TCI+ Forex Trading System

Introducing a New Era in Forex Technical Analysis

TradingCenter community is familiar with the TCI technical analysis system. TCI aims to indicate exaggerations in the short-term fluctuations of the World’s Financial Markets. Based on a complex algorithm of measuring abnormal fluctuations, TCI is able to generate trading signals regarding every popular Financial Market (Forex, Commodities, Stocks & Indices).

But how can an exaggerated price movement be identified?

Aren’t financial markets efficient enough to balance price exaggerations through financial arbitrage? The answer is no, and that is because new daily fundamental changes in the real markets are too complex to be evaluated instantly by arbitrage. Therefore new developments in real markets are not incorporated under the right extend nor the right time into financial market prices. New developments may need days or even weeks to be correctly evaluated and thus incorporated into financial prices. That is why we are using TCI technical analysis in the first place. Technical analysis can be used in general to identify overbought and oversold levels and thus forecast future price corrections.

Financial Markets Tend to Exaggerate and TCI Analysis Aims to Indicate it

But what does exactly technical analysis is able to forecast? It is able to forecast changes in the demand and the supply of a particular financial asset. In a narrow timeframe without news, the demand and the supply of a financial asset are determined by two factors of equal importance:

1) Psychology of the Market Participants

2) Global Arbitrage Movements

Read more: TCI+ Forex Trading System

Arbitrage trading is an automated trading strategy that aims to exploit inefficiencies in the pricing of a financial asset.

What are Arbitrageurs?

Arbitrageurs trade the same asset on two different markets by opening two opposite positions (one Short and one Long). An effective arbitrage strategy does not include any market risk and offers small risk-free returns.

Arbitrageurs are working in favor of the market and retail traders as they push quotes to be more efficient, and at the same time, they add significant liquidity to the system.

Example

Suppose the share of an airliner called BlueLines trades simultaneously in London and the New York stock exchanges. The spread between bid and ask in both markets is 20 points. When there is a difference in BlueLines pricing between New York and London that exceeds these 20 points, an arbitrage opportunity is emerging.

If you buy and sell the same amount of BlueLines in both markets the trade is risk-free. When both positions are opened you just have to wait until the pricing of BlueLines comes back into sync. When that happens both positions close and a risk-free profit is realized.

Read more: Arbitrage Trading Strategies

Dow Theory is an old but useful method for analyzing stock market trends through proof and confirmation. By applying the Dow Theory, investors can recognize primary trends and identify the six phases of a complete stock market cycle.

Dow Theory was created by Charles H. Dow (1851–1902), an American journalist and co-founder of Dow Jones and Company. After Charles Dow's death, William Peter Hamilton, Robert Rhea, and E. George Schaefer expressed Dow’s editorial as an integrated theory and gave birth to the Dow Theory.

Read more: Explaining the Dow Theory and Trading Strategy

Introduction to Automated Forex Trading Strategy

Automated trading is a branch of systematic trading which combines computer software and hardware in order to generate non-stop trading activity, without human intervention. All automated trading systems are systematic, but not all systematic systems are automated.

The Global Arena

Forex trading is a global arena where different styles of traders compete against each other. Intraday and day-traders, swing-traders, and carry-traders open trading positions for just one reason, to sell higher. But no matter if they sell higher or lower, the demand they create due to their anticipations generates liquidity and trading volumes in the Foreign Exchange market. This retail activity is just a portion of the aggregate Forex Market activity which also includes transactions by central and commercial banks, hedge funds, large corporations, etc. In overall, the Foreign Exchange market volume activity exceeds US$5 trillion, on a daily basis.

Liquidity, extreme volume activity, and very tight spreads create an opportunity for the implementation of automated trading systems. An automated Forex trading system is taking into consideration key market data, such as price and volume, to recognize and trade short-term trends. By using technical analysis, an automated system can analyze the dynamics of demand/supply, and by comparing them to historical price behavior, can decide what and when to trade, without any human intervention.

Basic assumptions of Automated Trading

These are some basic assumptions for all automated-trading systems:

1. Historic results have at least some predictive ability {Sharpe 1994}
2. Financial Markets are not perfectly efficient
3. Financial Markets have a finite depth
4. Regularities in financial data do exist, but only for short periods of time, a window of opportunity may open, and then at some future time it will close
5. The financial data are driven by human psychology and societal decisions, and therefore are random and unstable

Read more: Automated Forex Trading Strategies

TRADE STRATEGIES AT TRADING CENTER

In finance, a trade strategy is a method of opening and closing trading positions based on a fixed trade plan and a predefined set of rules and setups. A trade strategy aims to achieve high long-term returns by controlling the risk exposure through money management (MM) and by limiting the impact of the emotional human nature (greed and fear).

Day-Trade Strategies

Day trading is the act of buying and selling financial-traded assets on the same day.

The Basics of Day-Trade

These are some key issues you must consider in day trading:

(a) Trading Costs (such as spreads and commissions)

(b) Depth of the market (sufficient volume activity for easy entry/exit)

(c) Significant volatility (that may create short-term trading opportunities or increase risk)

Four Common Day-Trade Strategies

(i) Stop-Loss Day-Trade Strategy

(ii) Momentum Day-Trade Strategy

(iii) Scalping Day-Trade Strategy

(iv) Fading Day-Trade Strategy

► Introduction to Day-Trading

Read more: Trade Strategy Guide

COMMON STOCK DAY-TRADE STRATEGIES

Some common day-trade strategies for trading stocks and indices

(1) Momentum Day-Trade Strategy

A momentum day-trade strategy is applicable to markets moving in strong trends. A momentum trader will buy a stock usually on favorable news releases and sell it when he receives a clear sign of trend reversal. A trailing-stop order may be useful for this type of day-trading.

Tip: It is better to buy an expensive stock in a bullish market than a cheap stock in a bearish market

(2) Trend-Exhaustion Day-Trade Strategy

When you implement a Trend-Exhaustion day-trade strategy you search for stocks or indices that make rapid upward or downward movements. When you indicate such moves you place orders against these rapid trends. Although this day-trade strategy is risky, it can prove profitable if your choices are wise.

Technical Analysis Tip: Use the RSI (21) on the M5 timeframe, and:

(i) Sell if RSI(21) is at 70+ and it is falling below, or

(ii) Buy if RSI(21) is at 30- and it is increasing above.

Read more: Equity Day-Trade Strategies