Fxtradermagazine 6 Eg

BEST FX
BROKERS
hIGH FREQUENCY
TRADING
TRADER MAGAZINE
EXOTIc
MT5 OP T IONS
RELEASE
MARNEY
INDICATOR
eurozone
f uture
A DRIVING MARKET FORCE
BIG TROUBLES STrONG RESPONSE
JULY - SEPTEMBER 2010

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E IN TUTTE LE MIGLIORI GIOIELLERIE
EUROZONE
CONTENTs FX
FUTURE:
METATRADER 5
The article analyses
why the Eurozone
RELEASE:
represents a driving Exclusive interview with
market force and Alexander Saidullin, who
describes the impact explains the main differences
of the recent Euro between MT4 and MT5 and
troubles on the the new functionalities for
Swiss Franc and the forex traders.
Hungarian Forint.
34
18
13 MARNEY INDICATORS:
The codes of Marney Volume

Indicator and Marney Range
Indicator revealed and explained
by Caspar Marney. Results of years
of research, Caspar’s articles can
be found in the previous editions
of FX Trader Magazine.
05 EDITOR’S NOTE errors during volatile times and gives Group’s short-term systematic trading
practical trading advice to pursue approach.
FUNDAMENTAL ANALYSIS: capital preservation.
26 Frau Doktor M.: Will Angela OPTIONS:
Merkel’s dislike for financial markets TECHNICAL ANALYSIS: 44 Exotic Options: Part 6.
and the possibility that Germany might 07 Understanding the true concepts
consider abandoning the Eurozone of overbought and oversold: gives TECHNICAL ANALYSIS:
periphery affect the first positive Euro a practical method for identifying 56 Majors’ Report: USD/JPY,
recovery signs? overbought and oversold periods, using EUR/USD, EUR/JPY. EUR/GBP
examples with the Slow Stochastic, 52 Currency Outlook:
ALGORITHMIC TRADING: RSI, MACD and Kases indicators. EUR/GBP, EUR/HUF,
31 High Frequency Trading and EUR/USD
Market Stability: the author explains BROKERS:
why the use of algorithmic trading 10 Traders’ Choice Awards: Key INTERNATIONAL DATA:
systems is inevitable and unavoidable. attributes of the 2010 best FX 60 FX Spot Monitor
brokers. 61 Central Bank Rates
TRADING STRATEGY: 62 Economica Data - FX Poll
40 How to cope with violent market FX MANAGERS: 63 Markets View
swings and preserve your capital: 47 Interview with Marc H. Malek,
describes the most common trading who talks about Conquest Capital 64 ECONOMIC CALENDAR
FX TRADER MAGAZINE July - September 2010

FX CONTRIBUTORS
Alessandro Balsotti, worked for several Steve Jarvis, has well over 20 years’
years as market maker of Italian Lira, Greek experience of providing technical analysis
Dracma and Czechoslovak Koruna in JP to FX professionals. Steve is head of
Morgan. He was then in charge of the FX InterpreTA, Tradermade’s technical
trading desk in Abax Bank and Caboto. analysis service. Fully annotated
He is currently responsible in JW Partners Technical commentaries are provided on
for the FX Single Manager strategies. Tradermade’s Maverick charting system.
Daily and intra-day updates are applied to
Shaun Downey, is Technical Analyst at live charts for a wide range of FX majors
Cqg and Chief market analyst at Currensee. and FX emerging markets. InterpreTA is
He has spent the last 17 years as a technical also now available via the Reuters platform. Editor :
analyst at CQG ( www.cqg.com ). Shaun To arrange for a free trial, please call 020-
is the founder of i-traders.com, provider Emmanuelle Girodet
8313-0992 or e-mail sales@tradermade.
of technical commentaries, education and com editor@fxtradermagazine.com
mentoring programs for the professional
and retail trading arenas, and the author of Caspar Marney, started his trading career
“Trading Time” New Methods in Technical as a spot currency trader and technical Advertising manager:
Analysis. In addition, he is the Chief analyst with HSBC in London. He then Isabella Lamera
Market Analyst at www.currensee.com, moved to SBC Warburg (later UBS) as ad@fxtradermagazine.com
the first Forex trading social network. a proprietary trader and global head of
technical analysis for FX and precious
Elite E Services is an electronic boutique metals, where he became one of the bank’s Webmaster:
brokerage specializing in currency most successful traders and a regular Hristo Katzarski
trading, intelligence and technology commentator on financial television.
surrounding foreign exchange markets. webmaster@fxtradermagazine.com
Elite E Services offers FX trading systems Maurizio Milano, began his career as forex
for clients and investors, FX consulting, dealer in 1995. He created the technical
analysis department at Banca Sella Group Graphic design:
technology and tools for trading, system
development, custom programming, and teaches technical analysis at the Preslav Dobrev
and FX solutions for businesses. The University of Turin, Italy. His contributions
company offers it’s Forex blog at can be found in the most renowned Italian
financial newspapers and televisions. Editorial support:
http://www.eliteforexblog.com and a
forex forum at http://www.eesfx.com He is member of SIAT (the association Jacopo Visetti
of the Italian technical analysts), for Lorenzo Lorenzi
Alessandro Fugnoli, worked for 9 years which he gives lectures and sits in the
as head of macroeconomic and strategic Board of Directors. He is also member
Luca Di Bari
research in AbaxBank and recently joined of the Board of IFTA (the International
Kairos Partners. He is a well-known Italian Federation of Technical Analysis), being
financial analyst and previously worked as currently Vice-Chair Europe. Website:
Director of Research for Caboto group. www.analisitecnica.net Trading carries a high level of risk, and may not be
He also covered the roles of Investment suitable for all investors. The objective of FX Trader
Director in Gestnord broker and account Javier Paz is the President of Forex
Magazine is to give readers the tools, training and
executive in Merrill Lynch. Datasource, a boutique market information which will help them be better prepared
research firm that continues to track to trade on the foreign exchange. However, any analysis,
Steffen Gregersen has played a leading and attract broker evaluations from news, research, strategy, or other information contained
role in Saxo Bank’s Quantitative Analysis traders worldwide through its website on this magazine is provided as general market
and Advance Research Department in its www.forexdatasource.com. information and does not constitute investment advice.
development of the bank’s option pricing
models. He holds a degree in Mathematics Kevin Sollitt is an FX Portfolio Manager. FX Trader Magazine, will not accept liability for any
and Economics from the University of Previously, he acquired an extensive FX loss or damage, including without limitation to, any loss
Copenhagen where his thesis was on the trading background in Europe, Asia and of profit, which may arise directly or indirectly from use
North America, managing three bank of or reliance on such information.
effects of jumps in underlying prices on
option prices. trading teams. Kevin’s longevity in the FX
world has been assisted by a willingness
JW Partners is an independent FX to embrace a collaborative approach at all
solution provider, based in Milan, with a levels. Combining this with his clear grasp
strong FX specific know-how. JW supports of market dynamics & by using a wide Subscriptions:
institutional investors and HNWI range of disciplines has achieved positive
in building quality FX multimanager results in many different circumstances www.fxtradermagazine.com
portfolios, and FX underlying structures. and market conditions over the years.

EDITOR’s note FX
Tumultuous times for Forex traders
After the chaotic first six months about the Euro future. For Jürgen We also wanted to bring light on
of 2010, currency markets are now Stark, European Central Bank the recent release of MetaTrader
entering the second half of the year, chief economist, there is no crisis of 5, thanks to an exclusive interview
with significant question marks about confidence in the Euro, just a loss of with Alexander Saidullin, director of
Europe continuing to dominate the market trust in the state finances of platform development at Metaquotes
outlook. During the second quarter, some euro zone governments. He Software. Although MT5 is better
the euro faced its biggest test as explained at a conference in Frankfurt news for equity traders or forex
the Greek debt crisis threatened to that the issue of shaky public finances brokers wanting to expand on new
tear apart the European Union. As isn’t confined to the euro zone, but is financial and equities markets, the new
investors question the viability of rather “a global phenomenon”, using platform will offer forex traders more
the common currency, the euro was his favorite argument that budget analysis data, timeframes, indicators
sent into a tailspin, which by early deficits in many advanced economies and analytical tools. However they
June, amounted to an 11% decline outside the euro zone, especially the will have to learn a new programming
against the U.S. dollar from the end U.K., U.S. and Japan, are far higher language and develop their strategies
of March. At one point, the euro than the average within the European from scratch.
came within shouting distance of the currency union. In fact, the European
$1.18 at which it exited the first day Commission estimates that the euro Talking about strategies and
of trading when it was introduced in zone this year will have an aggregate indicators, don’t miss the 6th article
1999. budget deficit of 6.2% of gross of Caspar Marney, which reveals
Alessandro Balsotti writes, as usual, domestic product. the codes of his proprietary Marney
a pertinent analysis of the current Indicators, results of years of research,
Euro zone outlook, insisting on the Recalling Alessandro Balsotti’s and which illustrate the study that
importance and strength of the will introductory quote from Niels Bohr: has been presented in his previous
that brought the euro project to “prediction is very difficult, especially articles in FX Trader Magazine. For
life, and underling the impact of the about the future”, and our role is to readers who would like to receive
recent Euro troubles on the Swiss continue providing you with market a specific PDF file containing
Franc and the Hungarian Forint. experts analysis… and forecasts. all of Caspar Marney’s articles
Kevin Sollitt brings an interesting since April 2009, please contact
point of view about unstable forex Other interesting themes of this editor@fxtradermagazine.com.
markets and explains how to avoid edition include the announcement
most trading errors during violent in anteprima of the 2010 FX Traders’ We’ll keep you updated on major
market swings and preserve your Choice awards. Javier Paz reveals researches, trading strategies, market
trading capital. which are the key attributes of the events and releases. Good trading.
2010 best FX brokers awards, based
Not everybody is pessimistic on the votes of 1.000 retail traders. Emmanuelle Girodet

click here to ask for your
to the Live Trading Room

TECHNICAL ANALYSIS FX
Understanding true concepts of

overbought and oversold
The term overbought and oversold is heard on the encourage the ruinous strateg y of trying to catch
wires and commentaries and is an integral part of tops and bottoms with such a theory. If the common
any trader’s armoury, but it is a common theme that perceptions of what constitutes divergence are also
when I question traders or present at seminars, the applied the results can be even more damaging. The
common most tools that are used to quantify this theory here states that negative divergence is being
are the Slow Stochastic and RSI. This re-enforces created if price makes new highs for the trend but the
a common theme in technical analysis, in that the indicator of choice fails to do so and subsequently
long established turns down (a
m a n t r a s failure swing ).
continue to The reality is
feed through that all but the
as each new set most explosive
of traders enter of trends that
the markets. move into
The common blow off tops
philosophy is or capitulation
that once value b o t t o m s ,
goes beyond n o r m a l l y
80 and 20 for diverge, and in
the Stochastic many cases can
and 70 and 30 continue to do
for the RSI, so throughout
the market is much of the
overbought or trend.
oversold.
The inherent
H o w e v e r , flaw when
when these concepts are actually put to the test the thought about is somewhat obvious. The indicators
laziness and inaccuracy of this concept highlights of choice have limits of scale and the market in
how, not only can this cause problems by exiting theory can move anywhere and often can do it very
good trend following trades too early, it can also quickly. This flaw becomes apparent when looking

FX TECHNICAL ANALYSIS
at the Slow Stochastic in particular. The calculation

looks at the relationship between the close and
its vicinity to the high and low. In any trend, by
default closes will tend to err towards the high or
low depending on what the trend is. Therefore once
the indicator gets into its overbought or oversold
zone, it often takes just one or two bars of price
movement in the opposite direction to make the
indicator cross over. This is highlighted in the
recent Eurodollar fall as shown in Figure 1. Note
how a two day correction makes the indicator cross
up before the market slumps once more and then
on the next subsequent up bar, the indicator posts
divergence. This divergence then continues on 4
more occasions in quick succession before finally
the market does post some modest gains. This
Figure 2
highlights how a trader can feel that the market
remains irrational longer than they can remain Again looking at the Eurodollar in Figure 2 none of
solvent. these scenarios would have been satisfactory as price
The RSI presents a somewhat different dilemma moves out of the extreme and changes direction on
as typically there is no crossover feature meaning the same bar just before the downtrend resumes,
the trader is simply left with 3 alternatives. Track and then in a similar vein to the Stochastic, posts
divergence, track any move out of the extreme, or multiple divergences that eventually come good. In
simply a change of direction when in that extreme. fact on the day new lows are posted for the trend,
the Rsi is very close to 50 in value. In my testing
experience the lesser of the evils is to reference a
simple change in direction when the indicator has
been beyond 85 or 15.
So what are other solutions? One obvious alternative

is place a non linear calculation on non linear data.
The preferred method of choice for many traders
is the Macd. Whilst this is an improvement on the
others there are still problems associated with how
extremes are qualified. Normally it is necessary to
create a point of reference from previous trends and
the extremes that they created. However, this is a
somewhat haphazard approach and on historical
data can provide relatively few sample sets. However,
the concept of divergence normally produces a lower
Figure 1 number of false signals, and if the trader is prepared
to be patient and have higher risk, waiting for the

