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Forex Trading Crowd Buys US Dollars: We Forecast Declines

Thursday, 18 September 2008 14:58:18 GMT

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Written by David Rodriguez, Quantitative Analyst

EURUSD – Forex Trading Crowd Sells the Euro, Could Rally Further
GBPUSD – British Pound Forecast to Gain Against US Dollar
USDJPY – Currency Traders Accurately Signal Japanese Yen Gains
USDCHF – Forex Traders Remain Bearish, Signal Rallies in the USDCHF
USDCAD –Canadian Dollar Forecast to Rally Against US Dollar

While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading Signals
 
The SSI sought a EURUSD rally since 1.26 and was signaling a reversal around 1.60. Find our more in the DailyFX Forex Forum 

Forex_Trading_2008-09-18

 

How to Interpret the SSI? The FXCM SSI is based on proprietary customer flow information and is designed to recognize price trend breaks and reversals in the four most popularly traded currency pairs. The absolute number of the ratio itself represents the amount by which longs exceed shorts or vice versa. For example if the EURUSD ratio is 2.55, long customer orders exceed short orders by a ratio of 2.55 to 1. Conceptually similar to contrarian analyses using the CFTC IMM open position data or COT Report, the SSI provides an alternative approach that is both more timely and accurate in forecasting currency price movement. The SSI is a contrarian indicator that tells you how the market is weighted and where the trend may head. More long positions don't necessary suggest more confidence in the direction of the current trend. In general, when traders start having adverse movements against their position, many tend to increase the size of their position with the purpose to average down their entry price in one last attempt to recover from previous losses. However, the higher the number of short orders in a bull market the more dangerous is to take additional shorts because many of those traders who just entered the markets are also leaving their protective stop losses just above the current price action.
 
 
Have any further questions about the SSI and forex positioning data? Ask the author David Rodríguez on our forex forum.
 
We love getting feedback on our reports. Tell us how we’re doing: E-mail the author of this report at drodriguez@dailyfx.com.
 
 
For information on an FXCM Managed Account that takes advantage of the SSI, please review our Sentiment Program at: http://www.fxcmmanagedaccounts.com/ or call +1 646-432-2968.
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