ForexSpirit

This one came out of left field and I have no recollection of how I stumbled upon it.

FXMoneyMap at its heart revolves around a scalping approach based on moving averages in multiple time frames.

It’s well worth checking out their video website as it is very slickly done and contains a decent amount of information on what they do. The prices are just extortionate to me and it seems to be one of those trading methods that people either love or hate.

Like just about any black box method things lose a lot of their shine when you know what’s happening under the hood.

Terming FXMoneyMap as a black box is harsh in the sense that the software only provides proprietary charts and indicators. There are no explicit entry or exit signals.

The charts certainly do look pretty, with those nicely gradated, soothing blue bands. Here’s what they look like courtesy of an image from Beto’s FXMoneyMap blog.

As you can see there are plenty of lines on this chart, labelled L1 through to L7. Hmm, I wonder what they could be?

The key feature of the software you must pay for is to distil the information in multiple charts into one easy to read MoneyMap Grid.

Within the grid breakdown, each of the L1-7 lines are shown as a small green or red box. The price value of the break points between each of the gradient bands is also shown. The yellow line in the middle of the grid denotes the current bid price.

A lot of the videos available on this method point to having to only pay attention to the information contained within the grid, as it already contains all the information needed from the regular chart across four different timeframes.

It’s interesting to note that the grid only displays 30 pips above and below the current price. This is how you can tell this method is for short term trades only, if the lowest timeframe of 1 minute didn’t already tip you off.

There’s a lot of hilarious marketing vernacular used to associate each of the timeframes in the grid as a lane on a highway. You’re looking for clear roads ahead. It’s satellite navigation (GPS) for the forex market.

It cracks me up.

Before even beginning to spent time on looking at the entry and exit techniques derived from using the grid information I wanted to delve deeper and see what information was actually being imparted.

What were the lines on the chart? What about the bands? Why were they deemed to be significant?

My understanding is that the lines on the chart (which are displayed as boxes in the grid) and the band boundaries are viewed as support and resistance levels. Thus a clustering of band boundaries and lines constitutes a much more significant support or resistance level. If there are no lines or boundaries around then price will move much more freely through that area (the whole clear roads ahead analogy).

It didn’t take too much poking around to find out how to construct the lines and bands manually. The magic is this:

The lines L1-7 are Simple Moving Averages with the following periods: 21, 34, 55, 75, 100, 144 and 233.

The bands are calculated by adding and subtracting values from the SMAs. The band shade values used are : 8, 11, 16, 27, 43, 75, 100 and 144.

To calculate the band boundaries to the upside take the lowest SMA and add 8. This gives you the band boundary between the white band and the the lightest blue band.

The next boundary is another 11 pips up (thus, the lowest SMA plus 8 and 11). Followed by adding 16 pips to find the next boundary. And so on for each of the additional band spacing values.

You follow the same routine on the down side to determine the lower band boundaries. This information was found on the forex-tsd forum, where you can also find MT4 versions of the indicators and personal experiences of people having used the software.

I don’t get two things here. The first is how those SMAs can be seen as support or resistance levels. The only moving average values that I think have any real value as such are 50 and 200, and then only on a daily chart, and that is primarily because they are such widely used values that they fall into the realm of self-fulling support and resistance. Unless enough people are looking at the same information (SMA in this case) as a potential support or resistance level then it will not hold for the reason you think. Enough people have to believe in that level as support for it to have any meaningful effect.

The same rationale applies to the bands. Why is 8 pips above an SMA significant? Or 19 pips above that same SMA? Why is that a resistance level I need to watch? I don’t get it.

This obviously means I have a hard time viewing the grid and being able to extract any meaningful information from it. I don’t see the numbers being shown as being based on any sort of solid foundation. And with that the whole FXMoneyMap approach just crumbles away for me.

Pretty charts and a nice aggregation of multiple chart information into the grid view, but no meat on the bones for me to gorge on.

The moving averages and bands also reminded me of Pronet Analytics.

Turns out not to have been just a random coincidence. Andy Sherman who runs FXMoneyMap was also involved with Pronet, which in turn was tangled up with the Nostradamus compass and TraderHouse Global. Plus ça change.

Oh, and for those keeping track. The ghastly chart I featured a while back was found on the forex-tsb forum.