Macd to either crossover or switch back through

the zero line is another option. Figure 3 shows
how, although the timing was not perfect the trade
may have sur vived. Certainly there were less false
dawns.
My preferred solution is to take a similar concept to

the Macd but in a more sophisticated way. This uses
what is called the Kase Peak Oscillator@. In Cynthia
Kases excellent book, Trading with the Odds she
explains her complete trading methodolog y more
comprehensibly, but on a more simplistic basis, this
study takes a multiple number of moving averages,
creates an in analysis of trend cycle length, and
includes a calculation for volatility skew. What this
does is create an oscillator that has superficially
similar properties to the Macd. However, in addition Figure 4
it places a line which represents 2 standard deviations
around that. Her theory states that once momentum Returning to the chart and figure 4 we can see the
has moved beyond 2 standard deviations of its KPO@ and the KCD@. This latter indicator tracks
own momentum, mathematically we are now at an the Momentum change in the oscillator itself. The
extreme. If a trend cycle is being fulfilled (65 bars), Peak Out or oversold situation is flagged a little
then what she calls a Peak Out occurs (the purple early and is followed shortly afterwards by the
line). This mean that this is the extreme or there is KCD switching to over zero. This means that the
one more extreme due in this trend cycle. trace of momentum is now positive from negative.
We are now in the situation where this is the low or
there is one more low in this trend cycle of 65 bars.
The 2 vertical lines represent that figure. As can be
seen in figure 4, whilst its exact point is slightly off
balance, the trader is now in the position of linking
this analysis together and looking for other timing
indicators to confirm the trade. There are two black
arrows under the candles. These use a very simplistic
and my original method of quantifying divergence. It
uses a standard Rsi and states that price is making a
9 bar low but the Rsi is making a 3 bar high. There is
no value placed on what the value of the Rsi actually
is. Two days later the cycle is complete with the trade
being false if price breaks the absolute low of the
trend.
Figure 3 Shaun Downey

FX BROKERS
Retail FX World:
Key Attributes of the 2010
Best FX Brokers
The retail FX industry is reaching Before we get to the findings we should obvious incentive for voters to want to
puberty and it has brought a few establish just how credible they might rig anything:
million people to trading Forex over be. Properly constructed surveys take “What is the most important
the past 10-12 years. snapshots of opinion using random characteristic of a FX Broker?”
But in the vast geographic and digital sampling methods. The options were: spreads, execution,
expanse where retail FX trading takes If the sampling is random and platform, dealing-desk/no-dealing-
place, a key question arises regarding controlled, a relatively small number desk, regulation, service, or other.
the 100+ brokers that control this of people can reveal accurately the What the results of this table reveal is
marketplace. behavior of a large crowd. For example, that there are four attributes that are
In the United States we rely on political most important for FX traders: trade
What makes an FX broker better than polls that reveal the sentiment of 100+ execution, trading platform, spreads,
others? million voters by randomly sampling and customer service. Together they
The answer to this question opens 1500 people. account for 78% of all votes, with an
the door to a host of opinions. But an average of close to 20%.
informed person looks for coherent, For the 2010 FX Traders’ Choice Execution refers to whether a trade is
comprehensive answers, not anecdotes Awards, we obtained more than 1000 executed in a straightforward manner,
and hear-say. valid responses over the May 2009 – without requotes or slippage. The
Last summer, Forex Datasource May 2010 period.
announced results of a 2-year study These entries came
% Total Most Voted Broker
identifying the best brokers in the retail from 111 countries
FX arena. To reflect changes since then, thanks to the wide
the 2010 FX Traders’ Choice Awards reach of IBTimes.
Execution 22% Interactive Brokers
will be announced during the second com. In addition,
half of July in special partnership with we set up steps to Platform 22% DBFX
IBTimes.com, the large global news further limit vote Spreads 17% Alpari UK
leader. rigging. Service 17% FXCM
As a special preview for FX Trader But when it comes Deal Desk 8% Oanda
Magazine, this article based on the to the following Other 8% FXDD
data used to generate the 2010 awards question we asked
Regulation 6% PFG Best
identifies the key attributes that FX our respondents,
traders look for in brokers. there was no Source: ForexDatasource.com, 2010
10 FX TRADER MAGAZINE July - September 2010

content * content * content BROKERS FX
Trading Platform response in our poll is a leader in one attribute it does findings.
could mean a couple of things, whether not necessarily make them the most Before I venture into making regional
a broker offers a popular trading popular broker overall . . . comparisons, I will establish what is
platform such as MT4 or whether the the normal geographic distribution
trading platform has the (advanced?) Putting these results in perspective … of retail currency traders. Using the
specific features traders seek. voting percentages from the various
Most traders have multiple factors that continents over the past three years,
Of course, spreads refers to a broker are important to them, not just one. it seems pretty clear that FX traders
offering tight spreads which translate to When we make a broker selection, we originate from:
a low cost of trading. Customer service do look at multiple factors. Americas 35%, Asia 30%, Europe
is important because very often it is As a result, the table above helps us 21%, Africa 9%, and Oceania 5%.
hard to reach broker representatives to catch a glimpse of “the” most important
solve trading issues. trait to a large group of people in the Having said this, I should add a BIG
Interestingly, the issue whether a broker industry. But it does not necessarily caveat: this is the distribution of
has a dealing desk or not is not what tell us what is important and what English-speaking retail Forex traders
traders think as the most important isn’t, nor does it tell us how we select – next year we will hopefully have
characteristic of an FX broker. Some a broker. meaningful sentiment data from large
brokers base their whole marketing Having polled traders for three years non-English audiences as well.
pitch around the fact that they are in multiple categories, I have seen For this particular poll (what is the most
ECN or that they don’t have a dealing situations where people rank a broker important characteristic . . .) there was a
desk. It seems that on this issue, it is as a 10 in five categories, or a 10 in the heavier-than-normal concentration of
the French say, ca m’est egal! overall category and a 5 in the other American and African voters, while a
Perhaps to the dismay of regulators, four categories. Most often though a smaller representation of Asian voters:
being a regulated broker is not one of broker gets a numeric ranking around America 39%, Asia 22%, Europe 19%,
the four critical factors. 7 (plus or minus 1-2 points) in all Africa 17%, Oceania 3%.
The first column in the table above categories.
displays the percentage of voters that I think we as a trading community For voters in the Americas, the most
selected each response. I thought it have a predominant broker factor that important broker characteristic was
would be interesting to show in the is most critical to us. Because a broker Trade Execution, and it was selected
second column what broker was most has that critical factor we are willing to by 28% of Americans polled. The
often mentioned among people who forgive imperfections in other areas. second most important characteristic
selected each attribute. Now, switching gears, I would like to was Spreads, with 20% of the vote.
I should clarify that even if a broker add a geographic dimension to these In third place was a tie between
FX TRADER MAGAZINE July - September 2010 11

FX BROKERS
Platform and Customer Service, with 18% of the votes. The Other category traders is that it helps us understand
16% each. may include things such as, account what broker features are important
Voters in Asia considered Trade size, leverage, etc. to traders in our continent and in
Execution and Platform equally high, For Oceania, the number of votes was the world. It puts decision-making in
with 29% of the votes each. Regulation smaller than for the other continents, context. This data also may validate
was the third most important, with so there was less of a spectrum of or refute long-held beliefs of what
14% of the vote. answers. The top two categories traders consider most important
For Europe, the single most important were clear though: Trade Execution when selecting a broker.
broker characteristic was simple: and Customer Service, with roughly Can brokers learn from this analysis?
Trading Platform, which garnered 50% each. Clearly, the marketing department
50% of the European votes. Spreads It never ceases to amaze me how of brokers could learn a lot from this
came in a distant second with 17% of making decisions is much easier information. Here is enough analysis
the votes. after getting briefed with specific, to establish a rough marketing plan
Africa demonstrated its own reliable data. But even after reading that recognizes continental differences
preferences as well. Customer Service something insightful, a nagging and establishes four broker features as
was the single most important feature question from a former business the most important ones in the minds
for Africa with 36% of the votes, professor surfaces: this information of English-speaking FX traders.
followed by Spreads with 27%. The is great, so what?
“Other” category came in third, with The relevance of this information to Javier H Paz
TRADING SYSTEMS FX
Marney Indicators
As this is the last article in the series, I ’d like to actual volume is not readily available for FX ,
introduce the proprietar y Marney Indicators™, many data providers now include the number of
which have helped me to create profitable trading price updates, so that they can be plotted, as a
strateg ies by identif ying and exploiting non- proxy for volume and this can be exploited using
random behaviour. the Marney Volume Indicator™ (MVI).
Having learnt a great deal from other traders, Marney Volume Indicator
sharing their insig hts on the markets, I hope that
they will ser ve as a worthy contribution. The MVI plots a time-adjusted profile of volume,
throug hout the twenty-four hour trading day. An
The indicators illustrate a lot of the research that example of the Marney Volume Indicator™ is shown
has been discussed in the previous articles ; the below, applied to a 60min chart of EURGBP.
commonality of currencies as well as their unique
differences, how increasing volume and rang e I have used MultiCharts to illustrate and code the
confirm a trend, as well as the importance of time examples and Olsen Financial as the data source,
as an indicator. as they have one of the long est historical databases
available for foreign exchang e, tog ether with the
I was surprised not to have found these indicators number of price updates, as a proxy for volume.
already written elsewhere, as research and back
testing has shown that they provide a significant The histograms show the hourly volume, via the
edg e, in exploiting non-random and therefore proxy of price updates. If the corresponding hour
predictable behaviour. was an up event then the bars are coloured blue
and red for a down event.
Research with EBS data has shown that the number
of price updates per unit of time, correlates ver y The vertical dashed yellow line is a session break,
hig hly to actual volume traded. Therefore, while showing 0000hrs GMT.

FX TRADING SYSTEMS
The Marney Volume

Indicator™ therefore
provides a significant
improvement over the
classic volume rule of simply
looking for above averag e
volume.
For any g iven time of day,

we therefore know not only
whether volume is above
or below averag e but by
how much, for that time
of day also whether it is
likely g oing to increase or
decrease.
Marney R ange Indictor
A similar technique can be

The top yellow line is the Marney Volume Indicator™ applied to rang es, taking the true rang e for each
(MVI) and the bottom yellow line is a simple hour of the day over a preceding number of days
moving averag e applied to the volume, showing and plotting that as a time-adjusted averag e.
the dramatic difference that An illustration is shown below using the same
time-adjusting the averag e
makes.
The MVI line shows the

time-adjusted averag e over
the previous 50 sessions. By
time-adjusting the averag es,
the unique, predictable
profiles of each currenc y
pair are revealed. i.e. the
volume from 0000hrs to
0100hrs is taken for the
previous 50 sessions and the
averag e is plotted, followed
by 0100hrs to 0200hrs for
each of the twenty-four
hours in the trading day, by
using arrays in the code for
the indicator.

TRADING SYSTEMS FX
EURG B P data , showing the Marne y Volume expla ine d in this series of articles.
Indicator™ as the top study and the Marne y
R ang e Indicator™ as the bottom study. R e a l - ti m e Vo l um e a n d R a ng e A n a l y s i s
As describe d in ‘FX Trader Ma g azine’ Jan-Mar
2010 e dition, by studying historic data , we know A s i l l u s tr a t e d i n th e l a s t a r ti c l e , p r o f i ta b l e
that both hourly volumes and rang es throug hout tr a d i n g s tr a t e g i e s c a n b e d e v e l o p e d f r o m b e i n g
the trading day are both hig hly correlate d and a b l e t o p r e d i c t w h en th e h i g h e s t v o l um e s a n d
pre dictable. By plotting both the M VI and MRI r a n g e s d ur i n g th e d a y a r e l i ke l y t o o c c ur i n a n
tog ether we can se e this in rea l-time. i n d i v i d ua l ma r ke t .
The chart below shows the indicators applie d to By b e i n g a b l e t o p l o t e x p e c t e d v o l um e a n d

AUD JP Y. r a n g e s i n r e a l- ti m e , th o s e c o n c e p t s c a n b e
en ha n c e d e v en f ur th er.
Us i n g th e M V I a n d M R I ,
w e c a n s e e w h e th er th e
c urr ent r a n g e a n d v o l um e
i s h i g h er o r l o w er tha n
e x p e c t e d f o r a g i v en ti m e
o f d a y.
If th e ma r ke t i s ma ki n g
a n e w h i g h a n d b o th
th e r a n g e a n d v o l um e i s
h i g h er tha n e x p e c t e d f o r
tha t ti m e o f d a y, th en th e
m o v e ma y b e c o n s i d er e d
t o b e m o r e s i g n i f i c a nt
a n d c o nv er s e l y i f a m o v e
o c c urr e d o n p a r ti c u l a r l y
l ow vo l um e a n d r a ng e , th en
i t m i g ht b e c o n s i d er e d l e s s
s i g n i f i c a nt .
As we mig ht expe ct, the rang es and volumes are I hav e c a rr i e d o ut a c o n s i d er a b l e a m o unt o f
much hig her during the Asian session than for r e s e a r c h a r o un d th i s b a s i c i d e a a n d f o un d
a currenc y such as EURG BP and the pea ks are a num b er o f wa y s tha t th e s e i n d i c a t o r s c a n
much more define d when Asia , Europe and then b e u s e d , t o p r o f i ta b l y e x p l o i t p r e d i c ta b l e
the US enter the market. b e hav i o ur i n th e ma r ke t s .
We a lso se e the hig hest volumes and rang es for T h e c o d e f o r b o th i n d i c a t o r s i s ava i l a b l e

AUD JP Y during the London af ternoon session, f o r f r e e f r o m my w e b s i t e a n d I h o p e tha t i t
a lthoug h not a natively active time zone for p r o v i d e s r e a d er s w i th a n a d d i ti o na l e d g e i n
the currenc y pa ir, a common characteristic th e i r tr a d i n g , w h e th er s y s t ema ti c a l l y o r a s a n
of currenc y pa irs, pre viously identifie d and a d d i ti o na l t o o l f o r d i s c r e ti o na r y d e c i s i o n s .

