An automated trading strategy contains a set of rules which will take particular actions in response to incoming market data. When automating a trading strategy, the trader may want to add rules to trade only during certain market conditions. Rob Pasche of QuantNews presents three tools which can be added to an automated trading strategy to filter for ranging markets.
The Average Directional Index indicates whether the price of an instrument is moving in a primary direction up or down or if it's moving sideways. A high ADX (generally 30 or higher) will indicate price is primarily moving up or down while a low value (generally 25 or lower) will indicate price is exhibiting range bound behaviour. Therefore programming an algo to calculate ADX and only trade when ADX is below 25 will filter out trending markets and place trades only when markets are range bound.
The Average True Range calculates the difference between the high and low of the most recent candle, measuring volatility. Therefore taking the N-_period moving average of the ATR can be used to approximate the volatility of an instrument over the past _N periods. For example, programming an algo to only execute trades when the ATR is below its 20-day moving average can be used as a filter to avoid massive bull or bear runs which are often marked by a high ATR.
The Relative Strength Index measures momentum of an uptrend or downtrend using values 0-100. Including a filter for a middle-of-the-road RSI value, for example 40-60, will limit the algo to only trade when momentum is weak and the instrument's price is range bound.
Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation of Technical Analysts. He is a full member of the Society of Technical Analysts in the United Kingdom and combined with his over 20 years of financial markets experience provides resources of a high standard and quality. Russell analyses the financial markets from both a fundamental and technical view and emphasises prudent risk management and good reward-to-risk ratios when trading.
The Toronto Stock Exchange (TSX) is Canada's largest and oldest equities trading and capital raising market. The TSX is part of TMX Group, which is a publicly traded company that operates several Canadian markets and clearinghouses for equities, cash, derivatives, fixed income and energy. The TSX dates back to 1852, when it was an association of 12 Canadian businessmen. The exchange was formally founded on 25 October 1861, when 18 stocks could be traded. In 1977 it became the world's first stock exchange to introduce computer-assisted trading. In the late 1990s it became the first exchange to introduce decimal trading…
Achieving success in the foreign exchange (forex) marketplace can be challenging. Nonetheless, traders from around the globe, both experienced and novice, attempt to do exactly that on a daily basis. Given the above-average failure rate of new entrants to the market, one has to wonder how long-run profitability may be attained via forex trading. Among the many ways that forex participants approach the market is through the application of technical analysis. By definition, technical analysis is the study of past and present price action for the accurate prediction of future market behaviour. The premier tools for the practice of technical…
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, Friedberg Direct, FXCM or its affiliates takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of Friedberg Direct and FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the Friedberg Direct's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.**
Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. The spread figures are for informational purposes only. Friedberg Direct is not liable for errors, omissions or delays, or for actions relying on this information.
The relationship between Friedberg Direct and FXCM was formed with the purpose to allow Canadian residents access to FXCM's suite of products, while maintaining their accounts with a regulated Canadian firm. All accounts are opened by and held with Friedberg Direct, a division of Friedberg Mercantile Group Ltd., a member of the Investment Industry Regulatory Organization of Canada (IIROC). Friedberg customer accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request or at www.cipf.ca.
Please note you are now leaving the main Friedberg Direct website and you are about to be redirected to https://www.fxcmapps.com/ ("FXCM Apps Store")
Friedberg Mercantile Group Ltd. ("Friedberg Direct") is an independent legal entity and does not own, control or operate the FXCM APPS store. Therefore, Friedberg Direct does NOT endorse or make any warranties regarding any product or service offered on the FXCM Apps Store, nor has reviewed or verified any information that might be presented and/or described on the FXCM Apps Store. The link is provided for your convenience only.
Please note you are now leaving the main Friedberg Direct website and you are about to be redirected to a third-party website.
Friedberg Mercantile Group Ltd. ("Friedberg Direct") is an independent legal entity and does not own, control or operate this third-party website. Therefore, Friedberg Direct does NOT endorse or make any warranties regarding any product or service offered on the website of the third-party, nor has reviewed or verified any information that might be presented and/or described on it. The link is provided for your convenience only.