversal if the price reaches an L3 level, support or resistance. This is then considered a signal to make a trade against the prevailing trend – keeping the L4 level as a stop-loss.

In addition, or alternatively, crossing an L4 level can be used as a signal for definite breakout – therefore going with the trend. The difficulty here is where to place stops…?

Totally unconvinced of their value, and included for the sake of completeness – if you’ve found a system to make Camarilla pivot points work, do let us know…

Positive
A positive balance of trade = exports higher than imports. Exports good – money coming into an economy, a trade surplus.

Negative
The opposite of this is a trade deficit, or trade gap – more goods are being imported the exported. Imports bad – money going out an economy to pay for them.

Balance of trade has historically been a critical issue in the Japanese economy, which is heavily based on exports. The financial management of the economy is geared towards stimulating exports wherever possible – keeping the value of the Yen low, low interest rates etc. – so JPY tends to be more sensitive to good/bad balance of trade figures than other currencies – on average…

Japan is a good example of a mature economy and these always tend to run a trade surplus – other examples include Germany and Canada, (sometimes unfairly referred to as stagnant economies), running generally at a lower expectation of growth. But the strong growth economies eg. United States, Australia run regular trade deficits, simply to fuel this growth.

When it comes to pure economic theory – as usual, economists are divided. Some say that trade deficits have to be tackled as they will inevitably bring an economy down, others say it’s a necessary evil to stimulate some growth, and a few even reckon a trade deficit matters not at all…

The markets, however – and it’s always the markets we’re interested in when it comes to forex trading – will tend to go classic picture, trade surplus good, trade deficit bad.