FX TRADING SYSTEMS
MARNEY VOLUME INDICATOR™ MARNEY range INDICATOR™ Conclusion

input: avgLen(10), mins. input: avgLen(10), mins.
in.session(1440), autobars(True), in.session(1440), autobars(True), This series of articles has been the result of years
upcolor(cyan), dncolor(red); upcolor(cyan), dncolor(red);
var: start(0), end1(0), end2(0), var: start(0), end1(0), end2(0), of research, learning many expensive mistakes
x(0), p(-1), count(0), avg(0), x(0), p(-1), count(0), avg(0),
barsinday(0), DayNumber(0); barsinday(0); along the way, such as identif ying arbitrar y
array: xv[199,1440](0); array: xr[50,1440](0);
mathematical alg orithms that appeared to be
if bartype < 2 then begin if bartype < 2 then begin the Holy Grail, finding systems that worked
start= (Sessionstarttime(1,1)); start= (Sessionstarttime(1,1)); particularly well on some markets but not others
end1= (sessionendtime(1,1)); end1= (sessionendtime(1,1));
end2= (sessionendtime(1,2)); end2= (sessionendtime(1,2)); and systems that appeared to work well both in
value1 = timetominutes(start); value1 = timetominutes(start); and ‘out of sample’.
value2 = timetominutes(end2); value2 = timetominutes(end2);
if start > end2 then if start > end2 then
value3 = 1440+(value2-value1); value3 = 1440+(value2-value1); Almost all of these ideas and discoveries were
if start < end2 then if start < end2 then flawed.
value3 = -(value1- value3 = -(value1-
value2); value2);
if autobars = false then value3 = if autobars = false then value3 =
mins.in.session; mins.in.session; I have learnt that each mistake was, in some way,

barsinday = ceiling(value3/

barsinday = ceiling(value3/
a result of either over optimisation, or cur ve-
barinterval); barinterval); fitting , even if inadvertently. I hope that these
if d<>d[1] then begin if d<>d[1] then begin articles help others to avoid many of the pitfalls
if count=barsInDay then begin if count=barsInDay then begin
p=iff(p<avgLen-1,p+1,0); p=iff(p<avgLen-1,p+1,0); of building trading systems that it has taken me
for x=1 to barsInDay for x=1 to barsInDay begin
begin xr[p,x]=truerange[bar years to learn ; with no doubt many lessons still to
xv[p,x]=ticks[barsInDay+1-x];
end;
sInDay+1-x];
end;
be learnt.
end; end;
count=1; count=1;
end else count=count+1; end else count=count+1; To summarise, in a few simple rules :

if xv[avgLen-1,count]>0 then if xr[avgLen-1,count]>0 then begin
begin avg=0;
avg=0; for x=0 to avgLen-1 begin Keep it simple – if a system looks too g ood to be
for x=0 to avgLen-1 begin
avg=avg+xv[x,count]; end;
avg=avg+xr[x,count];
true, it probably is.
end;
avg=avg/avgLen;
avg=avg/avgLen;
plot2(truerange,”range”,defau
There is no ‘Holy Grail’ – only applying a small
plot2(ticks,”ticks”,default lt,1); robust edg e with consistenc y and discipline,
,1); plot1(avg,”avg”,yellow,
plot1(avg,”avg”,yellow,defau default,1); over a portfolio of instruments, with g ood risk
lt,1); end;
end; manag ement.
if close > open then setplotcolor
if close > open then setplotcolor (2,upcolor);
(2,upcolor); if close < open then setplotcolor
if close < open then setplotcolor (2,dncolor);
Avoid arbitrar y formula – if you test enoug h
(2,dncolor); parameters, you will always find some that work,
end;
end; both in and out of sample, or on some markets.
if bartype > 1 then begin
if bartype > 1 then begin avg = averagefc(trueran That doesn’t mean they’re robust parameters, nor
avg =
averagefc(v,avglen);
ge,avglen);
plot2(truerange,”range”
even robust ideas.
plot2(v,”ticks”,default ,default,1);
,1); plot1(avg,”avg”,yellow,
plot1(avg,”avg”,yellow, default,1); Do base systems on market behaviour that can be
default,1);
if close > open then setplotcolor explained and understood.
if close > open then setplotcolor (2,upcolor);
(2,upcolor); if close < open then setplotcolor
if close < open then setplotcolor (2,dncolor);
(2,dncolor);
Remember that nothing in the world can take the
end;
end; place of persistence.
Copyright Caspar Marney 2010 © Copyright Caspar Marney 2010 ©
Caspar Marne y

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
FX fundamental analysis
Euro: Prediction is very difficult, The new

especially about the future. Deutsche Mark.
Big troubles, Niels Bohr - 1885-1962 The Eur/Huf
strong response. Danish mathematician. swings.
E urozone future
A driving market force

fundamental analysis FX
E
ur o : big tr o ub l e s , c r i s e s , EU b a i l o ut p a c k a g e , a g g r e s s i v en e s s a n d q u i c kn e s s
s tr o ng r e s p o ns e G r e e c e d e b t r e s tr u c t ur i n g , o f p o l i c y r e sp o n s e wa s a s
E C B i nt er v enti o n i n th e w e l l q u i t e un f o r e s e en : th e
O ur p r e v i o u s a na l y s i s thr e e bond secondar y ma r ke t , ‘s h o c k a n d aw e ’ 1 tr i l l i o n Us d
m o nth s a g o ( ‘ We a k D o l l a r, a u s t er i t y p a c k a g e … . hav e a l l p a c k a g e a nn o un c e d o n Ma y
Eur o i n tr o u b l e ’ ) wa s b a s i c a l l y b e en ‘e v er y d a y w o r d’ i n th e 8 / 9 th w e e k- en d ( a f t er th e
a sp e c i a l r e p o r t o n Eur o z o n e e c o n o m i c n e w s - f l o w. a ma z i n g ‘f l a s h c r a s h’ o n th e
p r o b l e m s . At th e ti m e th e y S i t ua ti o n d e t er i o r a t e d p r e v i o u s T hur s d a y ) a n d th e
w e r e j u s t s t a r ti n g t o sp i n o ut e v en m o r e r a p i d l y tha n o ur E C B c r o s s i n g th e b o r d er o f
o f c o ntr o l . Fr o m Ma r c h t o (q u i t e n e g a ti v e a t th e ti m e ) o utr i g ht p ur c ha s e o f w e a ke s t
Jun e Eur o p e a n p er i p h er y ’s f o r e c a s t , w i th m o s t o f G r e e c e Eur o c o untr i e s (Greece,
( Cl u b Me d , P I G S e t c … ) y i e l d c ur v e e a s i l y r e a c h i n g Po r t u g a l , Ir e l a n d ) g o v ernm ent
tr o u b l e s , g o v e rnm ent d e b t d o u b l e d i g i t l e v e l s , b ut th e bonds.

W
h er e d o e s th i s l e av e
us ?
Fo r s ur e , i n v er y v o l a ti l e
ma r ke t , w i th v er y l i t tl e
v i s i b i l i t y o n a c l e a r en d g a m e .
C o nt a g i o n a n d tr a n sm i s s i o n
m e c ha n i s m s hav e s h o wn th e i r
ug ly face ver y similarly to Q4
2 0 0 8 : th e e x tr e m e l y n e g a ti v e
p r i c e a c ti o n a t th e b e g i nn i n g o f
Ma y w a s q u i t e i mp r e s s i v e . O n
th e o th e r e n d d e t erm i na ti o n
f r o m p o l i c y ma ker s t o d e f en d
th e Eur o p r o j e c t i s th er e , l i ke l y
i n b i g g e r s i z e tha n s o m e i n i ti a l
indecision and confusion
would hav e suggested.
D i sp e r s i o n of o ut c o m e s
f r o m e c o n o m i c a na l y s t s i s Charles de Gaulles’ visit to Germany in 1962
th e r e f o r e ma s s i v e . Fr o m
o n e e x tr e m e t o th e o th er…
• Competitiveness
d i sp e r s i o n among Eur o
The political will to bring along the Euro
c o untr i e s i s t o o b i g a n d project should not be underestimated
impossible to be reduced
un d e r a f i xe d c urr en c y, o r
un i q u e m o n e ta r y policy av o i d o n c e a g a i n th e tr a g i c b e f o r c e d up o n th e E C B .
f r a m e w o r k ( i . e . Eur o) , a n d e v ent s d e s tr o y i n g Eur o p e A s c a n b e i n f err e d f r o m th e s e
w i th o ut a r e s o ur c e tr a n s f er d ur i n g W WI a n d W WI I . o p p o s i t e o ut c o m e s , th e r a n g e
s y s t e m o r i g i na ti n g f r o m s o m e T h e s tr en g th o f s u c h a w i l l i s w i d e a n d a l m o s t a ny th i n g
c e ntr a l i z e d f i s c a l p o l i c y. T h e s h o u l d n o t b e un d er e s ti ma t e d . c a n ha p p en . O n o ur s i d e w e
ma s s i v e backstop package Po l i c y ma ker s w i l l d o w ha t e v er a r e v er y o p en o n p o s s i b l e
a n d th e s t a b i l i z i n g p ur c ha s e s i t ta ke s t o ke e p th e p r o j e c t e v o l uti o n s o f th e s i t ua ti o n ,
f r o m E C B i s o n l y b uy i n g ti m e afloat. If needed weak hav i n g s o m e h o w a b e t t er
before austerity programs c o untr i e s w i l l b e ke p t o ut c o nv i c ti o n o n t w o p o i nt s :
a n d p o l i ti c a l i n s ta b i l i t y w i l l o f th e r e f i na n c i n g ma r ke t - D e sp i t e th e sp e e d a t
force some r e s tr u c t ur i n g l o n g er tha n th e c urr entl y w h i c h th e s i t ua ti o n hav e
/ d e f a u l t / o utr i g ht e x i t e s ti ma t e d t w o - y e a r h o r i z o n , a e v o l v e d i n th e l a s t f e w m o nth s ,
f r o m th e m o n e ta r y un i o n . w e a ker Eur o c o u l d b e u s e d t o w e s ti l l b e l i e v e i t i s g o i n g t o
• T h e p o l i ti c a l w i l l t o i mp r o v e e c o n o m i c p r o sp e c t s , b e a v er y l o n g g a m e . Ye a r s a n d
b r i n g a l o n g th e Eur o p r o j e c t e v en a m o r e c o nv i n c e d d e b t n o t m o nth s i s th e ti m e h o r i z o n
w a s b o rn m o r e tha n f i f t y y e a r s m o n e ti z a ti o n ( U S o r U K o f th i s b a t tl e . T ha t i s w hy
a g o w i th th e n o b l e i nt ent t o style) m i g ht e v ent ua l l y tr y i n g a f o r e c a s t n o w i s q u i t e

impossible and not of great use.

- G l o b a l g r o w th w i l l p l a y
a ma s s i v e r o l e i n th e en d g a m e .
Br i n g i n g d e b t un d er c o ntr o l
thr o u g h a u s t e r i t y m e a s ur e s
( i n d e p e n d e ntl y ‘g r o w i n g o ut
o f p r o b l e m s’ i s a l u x ur y o f
c o untr i e s tha t c a n d e va l u e
a n d hav e a n i n d e p en d ent
m o n e t a r y p o l i c y ) av o i d i n g a
d e f l a ti o n / d e p r e s s i o n s c ena r i o
t o ke e p s o c i a l c o h e s i o n a t a
s u s t a i na b l e l e v e l , w i l l l a r g e l y
d e p e n d o n th e g l o b a l ma c r o
p i c t ur e o f th e n e x t f e w y e a r s .
E n o u g h o f th e Eur o z o n e s a g a
f o r n o w… b ut s ta y t un e d . We Chart 2. Impressive escalation in SNB reserves
a r e l i v i n g i nt e r e s ti n g ti m e s .
L e t ’s c o nti nu e th i s a r ti c l e
M
a ny w a y w i th o ut l e av i n g eet the new Deutsche Sw i t z er l a n d c a m e o ut f r o m
Eur o p e : th e r e are two Mark th e b i g c r e d i t c r i s e s o f 2 0 0 8
sp e c i f i c s i t ua ti o n s i n F X a n d 2 0 0 9 i n p r e t t y b a d s ha p e
w h i c h a r e d e e p l y i n f l u en c e d O r th e Sw i s s Fr a n c , a s i t i s a s m o s t We s t ern e c o n o m i e s .
b y th e s i n g l e c urr en c y s t o r y. m o r e c o mm o n l y kn o wn . Ma y b e , a b i t b e t t er f r o m a r e a l
e c o n o my s ta n dp o i nt ( n o n -
c y c l i c a l s e c t o r a s p ha rma o r
f o o d ) b ut s tr o n g l y b i a s e d o n
th e b a t t er e d f i na n c i a l s e c t o r.
W i th s h o r t t erm r a t e s a l r e a d y
s l a s h e d t o n e a r z er o l e v e l s , th e
Sw i s s Na ti o na l B a n k d e c i d e d
t o f o l l o w th e Q ua nti ta ti v e
E a s i n g p a th ta ken f r o m th e
Fe d er a l R e s er v e a n d th e B a n k
o f E n g l a n d . T h e d o m e s ti c b o n d
ma r ke t , e v en p ut ti n g t o g e th er
g o v ernm ent a n d c o r p o r a t e
ma r ke t s , wa s t o o sma l l t o hav e
a s i g n i f i c a nt i mp a c t w i th b o n d
p ur c ha s e s . S o th e S N B d e c i d e d
tha t un s t er i l i z e d p ur c ha s e s o f
Eur / Ch f w o u l d hav e s er v e d th e
c a u s e ( a n d h e lp e d th e e x p o r t
Chart 1. Eur/Chf – diminishing effectiveness of the SNB intervention
s e c t o r a t th e s a m e ti m e ) .

