The reasons for picking the hours I did to trade the Bunny method were mainly just the result of experience and deduction.

London and New York are the two main locations and time zones in which currencies are traded therefore it seems logical to posit that the greatest amount of trading activity occurs on their watch and especially during the market hours that overlap those two sessions.

The Sydney session has much smaller trading volume and thus when only the Sydney market is open you would expect there to be smaller volume and trading ranges.

The proof is in the pudding and that requires some number crunching.

It is therefore quite handy that someone else has thoughtfully done all the grunt work and made a subset of their findings available for free on the web. The information comes courtesy of Raghee Horner’s FXPowerStat service.

The chart shows the hourly pip range on EUR/USD using data from the past six months. The Hour of Day axis is in Eastern Standard Time.

The main data point in each bar to focus on is the dark green segment as this denotes the average pip range for that bar. The lighter green sections show the ‘area of high probability’, which I’m going to assume highlights the 2 standard deviations range.

The 8:00 to 12:00 EST bars have the highest averages which corresponds to the London and New York sessions overlap, confirming our ‘common sense’ hypothesis.

The choice of trading the 14:00 EST bar is also backed up here, as the average for this bar is the highest one of the whole NY session afternoon period, while also having a wide range.

The start of the Tokyo session at 19:00/20:00 EST (depending if DST is active or not) is shown to result in an uptick in activity.

The one bar I can’t really fathom is the 23:00 EST bar, both its high average (especially being well above the Tokyo session open) and its wide range, going from essentially zero to over 100+ pips.

Does anyone know why it might have these characteristics?

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.

I stumbled across a relatively simple trading method that uses long candlewicks as reversal points on the ForexNewsTrader website.

It boils down to a wick of 10 pips or more on a EUR/USD 5 minute chart signifying the strong possibility that a reversal is in progress. The long wick indicates that some resistance or support was encountered. If this long wick occurs after a sustained move in one direction then it points to the possibility of a retracement commencing.

You jump in on the retracement, using the extremity of the long wick candle as your stop loss point.

To help play around with this idea I wanted to have something similar to the wick histogram that you can see in the charts on the ForexNewsTrader website.

Since that indicator is not publicly available from TRO (TheRumpledOne) and is for MT4 (which I hardly ever use), I decided to code up my own version.

I did this in NinjaTrader, which I use for my charting needs when demo trading via MB Trading.

This was first experience trying to write a NinjaTrader indicator and it was rather interesting and fun.

My first version was a direct copy of the MT4 indicator, with a histogram of the wick lengths displayed below the price pane. Since my charts were otherwise naked I thought this was a bad waste of real estate space as well as being not very user friendly so I set about to making it more useful.

In its place I decided to place the wick length directly above or below the candlestick itself. This made it much easier to quickly see what the length of any given candlewick was. Since I was only interested in wicks that were 10 pips or greater it was not necessary to show the length of every single wick. I had the indicator only highlight wicks that were 5 or more pips.

This is what it looks like:

I was now able to easily see when a wick of 10 or more pips had been formed and act on it.

I still wasn’t finished quite yet with the indicator. I’m not one for incessant screen watching. I don’t want to have to watch every tick to know when to enter a trade. Even having to check the charts every five minutes to see if a potential entry was in play seemed a bit onerous.

This is especially true for a trading method where a signal can be given at any time of the day. I’m not a full time trader and can’t devote an excessive amount of screen time. I have a regular full time job that needs most of my attention during the day.

To overcome these constraints I added a couple of audio warnings into the indicator. The first was a ‘heads up’ sound to be played when the current bar has a candlewick that is greater than 10 pips and there is 15 seconds or less remaining in any given 5 minute chart period.

This ‘heads up’ sound alerted me to the fact that a potential signal might be forming, while giving me enough time to switch my focus over to the charts to see what was unfolding.

A second alert sound was fired on the first tick of a new candlewick if the previous bar has a wick of sufficient length that a decision was needed to determine if a new trade should be entered or not.

