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This article highlights how autocorrelation and linearity for end-of-day prices can benefit your trading strategy. We’ll focus on trading and investing in the Euro ETF (symbol: FXE) with a discount trading indicator. Finally, we’ll work our way to backtest the results of the discounting strategy.
The following is a scatterplot depicting the relationship between the previous day’s Net-Asset-Value (NAV) prices for daily median prices for FXE.
Figure 1

You’ll notice there is a good linear relationship, giving a leg up for those who know how to harness the strength in NAV price information for the Euro ETF (FXE).
The following chart corresponds to the same time horizon as the scatterplot, with daily close prices of FXE:
Figure 2
Notice, there isn’t a strong indication of a trend for the entire period since 2006. This is another reason why the sentiment discount trading strategy works so well. Generally, there shouldn’t be any strong trend on the underlying instrument—up or down—for the strategy to work well.
Since we’ve asserted linearity and autocorrelation in daily median prices, a discounting strategy is a reasonable one for us to expect to be profitable. The main goal of thi…
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Sebine avatar
Sebine 25 Jan.

Good job!

pshan avatar
pshan 25 Jan.

Thank you very much Sebine!

thedoctor avatar
thedoctor 27 Jan.

good job

pshan avatar
pshan 30 Jan.

Thank you.

Lovely_bee avatar

Good luck )

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I’ve heard a lot and have been discussed a lot about Futures contract and
Spot Forex. A lot of people try to argue that futures contracts are much “better”
than Spot Forex. The term “better” here could be interpreted in a way that it’s
easier and more transparent to trade with. In this article, I’ll try to break
through the argument.
People said that futures contracts are traded on a centralized exchange but
likewise spot forex is not being traded on a centralized exchange.  People
talk about the “shaving” and “shady” activities made by brokers since there is no
centralized exchange and also regulated exchange. People talk about how broker
profit from event such as news to widen spread or even to catch stoploss. Those
who talk to me use such argument to talk down spot forex not to be traded with
and there’re little way to profit unless you are a broker. 
It’s correct that spot forex is decentralized market. From what I’ve seen,
pricing is also a little bit different from broker to broker; and out there,
there’re a lot of shady brokers with no real information who take advantage of
trader to benefit themselves when they shading price and widen spreads or even
take out stoploss when…
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petefader avatar
petefader 29 Mar.

@foreverloser, I already told you, it would take time in this business. You must take it seriously, handling your loss, control your risk, and go with a set-up which has high percent of winning. Take a break, reflect yourself, what did you do wrong and then PM me, I'll give you more info.

petefader avatar
petefader 29 Mar.

@Rambo: I believe that scalper is quite difficult for us but for those arbitrageurs and quant funds, all they do is to catch 1/10 of a pip.

Victor avatar
Victor 29 Mar.

keep it up+

Gerrydavis74 avatar

Nice article and very informative.

foreverloser avatar

Ok, Thx for the encouraging advice. Now, I could say, I almost gave up on forex haha

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