Ma r c h 2009. W i th an h e l d , a r o un d 1 . 5 0 . But i n 2 0 1 0 , somehow sho cke d the market by

un e x p e c t e d i nt er v enti o n , th e w i th th e Eur o z o n e p r o b l em s a nn o un c i n g tha t , a s a r e s u l t o f
S N B ma na g e d t o l i f t Eur / Ch f s ta r ti n g t o g e t o ut o f c o ntr o l i t s i nt er v enti o n i n th e f o r e i g n
f r o m 1 . 4 8 t o 1 . 5 4 i n a c o up l e a n d w i th th e c o n s e q u entl y e xc ha n g e ma r ke t s , i t s c urr en c y
o f s e s s i o n s . A f t er s u c h a m o v e w o r s en i n g p r o sp e c t s f o r th e r e s er v e s l e a p t m o r e tha n 5 0 %
a n d e x p l i c i t d e c l a r a ti o n s o f Eur o , th e S N B i nt er v enti o n l a s t m o nth , f r o m 1 4 5 . 6 b i o
w a nti n g t o “p r e v ent Fr a n c b e c a m e l e s s a n d l e s s e f f e c ti v e . Us d i n Ap r i l t o 2 1 8 . 8 b i o Us d
appre c i ati on” ( later on c hang e d D ur i n g th e l a s t c o up l e o f i n Ma y. A s a r e s u l t , th e S N B i s
i n “e xc e s s i v e a p p r e c i a ti o n” ) m o nth s th e y r a mp e d up n o w th e s e v enth - l a r g e s t h o l d er
p ur c ha s e s o f Eur o s c o nti nu e d p ur c ha s e s tr y i n g t o d e f en d o f r e s er v e a s s e t s g l o b a l l y,
a h e a d o f Ho n g Ko n g , Br a z i l ,
In d i a a n d th e E C B a s w e l l .
the SNB is now the seventh-largest To p ut th e f i g ur e s i nt o
p er sp e c ti v e , th er e hav e b e en
holder of reserve assets globally ahead of o n l y t w o m o nth s w h en Ch i na ,
the world larg est ho lder of forex
Hong Kong, Brazil, India and the ECB r e s er v e s w i th 2 , 2 4 9 b i o Us d i n
a s s e t s , s aw i t s r e s er v e s i n c r e a s e
more tha n Sw i t z er l a n d’s
7 3 . 2 b i o Us d r i s e i n Ma y.
D esp ite these ma ssive purcha ses
th e Sw i s s Fr a n c ha s a p p r e c i a t e d
a b o ut 3 % o n a tr a d e - w e i g ht e d
b a s i s a n d 6 . 5 % a g a i n s t th e
Eur o s i n c e th e b e g i nn i n g o f
2 0 1 0 . Mo v i n g i t a r o un d w e
c o u l d a c t ua l l y s a y tha t th e
s tr en g th o f th e c urr en c y ha s
b e en th e c a u s e o f th e s i z e o f
i nt er v enti o n w i th th e S N B
d e sp er a t e l y tr y i n g t o av o i d
a p p r e c i a ti o n i n a n o th er w i s e
e v en mu c h s tr o n g er c urr en c y.
W
h at i s d r i v i ng th i s
s tr eng th ?
T h e Sw i s s e c o n o my, a f t er o v er
i n e a rn e s t a ny ti m e th e c r o s s 1 . 4 3 1 5 at f ir st a n d l at er 1 . 4 0 0 0 . a y e a r s i n c e th e w o r s t r e c e s s i o n
w a s s t a r ti n g t o m o v e l o w er. Ac c o r d i n g t o th e tr a d i n g p er i o d , a p p e a r s i n b e t t er s ha p e
In i ti a l l y a n d f o r th e w h o l e o f c o mmun i t y, ma s s i v e a m o unt s tha n m o s t o f i t s Eur o p e a n
2 0 0 9 , s ta b i l i z ati o n re s u l t s w ere o f Eur o s w er e b o u g ht : s e v er a l neighbors. While GDP for Q1
r e ma r k a b l e : i t l o o ke d l i ke a b i l l i ons p er day f or s e vera l day s . d i s a p p o i nt e d , th e c o untr y ha s
l i n e i n th e s a n d wa s d r awn a n d O n Tu e s d a y Jun e 8 th th e S N B r e l a ti v e l y l o w un emp l o y m ent ,
f l aw s . G erma n s ( a t l e a s t a
ma j o r i t y o f th e m ) w o u l d
p r o b a b l y l i ke t o s e e a r e t urn
o f th e D e ut s c h ema r k . Fo r e i g n
i nv e s t o r s hav e a l wa y s b e en
s e e ki n g a ha r d c urr en c y
a l t erna ti v e t o th e D o l l a r. Su c h
a r o l e f o r th e Eur o i s n o w i n
d a n g er. But , a s w e a r g u e d
e a r l i er, a Eur o b r e a k- up a n d
a q u i c k d em i s e o f th e s i n g l e
c urr en c y ( a n d a r e t urn o f
D E M ) i s v er y un l i ke l y i n th e
s h o r t t erm . W i th Sw i t z er l a n d
a l r e a d y a g o o d p r ox y f o r
G erma ny ’s e c o n o my ( 2 0 % o f
Sw i s s e x p o r t s c r o s s th e i r No r th
b o r d er ) th e Fr a n c c o u l d b e a
va l ua b l e ‘ha r d c urr en c y ’ ta r g e t .
Ir o n i c a l l y th e s i g n i f i c a nt
Fidesz recent concerns about Hugary’s r e s er v e s a c c umu l a t e d b y th e
SNB, now holding foreign
fiscal situation remind what caused the a s s e t s e xc e e d i n g m o s t o th er
Greek situation to spin out of control Eur o p e a n i n s ti t uti o n s by
f a r, c o u l d f ur th er b o o s t
e xc e p ti o na l l y h i g h P M I a n d th e th e w o r l d’s b i g g e s t o f f s h o r e c o n f i d en c e in th e Ch f ,
h i g h e s t KO F l e a d i n g i n d i c a t o r w e a l th ma na g em ent c entr e j u s t a s th e Bun d e s b a n k ’s
i n a l m o s t f o ur y e a r s . He a d l i n e s e em n o w t o b e c o mp l e t e l y r e s er v e s in th e past
c o n s um e r p r i c e i n f l a ti o n ha s r e v er s e d . Un c er ta i nti e s a b o ut b o l s t er e d th e D e ut s c h ema r k .
H
e xc e e d e d th e S N B’s p r o j e c ti o n Sw i s s b a n k s e c r e c y f o l l o w i n g
f o r m o s t o f th i s y e a r, a l th o u g h B ern’s a c c e p ta n c e o f g r e a t er ungary: sharing
th e l a t e s t r e a d i n g wa s s o f t er. tr a n sp a r en c y in Ma r c h Eur o z o n e d e s ti ny
But m o r e tha n c o m i n g f r o m 2 0 0 9 , e v en a d v er s e p u b l i c i t y
th e r e l a ti v e p er f o rma n c e o f f r o m th e f t s o f c o n f i d enti a l
When the April Hungarian
r e a l e c o n o m i e s , th e s tr en g th c l i ent d a ta f r o m r o g u e b a n k elections gave a clear winner, the
i s l i ke l y c o m i n g f r o m f l o w emp l oy e e s , are n ow d ownp lay e d Fidesz centre-right party, the
d y na m i c s . Ac c o rd ing t o rep o r ts w h en f a c i n g mu c h d e e p er country saw a nice rally in its
by s o m e o f th e c o untr y ’s l e a d ing w o rr i e s o n Eur o s ta b i l i t y a n d various asset classes: FX (Eur/
p r i va t e b a n k s , r i c h f o r e i g n er s th e p o t enti a l f i na n c i a l c r i s e s Huf got almost as low as 260),
a r e i n c r e a s i n g th e f un d s i n s o m e Eur o z o n e m em b er s . bond and equity markets. All the
th e y ’ v e h o l d i n Sw i t z er l a n d . worries coming from spillovers of
Widely flagged c o n c ern s Eur o p e ’s c r i s e s ha s e x p o s e d the Western credit crises seemed
a b o ut th e c o untr y ’s f ut ur e a s th e s i n g l e c urr en c y p r o j e c t ’s to have faded away.

Su c h a re l i e f wa s ver y shor t prom ises of fisca l larg ess . c o n f l i c t w i th th e C entr a l B a n k

l i ve d . E xtrem e tension from Stil l , market reacte d qu ite w i l l a r i s e , w i th g o v ernm ent
G re e c e an d m ore g enera l ly from b ad ly with Eur/ Huf losing l o o ki n g a t a w e a ker Fl o r i nt
Europ e an p erip her y onc e a g a in ab out 5% in a fe w sessions to a n d l o w er i nt er e s t r a t e s a s th e
star te d s om e c onta g ion in the touch year h ig hs at 290. o n l y f e a s i b l e wa y s t o r e f l a t e
em er g ing Europ e markets . With Eurozone’s financia l th e e c o n o my.
But th e re a l b l ow ha s b e en ver y instab il it y b eing stil l present, The s i t ua ti o n gets e v en
re c ent : th e n e w r u l ing p ar t y emerg ing Europ e cannot m o r e c o mp l i c a t e d d u e t o
vo i c e d c on c erns ab out the c onsider itself out of the wo o ds . th e p a r ti c u l a r na t ur e o f th e
c urrent f i s ca l s i tuation b lam ing In p ar ticu lar Fidesz man ifesto p r i va t e l en d i n g b u s i n e s s i n
th e pre vi o us g overnment to pursue g rowth a head of Hun g a r y : 5 5 % o f t o ta l l o a n s
o f having h i d den the rea l fisca l austerit y c ou ld b e in a r e d en o m i na t e d i n f o r e i g n
(d i s a stro us ) situation of dang er with risk s of deflation c urr en c i e s . T h e Sw i s s Fr a n c
p l a y s a p r i ma r y r o l e : 3 0 % o f
all bank loans and 60% of all
m o r t g a g e s a r e d en o m i na t e d
i n Ch f . Fo r e i g n ( p r i ma r i l y
p a n - Eur o p e a n ) b a n k s , d i r e c tl y
o r thr o u g h th e i r a f f i l i a t e s ,
a c c o unt f o r a l a r g e s ha r e o f
t o ta l b a n k a s s e t s i n c entr a l
Eur o p e a n c o untr i e s . A w e a ker
Fl o r i nt , a n d e v en m o r e , a
s tr o n g Fr a n c , c o u l d p ut m o r e
s tr e s s o n th e Eur o p e a n b a n ki n g
s y s t em w i th n e w wr i t e - d o wn s
l o o m i n g f o r Eur o p e a n a n d
Sw i s s l en d er s .
A s s o m e b o d y p ut i t , “ke e p i n g
Sw i s s Fr a n c f r o m r i s i n g i s a
l o t m o r e i mp o r ta nt n o w t o th e
h e a l th o f th e Sw i s s a n d EU-
Chart 3. Eur/Huf swings.
w i d e b a n ki n g s y s t em tha n i t i s
f o r R o l e x a n d Ne s tl é ”.
e c on om i c vari a b les and pub l ic lo om ing in many Eurozone In th e en d , a s w e c a n s e e ,
f i s ca l p o s i ti on . On the surf ac e, c ountries . The ne w g overnment Eur o z o n e ’s d e s ti ny a n d th e
ver y s im i larl y to what cause d wil l have to fig ht not on ly the s ta b i l i t y o f i t s f i na n c i a l s y s t em
th e G re e k s i tuation to sp in out I M F attitude (whose p lan for i s g o i n g t o b e p i v o ta l f o r g l o b a l
o f c ontro l a f e w months a g o. Hung ar y is much more b ia se d ma r ke t s , s ta r ti n g f r o m s o m e
To s om e e xtent Fidesz on fisca l c onso l idation) but i mm e d i a t e n e i g h b o r s s u c h a s
d e c larati ons have l ikely b e en a lso the wea kness of most of its Sw i t z er l a n d o r Hun g a r y.
mu c h m ore instr umenta l to exp or t markets .
d om e sti c p o l i tic tactics . A
way to b a c ktra c k on ele ctora l It i s v er y l i ke l y tha t s o m e Alessandro Balsotti

FX Macroeconomics
Frau Doktor M
Germany’s European option is not reversible
In this phase Europe is steered by a coming from the secret services. Mrs. Merkel is in a league of her own.
political leader, Mrs. Merkel, who It is well known that a common The fact that she was the daughter
spent the first 35 years of her life professional deviance for a secret of a Lutheran priest, even a Prussian
in the DDR . Mrs. Merkel, who service agent is a sort of amoral one, has left a peculiar imprinting.
speaks a perfect Russian, has been superman and ‘legibus solutus’ Even if she quickly became familiar
a member of Freie Deutsche Jugend, (rule-free) attitude. It is no with the “byzantinisms” of
the SED youth organization (SED coincidence that many leaders with politics, when she says something
has been among it is because
the European she believes in
communist it. Overall this
parties the most is positive and
rigorous in comforting ,
being loyal to especially when
Moscow). she is heard
Politicians, who defending
in Europe and G e r m a ny ’s
Russia have Eur o p e a n
grown under choice.
communist A bit less
rules, can be thrilling is
roughly divided the fact that
in two groups. someone with
On one side the a Lutheran-
e x- d i ss i d ents , communist
as we can find Activists of Freie Deutsche Jugend in blue shirt during the period of Angela Merkel’s militancy. 1970. training who
in the Baltic has learnt
countries, in Poland and in the such a background, from central Latin and English languages
Czech Republic. They generally Asia to Balkans, have showed from her professor mother, can
love market economy, but they extreme ease in moving from have - and will have - difficulties
are usually pure and disinterested. communism to satrapy and greedy speaking the international
On the other side we can find men richness accumulation. financial market lang uag e.

