The Grid Sight Index (GSI) is a tool for technical analysis that helps currency traders determine the relative strength of short-term pricing trends. Through the implementation of cutting-edge information systems technology, the GSI is able to study large sets of historical forex pricing data and relate past observations to current market conditions in near real-time.
The GSI is classified as a functional “big-data” indicator. “Big-data” is a term pertaining to data sets that are so vast that traditional means of processing are inadequate for the job. The objective of big-data analysis is to identify obscure statistical or behavioural patterns within the immense sample. In order to decipher an exceptionally large data set in a timely manner, access to technology with robust capabilities is a prerequisite. FXCM supplies the necessary functionality through the free GSI application for the Trading Station platform.
Sports, science, business and the financial markets are a few areas of life that have been greatly impacted by big-data analysis. In the financial arena, access to revolutionary forms of market study have been made readily available to retail traders by ever-evolving technology. It is now possible to efficiently compare the current market behaviour of a financial instrument to millions of data points from its past.
Grid Sight Index (GSI): How It Works
Perhaps the most formidable challenge accepted by active traders is accounting for future price action. Prognostication is always a tricky business, full of traps and pitfalls. However, the GSI can aid traders looking to capitalise upon future moves in pricing through providing insight and context derived from the past.
At its core, the GSI is comparative indicator. Its objective is to generate a percentage describing the historical outcomes of a specific set of market parameters. In order to accomplish this, the GSI executes the following progression:
- Pattern identification: The GSI examines current pricing data in real-time for the presence of significant patterns.
- Analysis: Upon the initial pattern being identified, the GSI then sorts through millions of independent historical data points for individual occurrences of the pattern.
- Insights: Lastly, the historical market data following each occurrence of the pattern is analysed to identify key aspects of market behaviour. Percentages are created to quantify how the market responded to those patterns in the past. For instance, a five pip positive move may have occurred 35% of the time while a 10 pip negative move transpired 42% of the time. The GSI is capable of examining how far and often price fluctuated after the occurrence of the pattern in the past.
The percentages created by the GSI provide useful context for current price action and may shed some light on future movements. While it is important to realise that past results do not equate to future performance, the information produced by the GSI is useful in determining what may occur in a given situation.
GSI: Supported Instruments And Analytics
The GSI supports a wide variety of forex currency pairings and CFDs:
- Forex: AUD/JPY, AUD/USD, CAD/JPY, CHF/JPY, EUR/AUD, EUR/CAD, EUR/USD, EUR/CHF, EUR/GBP, EUR/JPY, GBP/CHF, GBP/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY
- CFDs: GER30, NAS100, SPX500, US30, USOIL, UKOIL, XAU/USD
As previously mentioned, the GSI analytics generate performance metrics through examining historical market data following the occurrence of a specific pattern. Percentages of past performance are then created according to the length and frequency of the data. The GSI supports performance intervals of 5 pips, 10 pips, 15 pips and 20 pips.
By design, the GSI functions best when market volatility is high. During volatile market conditions, more patterns are present thereby creating the opportunity for extensive analysis. Market volatility is dependent upon many factors and is often specific to both the market and instrument being traded.
It is important to understand that engaging in active trade during volatile periods may add a considerable degree of risk to trading operations. Ultimately, it is the responsibility of the individual trader to perform adequate due diligence and decide if currency or CFD trading is suitable given capital constraints, risk tolerance and goals of the trading endeavour.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites are provided as general market commentary and do not constitute investment advice. FXCM will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.