These two sound alerts allowed me to go on with my daily routine and only brought my attention to bear on trading matters when a large wick was formed, which was on a relatively infrequent basis.

Every trading method has its nemesis moments and the chart below exhibits one such very difficult period when attempting to trade just on long wicks would have produced some poor results:

It’s very difficult to see how there could have been anything but losses when trying to trade the 10 or 11 pip wicks that form near the bottom of the move around 10:00. Even the 18 pip wick that quickly follows does not offer any great reward.

Now for some general observations about using this sort of technique.

• Long wicks at major support or resistance levels in a ranging market are going to be pretty strong signals.
• A long wick that is formed after a sustained move is going to be stronger if that sustained move is a retracement in the longer term trend, rather than a sustained move that is part of the long term trend itself. In other words, it’s better if the trade you’re going to enter based on the wick signal is in the direction of the longer term trend.
• Wicks that are greater than 20 pips usually occur in very volatile markets. Best to step aside in this case, or any time when volatility is well above normal, as any support or resistance highlighted by the long wick is not going to be very strong.

With the way the currency markets are seemingly tied at the hip of the equity markets it certainly makes sense to pay attention to the gyrations of the DJIA and S&P 500 these days.

Looks like the equity markets might actually end on a high today. With the way they’ve been bouncing around it could have ended either way…

I’ve resisted looking into this trading tool for quite a while as I know that Tom prefers to trade short time frames, generally 5 minutes charts, which have never seemed to mesh very well with me. After trading for five years now I know only too well the randomness vortex that exists in these short time frames.

The ForexGrail is a Windows application that shows the relative strength of an individual currency.

When EUR/USD is rising there is at least one of the following two reason in play (if not both): the euro is strengthening and/or the US dollar is weakening. If you want to figure out technically which is the case you can look at other currency pairs that contain the euro and US dollar and see if the euro is also gaining against other currencies, or if the dollar is weakening elsewhere.

The ForexGrail does this examination for you and if a currency is strengthening against multiple currencies then it will be given a value closer to ten. If a currency is weak against multiple other currencies then the application will give it a value on the bottom end of the scale closer to zero.

The application uses a MetaTrader DDE price feed as its data input and thus must be run for a while before you can see any real trends or changes in the strength or weakness of any individual currency.

As a quick example, here’s a quick snapshot from today’s price action:

The US dollar has been generally strong all day while the Aussie dollar has been beaten down (not surprising give the RBA’s statement from last night).

The ForexGrail thus allows you to quickly zone in on a currency pair that is trending nicely without having to examine tons of charts.

Another reason why I haven’t given up completely on short term time frames is something that has stuck with me from reading Richard McCall’s Way of the Warrior-Trader. McCall’s approach to trading is grounded in his martial arts background and is steeped in the way of the samurai. He focuses on short term trading (for him on the e-minis) for no more than an hour each morning. Just as a samurai sword fight is quick and brutal, McCall recommends focusing all your energies on your trading activities for a limited amount of time. You engage with the market for however long you are at your peak mental fitness, and then disengage and rest for the remainder of the day.

I think I’ve mentioned this concept a few times before and generally tried to apply it in the way I approach the market for medium and long-term trading: the majority of my analysis and market research is done during a twenty to thirty minute period in the morning.

As I dial down the time frames on my charts and look to examine those five minute charts again I need to take heed of this same approach to make sure that I don’t get sucked into the relentless tick movements at these shorter time frames. I don’t want to be watching prices bob up and down for hours on end. I want to be able to hone in on where the action is, which hopefully the ForexGrail will help with, spot a trading opportunity that fulfills a predefined set of criteria. Manage and exit the trade within a reasonable timeframe and then go about the rest of my day.

It’s very early days yet on how viable this sort of trading approach might be for me, but I think it’s worth examining since I have learned a lot on my trading adventure since the last time I really engaged with short time frames.