Macroeconomics FX
In the last thirty years and until a The story of a Germany worried and government bonds is of the
few years ago, emerging countries from devaluation and inflation first kind. These are defense
leaders, quite heavily indebted which is g etting ready to exit (with some sense) precautions.
and pretty much depending on the Euro is ever yday word The second group reg ards a
Wall Street and Washing ton’s from dozens of manag ers, miscellaneous of Tobin Ta x
money, have perfectly learnt analysts, g urus based in New and attacks to hedg e and
markets’ lang uag e, up to the York, London or California . private equity funds. They are
point of being concessions in
able to soothe order to g et
them. The most other, more
resounding complicated,
example is approvals in
coming from Parliament.
the ‘trade Bundestag will
unionist’ Lula , be requested
a real ‘maestro’ to approve
in the art a potential
of speaking expense of
g ently to both 140 billion
trabalhadores Euro (German
and bankers pro -quota of
and being loved the European
from both of packag e), a
them. hug e 5% of
Mrs. Merkel GDP, while
does not have SPD, Linke,
this skill. In all German youth march for peace. 1951. Green party
likelihood she would all like
does not love the finance world, Unfortunately among the 82 to have much more than the
but many of recent declarations millions of Germans who live above mentioned miscellanea in
of her government, stinging and in Germany it is impossible to exchang e.
ulcerative for markets, are meant find a voice with some sort of The third kind of action, the
to do g ood. From abroad, it is authority or consensus asking most contentious and tricky
commonly thought that German for Euroland dissolution or a in our view, is the request
public opinion opposition to Euro exit. There are plenty of of implementing a default
pro-Euro measures is originated people, on the contrar y, asking procedure for countries at the
from the right wing: a sort of rich for finance to pay as hig h a price European level. Markets took it
people selfishness who do not as possible. in the worst way, inferring that
want to help the irresponsible These days the German defaults will happen and will be
Club Med. Mrs. Merkel is indeed g overnment is taking or asking numerous. The aim is actually
facing a strong opposition from ( in a quite harsh way) for three the opposite : to scare fiscally
the left wing both in the countr y types of measures. The short irresponsible nations in order
and in the Parliament. ban on European banks stocks to make them responsible not to

FX Macroeconomics
have them happily defaulting . quantity of them. The fact that you, as far as Euro’s weakness
It is clear that this is a g ame each time tensions arise on g oes, that is enoug h. Actually
played on razor ’s edg e. To the markets the oil supply g ets the IMF has always argued that
convince both Bundestag and plentiful shows that exporters this is the optimal level. There is
Club Med, a loud and dramatic are quite careful in stabilizing nothing wrong with having the
voice is needed, but it is obvious the world in this delicate phase. Euro under valued for a couple
as well that some declarations No inflation then, it is this of years after a long period of
could cause even more dramatic that really matters. How many overvaluation, if markets will keep
effects when the reader is in the Americans outside Wall Street pretending that the States are
US and is already short most could tell if Euro is currently sounder than Europe.
European assets. worth 1.00, 1.20 or even 2.00 It is actually worth questioning
What makes us think on the Dollars ? Likely not many, and if why all this drive to sell
positive side is the fact that if inflation is not existing , nobody g overnment bonds of half of
Germany was really evaluating to cares. It is not going to be much European countries now that
abandon the Eurozone periphery different in Germany. some growth is showing up, and
to its destiny, it would not at the In more practical terms, we not 15 months ag o when the
same time short-ban its assets, report that IMF ’s Lipsky just world was seemingly falling in an
g enerating market ang er. stated that Eur/Usd exchang e ever ending abyss ? The reason is
In the end, anyway, the most rate is now at equilibrium level. that, at that time, stock markets
p o w e r f u l were quickly
arg ument that sold and money
the German was parked in
government the first option
is using is available,
that not a d o m e s t i c
sing le grain government
of inflation bonds. Today,
will come out European assets
from Euro are quickly
depreciation sold and money
and from is parked in
ECB actions. Tr e a s u r i e s ,
Wag e inflation hoping to find
is a distant some peace,
memor y. As far but it will
as commodities not be like
are concerned, this forever.
p r o d u c e r s Our flag is flying in front of us. FDJ demonstration. After two ex
think in terms Fed g overnors
of purchasing (Greenspan
power more than in Dollars and, Lipsky is the US man at the IMF and Volcker) have been vocal on
if the Dollar g ets strong er they and this could mean that the the worr ying American balance
are ready to accept a smaller United States are saying : thank sheet, now even an ex MoF,

Macroeconomics FX
Paul O’Neill, has noted that US on the positive side. Indeed, a vag ue Venezuelan flavor) and
unfunded liabilities add up to as noted from Bruce Kasman, the result has already been to
61 trillion Dollars, in the face the compilation between have several investment plans
of which big Mediterranean ver y hig h marg ins, massive immediately cancelled.
debtors can be seen as playing unemployment, hig h public Who thinks that world will
in an amateur leag ue. deficits is potentially explosive not end in the next few weeks
Euro is probably facing a short- and the temptation for the can take advantag e of several
term stabilization. Even some public sector to extract money barg ains, some of them really
recover y cannot be excluded from corporate balance sheets interesting , in the stock market.
since short positions are is likely to be irresistible. At Big investors with a watertig ht
significant. track record
When the keep buying
s i t u a t i o n A m e r i c a n
calms down banks, but
again, the Euro s p e c i a l
could resume offers are so
its decline, numerous that
but not that it is possible
much. The fact to restrict
that Europe the choice to
is currently sectors easier
posting a current to read as
account surplus c yclical, oil
should not be and materials.
forgotten. Obviously,
A possible after the even
double-dip for easier choice
the European of all European
e c o n o m y Last event for FDJ on 40th anniversary of DDR, October 7th, 1989. exporters.
has been The Berlin Wall will collapse just one month later. Mrs. Merkel joined opposition few months before. When a countr y
mentioned devalues it is
several times these days, but the the moment analysts’ estimates quite common to see its stock
positive effect of the weak Euro do not include a growing fiscal market decline. If it devalues,
on export will overcome the burden for corporates in 2011 there is usually a problem and
negative impact of Mediterranean and onwards. It is a g ood thing foreign investors, noticing the
austerity. The rest of the world’s to keep it in mind. problem, sell all the countr y’s
growth pace is so hig h that even The impression anyway is assets, without too much of a
if Europe will slow down (and that g overnments in the US, detailed analysis. However, after
will likely slow down), ver y g ood Europe and Japan will be able to six to nine months, the stock
external conditions for exports refrain from plainly exploiting market is usually strong er.
should persist. corporates, still reg arded as the
As far as stock markets eng ine of any possible growth.
are concerned, earning s Australia has started such a Alessandro Fugnoli
announcements keep coming out process with a mining ta x (with 21 May 2010

algorithmic trading FX
High Frequency Trading

and Market Stability
The news is filled with comments about including Mutual Funds, Hedge The Luddites were a social movement of
automated trading and ‘high frequency’ Funds, Banks, and retail brokers? British textile artisans in the nineteenth
trading, blaming either directly or century who protested - often by destroying
implicitly, that it was these computer Exchanges have moved to fully mechanized looms - against the changes
systems that caused or exaggerated electronic trading, as have funds - not produced by the Industrial Revolution,
the crash. In a Fortune/CNN article: only for execution but for decision which they felt were leaving them without
“We want to see a big reaction in making. Anyone who suggests that work and changing their entire way of life.
Washington,” said Saluzzi. “We need to automated traders should be banned This English historical movement should
get all these fast-trading jokers out of here.” represents a dying class of angry workers be seen in the context of the era’s harsh
Are they suggesting we stop using similar to the Luddites, a social movement economic climate due to the Napoleonic
algorithmic trading systems, used by in pre-industrial Britain against the Wars, and the degrading working
nearly every type of investment fund, development of automated looms. conditions in the new textile factories. Since

FX algorithmic trading
counterparty know, in an
electronic market, if it was a What is High Frequency Trading?
human placing trades via an
electronic manual platform, High Frequency Trading (HFT) uses
or if it was an algorithm? super-fast computers and complex code
Banks have designed to detect large orders (increasingly
algorithms to detect fraud split into smaller lots) coming onto
and arbitrage based on the market, to make canny in-and-
trading activity, and algo- out trades ahead of these orders,
traders have responded by and to arbitrage small, fleeting price
discrepancies across different trading
creating more intelligent
venues for the same securities. High
then Luddite has been used to describe algorithms that act like
Frequency can be characterized as [1]
those opposed to industrialization or new humans (by placing and removing bids and a large amount of orders generated by
technologies. The Luddite movement, offers as a human would, for example). a computer system, for example placing
which began in 1811 and 1812 when There is a similar trend in the 10,000 orders in a single day on a single
mills and pieces of factory machinery were internet; the CAPTCHA fight stock or commodity in 1 account, [2]
burned by handloom weavers, took its against spam-bots. And spammers have orders placed in very short time frames,
name from the fictive King Ludd. For a responded by creating CAPTCHA trades which last less than a second
solvers, and companies have sprung up (see Flash Trading). HFT accounts for
short time the movement was so strong that
offering CAPTCHA solving services. over half the trading volume in the U.S.
it clashed in battles with the British Army.
Measures taken by the British government The use of algorithmic trading
included a mass trial at York in 1812 that systems is inevitable and unavoidable. It is Opponents claim that practitioners
resulted in many executions and penal also impossible to create a fair comparison of high frequency trading gain
in the argument because we cannot ‘stop’ an advantage at the expense of
transportations. The principal objection of
using electronic trading to test how the individual investors. Proponents
the Luddites was against the introduction
of new wide-framed automated looms markets would have reacted without the use
of algorithmic systems. The internet and
that could be operated by cheap, relatively
computers are the electronic ‘information
unskilled labour, resulting in the loss
superhighway’ that the economy operates
of jobs for many skilled textile workers.
on, it would be highly inappropriate
Electronic trading is not a trend; it is difficult
and inefficient to have a non-electronic
to trade non-electronically. 55% of FX
trading system.
Volume is now executed electronically. The
question of whether or not high-frequency Volatility and IT systems
trading contributes to market stability or to
market volatility is the wrong question. In Something EES noticed that was unique
most cases, airplanes do not cause crashes, about this market spike, prices were being
pilots do. Electronic systems are as good updated faster in absolute terms (not
as their makers and executors. In the case because of the volatility). For example,
of the DOW’s severe drop and recovery, imagine in 1 minute EUR/USD price
this would likely not have happened if the goes down by 10 pips, and the price is
markets were not already concerned about updated 10 times. Compare this to the
Greece. What difference does it make if same move in 1 minute (10 pips) but the
humans were trading or algorithms? price is updated 100 times.
In a trading Turing test, how would a Most FX brokers do not display the

algorithmic trading FX
argue that high frequency

trading narrows spreads
between bid and asked (offered)
prices, thus reducing trading costs
for all market participants. They also
argue that high frequency trading
increases liquidity in the market.
Investors with money in mutual funds
and pension funds, according to
advocates, are particular beneficiaries
of high frequency trading that makes it
easier for these funds to transact large
volumes quickly and anonymously.
These funds are highly dependent

on ultra-low latency networks. They
profit by providing information, such
as competing bids and offers, to their
algorithms microseconds faster than
their competitors. The revolutionary
volume of each trade, so we cannot say data and NOT update in real time. advance in speed has led to the need
this is an increase in Volume (although Thus, the platforms began to eat up for firms to have a real-time, colocated
it may be). It is an increase in the system memory at an exponential rate, trading platform in order to benefit from
amount of times prices are updated until many servers crashed. This was implementing high frequency strategies.
in a certain period of time. We could experienced by brokers as well as client Strategies are constantly altered to
call it ‘tick volume’ or ‘price change terminals. reflect the subtle changes in the market
volume’ because it is an increase in the as well as to combat the threat of the
strategy being reverse engineered by
number of times the price changes, not High Frequency Trading as an Asset
competitors. There is also a very strong
necessarily the increase or decrease (it Class pressure to continuously add features or
could change 1,000 times but only improvements to a particular algorithm,
increase or decrease by 2 pips). As markets become more volatile and such as client specific modifications
uncertain, traditional investments and various performance enhancing
(Tick Volume / Volatility) Close may produce unstable results. High changes (regarding benchmark trading
[Today] > (Tick Volume / Volatility) frequency automated systems have performance, cost reduction for
Close [10 days ago] the advantage of being able to profit the trading firm or a range of other
in nearly any type of market. These implementations). This is due to the
This could have been caused by a large systems should not be discarded as evolutionary nature of algorithmic
amount of orders coming out of European investments for only Elite hedge funds trading strategies - they must be able to
adapt and trade intelligently, regardless
institutions, or due to fund trading, and and I-Banks. In fact, it is better for
of market conditions, which involves
a number of other crisis related factors. the market if these systems are widely being flexible enough to withstand
But the unique observation is that this proliferated instead of being controlled a vast array of market scenarios. As a
surge in Volume caused many FX trading by a few powerful funds. The future of result, a significant proportion of net
platforms to become overwhelmed with trading may be a battle of computers. revenue from firms is spent on the R&D
data. Most platforms update in real of these autonomous trading systems.
time, they couldn’t afford to filter price Elite E Services
FX Trading platforms
content * content * content

MetaTrader 5 is a 21 timeframes, more parameters
complete redesign of quotes, more technical
of the platform. indicators and analytical tools.
E XC LUS I V E I N T E RV I EW – A L E X A N D E R S A I D U L L I N FOR FX TRADER MAGAZINE
M E TAT R A D E R 5 R E L E A S E
Alexander Saidullin
Director of Trading
Platform Development
at Metaquotes Software

trading platforms FX
It is official. The Russian company Metaquotes Software released the new version
of MetaTrader. This is a strategic milestone in the development of the platform and
brokers are already starting to offer demos of the new platform to retail traders.
FX Trader Magazine interviewed Alexander Saidullin, Director of Trading Platform Development,

to understand the differences between MT4 and MT5 and the benefits that the new platform will
bring to both retail traders and broker firms. Alexander explains that MetaTrader 5 is not just
a new version of the most popular forex retail trading platform. It is a complete redesign of the
platform, which will give Metaquotes the possibility to enter new financial and equity markets.
Both programs have similar interfaces, but they are two completely different terminals
with different trading systems, different databases of quotes and development
environments. MT5 also offers higher performance and scalability than version 4. For
Forex traders the new terminal offers more opportunities and information for analysis,
21 timeframes, more parameters of quotes, more technical indicators and analytical tools.
Although MT4 and MT5 are not compatible, meaning that traders have to re-program
their strategies using MT5 new programming language, Alexander explains that the new
system development language, MQL5, is quiet easy to learn and offers programmers the most
powerful environment for writing trading robots. MQL5 is also one of MetaTrader 5 key
competitive advantages, allowing MT5 to be a comprehensive analytical and trading platform.
FXTM. What are the main symbol with the partial close; also MQL5, an editor, a debugger and a
differences between MetaTrader 4 the unlimited number of orders multi-currency strateg y tester that
and MetaTrader 5? and no locks. supports distributed testing. With
Secondly, Depth of Market is such an arsenal, traders can create
AS. MetaTrader 5 is designed not implemented in the platform, almost any trading robots. I think
only for forex. With this platform, which enables you to work in stock we are going to see some interesting
we want to enter new financial markets. Parameters of quotes in Expert Advisors during the
and equity markets. This resulted the Market Watch are also extended Automated Trading Championship
in the main difference – a new – now many different data about a 2010.
trading system. In MetaTrader 5, price can be translated. As for the technical side of
we implemented a classical trading What we offer to traders things, the MetaTrader 5 platform
system which is adopted by most is a powerful development is a further development of a
stock exchanges and markets. Now environment MQL5. It includes distributed architecture. Now
a trader has only one position for a the object oriented language different functions of the platform

are separated on different servers. AS. Right, MetaTrader 4 is good. Development of a new platform is
Thus, trade operations are processed But it’s not a reason to stop for quite a lengthy process. In this case,
on one server, and the history of us. We always try to improve our time is measured by months and even
quotes and news – on another one. products and offer something new to years. Well, we started to develop
Such a distribution of functions our clients. Thus we can extend our MetaTrader 5 three years ago. It is
allows for a better scalability of the client base on the retail forex, expand therefore no wonder that testing
new platform. to new markets and protect ourselves took us 9 more months.
In fact, there are many from competitors. And we really wanted the product
differences. Actually MetaTrader Many forex brokers want to enter to be as stable and reliable as possible.
5 and MetaTrader 4 are absolutely new financial and equity markets. That is why we introduced a multi-
different platforms. Expanding business into adjacent stage testing. First, MetaTrader 5 was
markets is not an easy thing. For tested in our own QA department.
FXTM. When you started the our part, we tried to remove the The second stage was a closed beta
project, which improvements did technical barrier from their path. testing of the client terminal among
you have in mind for forex traders With MetaTrader 5, they will be selected traders. This was followed
and brokers? able to enter the adjacent markets, by an open testing, which lasted for
not having to change their soft or re- a few months.
AS. We’ve implemented everything train their staff. One more advantage During this time, we managed to
we wanted. MetaTrader 5 can be for brokers – their traders also do not fix a lot of bugs and implemented
integrated with other systems. For have to learn a new client terminal. dozens of traders’ suggestions. During
brokers, this means the possibility the open testing, we released about
to easily enter new markets and FXTM. What are the most 50 builds, each of them with fixed
expand their businesses. The new innovative features of MetaTrader bugs and implemented suggestions.
platform gets higher performance 5? The ones you are the most proud So, this is not a long time for such a
and scalability, which is also vital of ? great job.
for expanding one’s business.
Besides, we wanted to give more AS. In fact, there are a lot of FXTM. What has been the
opportunities and information for them, and all of them are closely market reaction since the official
analysis to traders. MetaTrader 5 interrelated. If I try to tell you about release on the 1st of June? Is the
has 21 timeframes, more parameters one of the features, I will have to tell demand stronger from the retail or
of quotes, more technical indicators you about the whole platform. The institutional side so far?
and analytical tools. I think this platform was written from scratch,
will be enough to most of traders. and it is built of new features. So, it’s AS. The market reaction was an
If someone needs more, we offer the hard to single out one thing. increased interest. It’s one thing
MQL5 environment. So traders can when software is available but is on
develop or order a desired analytical FXTM. The market had been the testing stage. It’s quite another
tool or a trading robot. waiting for MT5 for over a year. Can thing when the software is officially
you explain the delay between the released. The client terminal was
FXTM. With MetaTrader 4, announcement of the new terminal available to traders since the end
MetaQuotes is already the worldwide and its release on the market? of the previous year, when the
leader on the retail forex market. Do open testing stared. They tried it,
you expect MetaTrader 5 to expand AS. It all stems from our desire to saw what the MetaTrader 5 is and
your client base to new markets? release a stable product, and from calmed down. With the release of
What are your objectives? the very character of the software. the platform, with the possibility to

“MetaTrader 5 will give
Metaquotes the possibility
to enter new financial and
equity markets”

its possibilities and

configurations. I
think soon they will
officially announce
the launch of
MetaTrader 5 and
will offer it to their
clients.
FXTM. The
process of switching
over from one
platform to another
can be difficult and
painful, especially
on the institutional
side. Which kind
of support will you
offer brokers in this
process?
AS. We began to
study this question
already on the stage
of MetaTrader
MT4 and MT5 are two completely different 5 development.
We have all the
terminals with different trading systems, different necessary tools for a
databases of quotes and development environments. smooth and painless
switching over to the
new platform. With
trade, their interest increased. for brokers, because we tried to these tools, you can
Since June 1, the number of implement their suggestions and easily convert databases of traders’
downloads of the client terminals needs in the new software. They accounts and trading operations
and visits of our websites increased required this platform for expanding into MetaTrader 5. So, there are no
dramatically. The number of their business and developing their problems from the technical point of
published articles about MetaTrader companies. And we’ve implemented view.
5 and MQL5 programs also began to such a platform for them. To train the staff of brokerage
increase significantly, even though Even before its official release, companies, the platform is equipped
it is a season of vacations. Based on we received a few pre-orders, but with detailed Help files. In addition,
these data, I would say that traders after July 1, their number increased we constantly publish articles on
are showing great interest in the new greatly. Currently, more than ten different subjects related to setup and
platform. brokerage firms have purchased operation of MetaTrader 5. Already
The platform is also interesting the new platform. Now they study with these materials, specialists

trading platforms FX
of brokerage firms can set up and speed of the platform. They all show new website MQL5.community,
customize the platform. However, if that MetaTrader 5 is much faster than which incorporates plenty of useful
any of our clients have difficulties, we its predecessor. and unique information on the
are always ready to help them. development and use of trading robots.
FXTM. Is MetaTrader 5 compatible Plus to that, recently we launched a new
FXTM. Will forex brokers, which with MetaTrader 4? Jobs service on this website. With it, a
business model is to concentrate on trader can ordered a required program
the forex market, have to swap from AS. Many developers have written from any developer. For example, this
MT4 to MT5? For how long will you strategies in MQL4. Can they migrate can be an order for rewriting a MQL4-
continue supporting MT4? strategies in MQL5 easily, or do indicator into MQL5.
they have to re-write all programs in
AS. No, we don’t force anyone to MQL5? FXTM. For forex retail traders, what
move to the new platform. If a broker Unfortunately, terminals of does MetraTrader 5 offer which other
still finds that MetaTrader 4 is enough, MetaTrader 5 and MetaTrader 4 are not forex platforms don’t provide?
and he does not want to switch over to compatible. True, both programs have
MetaTrader 5, he can continue using similar interface. But these are two AS. Let’s call one of the advantages
the previous platform. completely different terminals with of MetaTrader 5 “all-in-one”. You can
We understand all the difficulties that different trading systems, different find different purely analytical or
a brokerage company may confront databases of quotes, development purely trading software. In MetaTrader
during transition to new software. environments and so on. Of course, 5, these functions are combined, which
And we do not want to speed up this this creates additional difficulties for is very convenient.
process. Let every broker decide when traders. But that is the cost of progress. Moreover, our terminal offers a
their company will be able to switch MetaTrader 5 and all its components significant bonus in the form of an
over to MetaTrader 5. Until then, are much better than MetaTrader integrated development environment
brokers can use MetaTrader 4 and be 4, it’s a new stage. But this required MQL5. This is one of the most
sure that we will keep supporting the sacrificing compatibility. powerful development environments
platform. It is the same with the development for writing trading robots. MQL5
environment of automatic trading IDE is integrated directly into the
FXTM. Is there a difference in the systems. The core of the development MetaTrader 5 terminal. You use the
program execution speed? If yes, how environment in MetaTrader 5 is the single terminal to analyze and trade, to
much faster is MT5 compared to programming language MQL5. And in develop automated trading programs,
MT4? order to give traders new opportunities, test them and let them trade.
we had to rewrite everything from Another difference is our strong
AS. Yes, of course. Although I can’t say scratch, and make a fundamentally support of the community of traders.
for sure by how many times MetaTrader different language. That is, in this case Very few software developers spend
5 is faster than MetaTrader 4. It all compatibility was also the price for the time and money to help traders. But
depends on the specific components new opportunities. we do it. We develop special websites;
of the platform. For example, MQL5 But this should not be feared. At the we publish books and tutorials, pay
is about 10 times faster than MQL4. stage of testing, we found that traders for the publication of articles, conduct
At the same time, the MetaTrader 5 quickly learn the new MQL5 language championships of trading robots and
trade server can process 20-25 times and easily rewrite their own programs. much more. We not just provide
more trading operations per second, Moreover, we always support the software, but we are creating the
as compared with MetaTrader 4. There traders who write their own programs infrastructure around it.
are many parameters for evaluating the using MQL5. We have launched a

FX STRATEGY STRATEGY FX
How to cope with violent market swings

and preserve your capital
In our last issue’s column we looked general malaise reflected by a value against many other major
at various positive developments in decline in global equity indices currencies, the most obvious
Latin American FX markets and and with many commentators catalyst being an absence of the
potential future opportunities that now spooked by the prospect of Swiss National Bank in defending
may exist in the region. Although China’s economy peaking, the the all-important (perceived) line-
the macro views expressed are prevailing mood now seems grim in-the-sand of 1.40 in EUR/CHF,
still largely intact, a pause for to say the least. Sentiment again after its estimated purchases of
reflection has become necessary as raises the possibility of a much- several billion Euros to prevent
participants reassess and reevaluate feared double-dip global recession, excessive Swiss Franc strength
global growth prospects due a dire situation that would starve earlier in the month.
to events closer to home in the established and emerging markets
Eurozone. alike of much-needed access to At time of writing the G-20 summit
capital. meeting of Finance Ministers is
A severe meltdown in sentiment concluding and although markets
has manifested itself despite official To briefly recap and as most FX are not yet functioning in a
efforts between the Fed and ECB followers are aware, EUR/USD completely disorderly fashion,
to keep swap lines open and credit plunged by around 9 percent from with record shorts in EUR/USD
flowing ; observers cite anecdotal late April’s 1.32 at the outset of Greek seemingly content to remain
evidence of tight lending standards aid being officially acknowledged, exposed thus, we sense potential
and have witnessed a subsequent to sub-1.20 in early June after the for some official smoothing of
fall in intrinsic value of EUR- release of pretty ordinary Nonfarm currency rates, should the situation
denominated assets. payrolls whose only major boost worsen progressively and especially
came from Census workers. The if any further declines are rapid.
These factors have outweighed any US unemployment rate remains The launch rate of circa 1.18 is now
fundamental macro-view that may very close to a recession-like 10%. within sight as officials claim the
or may not be correct in the medium- current rate is not troublesome.
term and have overwhelmed the Although these US data were
collective attention and focus of weaker than most expectations, In sum and substance, through
the world’s capital markets, igniting the USD asserted itself yet again dialogue with global business
contagion fears last seen at the end as the currency of choice during partners our view is that the last
of 2008. uncertainty with the Euro making few weeks have presented some of
a new 4-year low against the the most challenging and tough
Adding to the uncertainty is a Greenback. The EUR also lost conditions in recent memory

The last few weeks
have presented some of
the most challenging
and tough conditions
in recent memory for
many FX asset managers

FX STRATEGY
for many asset managers of a with violent market swings and occur. However being equipped
diversified nature, and of any class, importantly if taking market risk, to survive such rough spots both
but particularly those in FX. allow preservation of capital to be psychologically and monetarily
While in FX it’s always reasonable to maintained on a relative basis. could assist with ultimate goals such
have a view, as the events of last month as future prosperity and, if readers
proved, it is not always necessarily This month’s column is primarily are able to benefit from some
beneficial to reasonable tactics,
have a position these latent
or exposure opportunities
to reflect that may become a
view if market little more within
conditions reach.
change rapidly.
Evidence to We took an
support this can unaud ite d
be found easily survey among
by studying FX contacts
intraday moves in that considered
certain currency the governing
pairs such as criteria that may
AUD/JPY or have contributed
GBP/MXN to a variety of
that gyrated by flaws within
several percent FX strategies
on various days in general. In
last month, conclusion we
interestingly Most errors might be avoided by found that the
without any weakest criteria
official action stripping out the human element were exhibited
such as interest when traders:
rate changes or of decision-making and improved
egregiously out- -Risked more
of-line data that upon by following rule-based systems than 5X equity in
might normally a volatile market
be expected to (even the smallest
produce such reactions. intended to share ideas and opinions stop-loss can get too big ).
Due to the overbearing nervousness with those readers who may be new
of the FX market evidenced to Forex, perhaps via retail accounts -Added to a small losing trade too
by breakdowns in traditional or through separately managed soon and/or several times in the
correlations (e.g. Gold and USD accounts. misguided hope of recovery.
higher simultaneously) we’d like
to switch analysis this month from All markets ebb and flow and it -Entered a medium or long-term
projections and instead offer some should be expected that in any trade and became governed by
insights that may help readers cope strategy losses can sometimes short-term gyrations.

STRATEGY FX
-Entered a short-term trade and define allocations by whichever where open positions are subject
became governed by medium or method the trader or manager to knee-jerk reaction by the market
long-term views. implements. at large, increasing risk of getting
For example, once a trade opportunity stopped-out.
-Let profits run as conditions is identified, follow clear mechanics
altered adversely without reducing such as looking for a specific return -If the reason for placing a trade
exposure. on equity per trade, dependent on becomes invalid, exit the trade.
the market situation. Always use a
-Did not follow a rule-based stop-loss, even better use one that is -Minimise event risk by closing
system such as or reducing
using a stop- positions over
loss. key data releases
and weekends.
-Retained too
broad a focus, -Live to fight
(e.g. held too another day!
many open
positions). As with any
other market,
-Tampered with no component
strateg y, e.g. in part or
by initiating a whole of any
cross trade and such approach
taking off one is guaranteed,
side, second- yet experience
guessing the gained over
original intent several different
thus violating market cycles
the strateg y. shared in this
article could
suggest that at
-Used inconsistent risk/reward correlated to the profit objective, e.g. the very minimum, an awareness of
ratios governed by market an average 50% of the desired gain. these principles may at worst serve
developments, deviating from as timely reminders that we all need
predefined risk/reward profile -Choose one or two currency pairs a strategy and at best might help
(e.g. originally looking for 2:1 that have the highest probability of combat some of the nervousness
and settling for lower or inverse reaching the target. and tough days that have and
ratios). always will be a part of the floating
-Exit the trade as soon as the target exchange rate world, with pursuit of
We found that most of these errors is reached, whether it is at a loss or capital preservation and conservative
might be avoided by stripping out a profit. growth the underlying goals.
the human element of decision- Good luck trading.
making and improved upon by -Place trades on a reactive basis
following rule-based systems that thereby reducing event-driven swings Kevin Sollitt

FX options
Exotic Options
In a l l o ur ar ti c l e s unti l in, kn o c k- o ut , reverse- barrier is above the strike

now we have focused on kn o c k-in , and reverse- for a call option or the
the simple put and call kn o c k- o ut . Fur th erm o re , we barrier is below the strike
options also known as will look at the American for a put option (see Fig ure
vanilla options and related digital option one-touch, 1 and 2 for illustrations of
strate g i e s . In th i s la st no -touch, and double-no - th e kn o c k- o ut f e at ure ) . Th e
article we will focus on touch. kn o c k-in o p ti o n f un c ti o ns
exotic options. The kn o c k- o ut option by being worthless unless
Exotic options are functions by being an the barrier is touched, in
characterized which case it
by a greater converts into a
complexity normal vanilla
than that of option. Again
the commonly the reverse
traded vanilla termed is used
o p t i o n s . if the barrier is
V a n i l l a placed where
options are the option is
considered in-the-money
simple since (see Fig ure
the payoff 3 and 4 for
profile is illustrations).
continuous Notic e that
and is only holding a
dependent on kn o c k-in a n d
the value of the k n o c k - o u t
u n d e r l y i n g a t e x p i r y. E x o t i c ordinar y vanilla option, based on the same barrier
options are ever ything put or call, unless a pre- and vanilla option strike
else - which is a ver y large specified barrier level is is the same as holding
definition. reached, or touched, before the vanilla option itself.
Therefore, in this article e x p i r y. T h e o p t i o n i s t e r m e d Therefore, the price of
we will only focus on the reverse if the barrier is h o l d ing a kn o c k-in a n d a
vanilla option with in and placed where the option is kn o c k- o ut w i th th e s a m e
o u t f e a t u r e s k n o w n a s k n o c k- i n - t h e - m o n e y. T h a t i s , i f t h e barrier and strike should

Options FX
be equal to the price of of both the strike and the

the vanilla option with the barrier on the delta of the
s a m e s tr i ke . It s h o u l d n o w o p ti o n . Th ere f o re , kn o c k-
be obvious that the prices in, kn o c k- o ut , reverse-
o f th e kn o c k-in a n d kn o c k- kn o c k-in , and reverse-
out options are expected to k n o c k - o u t ’s a r e o f t e n b e s t
be lower than the vanilla suited as directional option
option with the same strike. trades, as described in the
I n t h i s w a y, a p u r c h a s e r o f article about speculative
an exotic option may strive trading .
essentially to gain the Another class of exotics
same exposure to a vanilla options are the American
option but at a lower price digitals also known as
- on the condition that his Figure 2. Reverse-knock-out call touch options. They
option. The green (blue) payoff
prediction about whether line is if the barrier is (not) touched
f unction like bets by paying
the underlying will reach during the life of the option. a predetermined amount
the barrier level holds if a certain condition is
true. p a r a m e t e r. H o w e v e r , b a r r i e r met. The payoff is thus the
While the purchaser of options can behave quite full amount or nothing ,
the exotic option does d i f f e r e n t l y. F o r e x a m p l e , which gives rise to the
gain an exposure similar a re ver s e -kn o c k- o ut c a l l term digital. The one-
to the vanilla option, option with the underlying touch option pays out if
the pricing dynamics do trading close to the barrier the price of the underlying
c h a n g e d r a m a t i c a l l y. W i t h will decrease in value from touches the barrier before
vanilla options, the price an increase in volatility as expir y (see Fig ure 5). The
is always increasing with the chance of hitting the no-touch option works
respect to the volatility barrier increases. On the the other way around and
other hand, the value of the
same option will increase
in value from an increase
i n t h e v o l a t i l i t y, i f t h e
underlying is far from the
b a rri er, a s th e in cre a s e d
likelihood of hitting the
barrier is compensated by
the increased value of the
option with respect to its
strike. This implies that
simple gamma scalping
strateg ies as explain in
Figure 1. Knock-out call option. previous articles, for Figure 3. Knock-in call option. The
The green (blue) payoff line is if the green (blue) payoff line is if the
barrier is (not) touched during the
example, become ver y barrier is (not) touched during the
life of the option. difficult to manage, due life of the option.
to the complex influence

FX options
Fig ure 7).

Quotation of touch options
is done as a percentage of
the possible payout amount,
which can be seen as the
(discounted ) probability
of the payout happening .
Looking at the quotation as
the probability of hitting
th e b a rri er, we w i l l s e e
for the one-touch option
the effect of the var ying
volatility and black swans,
Figure 4. Reverse-knock-in call Figure 7. Double-no-touch option.
option. The green (blue) payoff The green (blue) payoff line is if one
line is if the barrier is (not) touched (non) of the barriers are touched
during the life of the option. during the life of the option.
pays out if the price of the be more expensive due to

underlying does not touch the increased likelihood
the barrier before expir y o f t o u c h i n g . F i n a l l y, o n e -
(see Fig ure 6). The double- touch options in-between
no -touch option pays out if the two extremes will
the price of the underlying actually trade at a lower
stays within a range not price than if the price
touching either the lower moves of the underlying
or the upper barrier of this were normally distributed.
range before expir y (see Figure 6. No-touch option entered In th i s ar ti c l e we have
with spot below the barrier. The touched upon the subject
green (blue) payoff line is if the
barrier is (not) touched during the
of exotic options, there
life of the option. exist many other forms
of exotic options such as
chooser options, basket
explained in the previous options, lookback options,
article. Since we have many to mention a few of their
small moves compared to colorful names. These
a normal distribution, w i l l b e l e f t a l o n e f o r n o w.
options close to the barrier The options explained
will be more expensive in this article cover the
than if the moves where most heavily traded exotic
normally distributed. options which we consider
Figure 5. One-touch option entered an interesting starting
L ikewise if there are
with spot below the barrier. The
more extreme moves, one- point for most traders.
green (blue) payoff line is if the
barrier is (not) touched during the touch options with more
life of the option. extreme touch levels will Steffen Gregersen

FX MANAGERS FX
Marc H. Malek
Managing Partner at Conquest Capital Group,
Systematic Macro and FX Trading US Firm
Explains Conquest’s short-term systematic trading
approach with a trend-following bias, and how the use of several
strategies and quantitative models can ensure
disciplined investment decisions.
Interview by JW Partners for FX Trader Magazine INTERVIEW
Manager Conquest Capital Group

Strategy Conquest Macro FX
Location New York
Assets Under Management 660 mln Usd
Type Long Vol / Momentum
Style Fundam Systematic ental
Instruments OTC, FX Spot and Forwards
Australian Dollar, British Pound, Canadian Dollar, Euro, Japanese
Currencies Yen, Swiss Franc, British Pound / Japanese Yen, Euro / Japanese
Yen, Danish Krone,New Zealand Dollar, Norwegian Krone, Swedish
Krona
JW: Is FX a unique market? In what reliable because they are trading FX as events have to occur before a trade is
trading currencies is different than it has always been traded as opposed initiated. Typically, before the trade is
trading other financial instruments? to the manner in which the market has put on, the trader sets pre-determined
MM: FX is unique in that it has evolved over the past few years. stop-loss and take-profit levels. In
historically been a 24-hour market and reality, however, most traders let losses
is liquid at virtually any given point in JW: When and why did you decide run beyond their stop-loss and take
time, including periods where exchanges to create Conquest created? profits too early. A system, however, will
are closed. This difference creates a level MM: Prior to launching Conquest I execute the same trade ideas without
of gap risk that is not present in other ran Exotic Derivatives in FX at UBS as the risk of emotions coming into play. If
markets. well as FX Proprietary Trading for the the trader has a good strategy, a system
Although the advent of 24-hour merged SBC/UBS bank in Europe and will execute it more efficiently.
electronic trading has changed the the U.S. I built and managed businesses Given our strategy however, we
landscape to some extent, other in foreign exchange, derivatives in the were not just looking to create an
instruments are still keyed off of U.S., Europe and Asia. While managing absolute return portfolio, but rather
exchange trading hours and see these businesses it became clear to me a combination of absolute return and
liquidity deteriorate during off-hours that emotions can end up playing a portfolio hedge product. We desired
periods. Moreover, because FX has negative role in trading decisions. Most to create a product that would produce
historically been a 24-hour market, 24- professional traders have clear trade- significant returns during systemic
hour models built on past data are more entry algorithms in mind. Certain shocks such as 1998, 2002, and 2008.

FX FX MANAGERS
JW: How is the company structured actually go above and beyond our by academic research, which shows
today? What are the key positions in an regulatory requirements. It is with skewness, kurtosis and auto-correlation
FX Management company? this proper foundation and culture beyond what one would expect from
MM: Conquest Capital Group of compliance that makes ongoing the random walk theory. However, it is
is based in New York with a current maintenance a much less burdensome critical to apply disciplined risk control
headcount of 12 people. As anyone task and general revisions and routine when trading, as one cannot know for
would suspect, our quantitative research testing become familiar aspects in our sure when a trend is starting or ending.
team is vital to the success of our ordinary course of business. Not all trades will be profitable, but
business. That being said, our middle disciplined money management will
and back office and IT teams keep the JW: How would you describe your ensure that drawdowns are kept to an
business running smoothly. People investment strategy? acceptable level while waiting for the
often underestimate the importance of MM: Conquest Macro FX is a next profitable trend to start.
these roles. short-term systematic trading strategy
with a trend-following bias. Research JW: How and when did you develop
JW: Which authorities regulate has shown that new information is your current FX management strategy?
Conquest? Do you keep and update not assimilated instantaneously by all MM: The system has been trading
procedure manuals, and a compliance market players. Prices move in “random since May 1, 1999. However, the
and risk management policy? How walks” with mean reversion in trading composition of the program has evolved
time consuming and how important is ranges most of the time when supply over time as new systems have been
it to satisfy regulation requirements on and demand are in balance and trend added and markets have been adjusted.
one side, and internal procedures on the remaining time due to supply and
the other? demand imbalance as information JW: Risk, an exciting yet dangerous
MM: Conquest Capital LLC is is absorbed in the market. Put more word. How do you manage it?
registered with the Commodity simply, markets spend short periods of MM: Risk management is inherent
Futures Trading Commission as both time going to new trading regions, and to our goal of maximizing the average
a commodity trading advisor and most of the time consolidating in those return divided by the largest cumulative
a commodity pool operator and is regions. Some factors that affect the drawdown. After creating a robust
a member of the National Futures existence of trends are: system and a well-diversified portfolio
Association in such capacities. 1) Information often comes out that maximizes our return relative to
We are very proud of the compliance gradually. For example, the state of an this largest drawdown, we select our
and risk management policies and economy is implied in a plethora of level of exposure so that the maximum
procedures that we have instituted economic statistics that come out one hypothetical drawdown is well below
within Conquest. Our internal at a time. our acceptable real-time drawdown
documents such as our Compliance 2) Monetary policy changes are level.
Manual, Employee Manual, and implemented incrementally rather than
Business Continuity and Disaster in one large move. JW: Do you use a blend of strategies
Recovery Policy are updated at least 3) Information might require for diversification?
annually and all members of the firm analytical processing, which is not MM: Conquest uses quantitative
are required to sign an affirmation to instantaneous. models to ensure disciplined
acknowledge their understanding of Information inflow is continuous, investment decisions. In order to
the contents contained therein. With and so is the absorption process. As maximize the diversification benefits
the proper policies in place, and the more and more players react to news of the currencies traded, Conquest uses
culture of the firm established, we feel and enter the market, the market trends. several trading strategies. Within each
our internal procedures and controls The existence of trends is verified strategy, the parameters are the same

FX MANAGERS FX
for all currencies traded. Each strategy markets and is only employed during periods where a directionless market
takes advantage of trends that occur in risk-seeking environments, which tend has high volatility on a daily basis.
different time frames, and works totally to exhibit lower or depressed volatility
independently of the other strategies. over extended periods. JW: Do you use less mature
What is considered trend-following currencies?
in one time frame is counter-trend in JW: How do you think your MM: We do not. Liquidity is the
another timeframe. performance has been over time? What first and most important criterion in
The first strategy exploits short-term market conditions could have a positive selecting markets for the portfolio.
price/time/volatility relationships. or negative impact on it?
The strategy looks for certain short- MM: Since our inception, Conquest JW: Do you think some of the less
term price/volatility relationships to Macro FX has delivered on its mandate mature currency pairs are viable for
enter the market. Specifically, it takes to outperform in high volatility individual traders, who don’t have to
advantage of low market volatility environments. The program has proven worry as much about huge liquidity?
points where one can enter with a high to be a great diversifier for almost all Would you suggest to trade them?
reward potential (a tight stop with low portfolios. MM: Each trading strategy is suited
likelihood of being stopped out due Short-term trends with consolidation to trading a different set of markets.
to market noise). The second strategy and continuation periods are most Our strategy is much more short-term
looks to capture market movements beneficial to our systems. We expect to and thus demands that the instruments
that constitute a short-term trend. The particularly outperform the competition traded are extremely liquid. The
third strategy exploits counter-trend when long-term trends reverse, as our inability to execute a trade without
opportunities within longer-term shorter-term systems are quick to enter significant slippage would have a
trends. The fourth strategy selectively trades against long-term trends. material effect on our performance. If a
captures risk premium from the We will experience difficulties in strategy has a trade horizon of 1-2 years,

FX FX MANAGERS
the universe of acceptable markets of our major research studies into focused on the composition of the
would certainly be larger because a bad the design of Conquest Macro FX. portfolio but kept leverage more or less
fill would not ruin the profitability of a These studies covered the relationship constant, this enhancement adjusts both
trade. That said, as one begins to trade between short-term strategy returns the leverage and system composition of
less mature currency pairs, gap risks and and market risk appetite. Conducted the portfolio.
fast markets become much more likely. in parallel, the studies produced two
significant conclusions: JW: Do you believe in ever-valid
JW: When developing strategies, 1. The general risk appetite level rules, or every strategy loses its accuracy
how do you allocate your time between of the market environment can be sooner or later? Have you ever found
building entry signals, exit signals and measured and that it tends to change strategies that come back into phase
money management rules? slowly over time. after a long time in negative?
MM: We have found that every 2. Short-term trend-following MM: I think the performance of
strategy generates alpha in three strategy returns provide conditional trend-followers over the past 30 years
ways: entry criteria, exit criteria, and long-volatility exposure (i.e. they suggests that trend-following has been
money management. We tend to exhibit high correlations to the a fairly robust, if unspectacular strategy,
devote equal attention to each of the change in volatility when volatility even with its drawdowns. Within our
three components because each one rises significantly but are only slightly strategy, we have models that been
is essential. However, each system correlated to the change in volatility trading since 2001 or earlier and are
will have its own unique traits and when volatility rises slightly or still profitable. Models tend to fail for
composition. Certain trading systems declines). a number of reasons, but here are five of
will emphasize the entry signals and use Using the proprietary metric we the most common:
more generic exit strategies, others will devised to measure market risk aversion, 1. They are over-optimized
emphasize the latter. The important our Conquest Risk Index, we observed 2. They require more liquidity
consideration is that it is essential that that market risk appetite was quite than is reasonably available in the
the strategy be robust and that the high at the time. This period of risk market
model does what it is supposed to do. accumulation created an environment 3. They attempt to exploit market
that would likely continue to be behaviors that no longer exist
JW: How much time do you allocate unfavorable for Conquest Macro FX’s 4. They attempt to exploit market
to research and development of existing long-volatility strategy. The latter behaviors that occur infrequently
or new strategies? conclusion left us confident that we 5. They have significant tail risks
MM: We continuously attempt to could preserve our long-volatility profile Models that come back into phase
expand the number of systems and should there be a rise in volatility while typically either work infrequently or
markets without changing the core reducing the drag on Conquest Macro exhibit sufficiently large tail risks that
risk parameters and return profile FX’s returns. Harnessing these two they are removed from trading. The
of the program. In January 2002, we effects led us to adjust Conquest Macro risk is that it is difficult to infer whether
expanded short-term trend-following to become a dynamic strategy allocating a model will continue to generate gains
and short-term trading strategies, risk based on the risk environment after a profitable run unless it is possible
while eliminating our long-term trend- among our sub-strategies. to identify the factors that contribute to
following strategies. We believe that In 2010, we improved the strategy its success and determine whether those
long-term trend-following returns are further by integrating our environmental factors are present at any given time.
commoditized and there is no alpha to analysis with observations regarding
be derived in that space. Consequently, downside exposure. This refinement JW: Do you adjust systems parameters
we can achieve a higher Sharpe ratio by is an extension of the research that led to cope with new market conditions?
being more short-term oriented. to the 2005 strategy enhancement. MM: No, our system parameters are
In March 2005, we integrated two Whereas the prior enhancement not changed to meet market conditions.
FX MANAGERS FX
The systems are designed to adjust to JW: What historical data do you use in JW: What is the single biggest
changing market conditions. developing your strategies? strength of your team? And is there
MM: We have tested our current any particular advance that has taken
JW: Do you favor any particular time strategy and market portfolio for the place since Conquest started that has
frame in your strategies? What is your period beginning with January 1990. This particularly benefited your trading?
average trade duration? testing period is representative of a wide MM: The biggest strength of the
MM: Conquest Macro FX is a range of market conditions, provides team is the diversity in background
short-term strategy with average trade a large enough sample size per system and experience that each person brings
duration of 6 days. We believe that and includes difficult trend-following to the table. Our two senior research
long-term trend-following returns are periods, such as 1994 and 1999. analysts both have trading and execution
commoditized and there is no alpha to experience. Our head trader worked as
be derived in that space. Consequently, JW: Which tools do you use in the a sell side options dealer. Our COO has
we can achieve a higher Sharpe ratio by strategy development process? worked with a variety of hedge funds at
being more short-term oriented. MM: The strategies are programmed a large investment bank.
using our own proprietary model The largest advance was the
JW: What should an inexperienced evaluation system and positions are development of the Conquest Risk
trader watch when choosing a time managed using our proprietary trade Aversion Index. The ability to quantify
frame? generation and entry database. These risk appetite has made it possible for
MM: Each situation is specific, but I two databases read the same decision us to allocate risk to our portfolio and
can tell you that you should not trade a code, so models developed in the testing between our strategies more effectively.
strategy for which you do not have the database translate directly to the order
time or resources. generation database. We also use an JW: Can you give us your feeling
“off-the-shelf ” package for additional about the evolution of the EurUsd over
JW: What are your average and validation of the testing results. the next 6/12 months?
maximum leverage levels? MM: The continued instability in
MM: Our average margin-to-equity JW: How does liquidity impact the Europe and the departure from the Euro
ratio over the past five years has been efficiency of your strategies? Have you as a reserve currency suggest that parity
roughly 7.50% and has been below 25% already explored to what AUM limit the to the Dollar is back on the horizon.
more than 99% of the time over the past strategies would allow you to grow to?
five years MM: Short-term strategies are heavily JW: What’s the best advise you
We maintain a strict margin limit of dependent on liquidity. Hence we would give to an individual trader and
33% to limit tail risk due to excessive restrict our strategy to the most liquid to a semi professional trader who wants
exposure and position concentration. currency markets. Trade size does not to enter the FX fund management
This limit is rarely even approached. grow linearly with assets, however. We industry?
have devoted a significant amount of MM: It is a very exciting and
JW: How many execution brokers do research to signal diversification and have rewarding space. In general, the most
you use? How do you split execution a large library of systems that have been important criteria for a successful
between electronic and voice? developed over time. With the constant trader are discipline with entry and
MM: We use a wide variety of evolution of our trading strategy, we exits and the patience to let trades
counter-parties, certainly in double- have been able to diversify the number come to you rather than chase them or
digits. The majority of our execution is and type of models we trade. look for them. Overtrading and poor
voice or agency execution, although we I believe that the strategy can manage discipline are the two most common
use electronic execution for a significant at least $2 billion before there would be causes of losses and blowups.
percentage of our market orders. any effect from trade size.
Technical outlook
MAJOR TRENDS AND TARGETS FOR THE MAJOR FX RATES
Current level Major trend Major target Trend change level

EUR/USD 1.1950 Down 1.1434 & .9514 1.3816
USD/JPY 91.50 Down 82.54 & 79.28 97.77
USD/CHF 1.1550 Up 1.1967 & 1.2297 1.0435
GBP/USD 1.4400 Down 1.3500 & .9959 1.5814
USD/CAD 1.0550 Down .9713 & .9061 1.1725
AUD/USD .9100 Down .7705 & .7266 .9077
NZD/USD .6625 Down .6157 & .5974 .7194
EUR/JPY 109.25 Down 100.00 & 81.26 127.92
EUR/CHF 1.3775 Down 1.3375 & 1.2763 1.4587
EUR/GBP .8275 Down .7695 & .7253 .8807
EUR/NOK 7.9900 Down 7.6256 & 7.2418 8.3181
EUR/SEK 9.6700 Down 9.2540 & 8.9596 10.2880
MAJOR TRENDS AND TARGETS FOR FX EMERGING MARKETS
Current level Major trend Major target Trend change level

EUR/CZK 25.950 Flat 24.971 / 26.614
EUR/HUF 283.00 Up 01.87 & 317.08 260.96
EUR/PLN 4.1400 Flat 3.8238 / 4.3280
EUR/RON 4.2200 Up 4.6455 & 4.9363 3.8354
USD/ILS 3.8800 Sideways 3.6634 / 4.0458
USD/RUR 31.850 Up 33.076 & 34.218 28.916
USD/TRL 1.6050 Up 1.8237 & 2.1138 1.4705
USD/ZAR 7.7800 Sideways 7.1972 / 8.2653
Data: 8th March 2010

EUR/ HUF
EUR/HUF under went a strong two - above 268.93. Since then, a golden
legged advance from the new all-time cross of the (red & green) 13 & 52
trade d low at 228.11 in Ju ly 2008 (versus week moving averages has occurred,
2 3 4 . 0 6 in Januar y 2 0 0 3 ) , re a c h ing accompanied by MACD nudging back
286.28 & 317.08 highs in October over the pivotal zero line. Resistance
2008 & March 2009, interrupted by a has so far emerged near the 50%
brief dip to 252.85. Both the 2008 and retracement of the 317.08-260.96
2009 peak marked new all-time traded decline at 289.02, with a higher low
highs, the previous top having been at now sought above resistance-turned-
284.96 in June 2006. A steady retreat support around 268.93-271.47 to
occurred from 317.08, reaching 262.89 cement the current bullish structure.
& 260.96 lows in October 2009 and We s e e s c o p e f o r a f u r t h e r s t e a d y r i s e
March 2010, either side of the 61.8% over coming weeks and months to at
retracement of the previous 228.11- least test 295.64-303.84, the 61.8%-
317.08 advance. These lows were also 76.4% retracements of the 317.08-
just above the gently rising ultra long- 260.96 decline which surround the
term (blue) 260 week (5 year) moving April 2009 lower top at 301.87, with
average. A six week double bottom scope for a return towards the March
d e v e l o p e d a t t h e s e c o n d l o w, t h i s b a s e 2009 tops at 312.82 & 317.08 further
pattern being completed by the push out.

EUR/GBP
EUR/G BP re corde d an all-time trade d hig h at more re cently occurre d. A batch of Fibonacci
.9801 in December 2008, before underg oing retracements are se en around the .8169-.8228
a c h o p p y r e t r e a t t o . 8 4 0 0 i n Ju n e 2 0 0 9 , area , but we see an extension throug h that
where a .8400 / .8458 base was trace d out. support reg ion towards the .8000-.8010 area
Gains from .8400 / .8458 failed to break the initially ( psycholog ical support / measured
Ja n u a r y & Ma r c h 2 0 0 9 l o w e r t o p s a t . 9 5 1 8 move – 100% of the .9801-.8400 decline
& .9478, being capped at .9411 in October from the .9411 lower top) with another
2009, from where a return to weakness b a t c h o f Fi b o n a c c i s u p p o r t s a t . 7 7 4 2 - . 7 7 8 4
c o m m e n c e d . T h e Ja n u a r y 2 0 1 0 b r e a kd o w n and the .7649-.7695 reg ion (ultra-long
t h r o u g h t h e No v e m b e r 2 0 0 9 h i g h e r l o w a t ( blue) 260 week (5 year) moving averag e /
.8833 and the 15 month uptrend conne cting October 2008 low) offering the next targ et
.7695 & .8458 added to fears that .9411 zones below there. On the upside, we see
m a r ke d a s i g n i f i c a n t l o w e r t o p f o r a f u r t h e r support-turned-resistance around the .8807-
retracement of the multi-year rises from the .8833 area acting as a solid cap to recover y
2000 & 2007 bottoms at .5684 & .6537. attempts over coming weeks, with the 18
Since then, the 2009 base at .8400 / .8458 month downtrend line conne cting .9801 &
has g iven way and a dead-cross of the (red .9411 (now at .9088) a f urther barrier above
& green) 13 & 52 week moving averag es has there.

EUR/USD
EUR/USD reached an all-time high of 1.6039 .8566 & 1.2459 being breached. As yet, there
in July 2008, with losses from there having left are no immediate signs of a base being formed
a double bottom at 1.2329 / 1.2459 in October and we see the risk of continued weakness over
2008 / March 2009, from where a prolonged coming weeks and months towards 1.1434 (100%
recovery phase was enjoyed. However, this of 1.6039-1.2329 from 1.5144) and possibly the
eventually left a lower double top at 1.5062 / 1.1214-1.1283 area (61.8% Fibonacci retracement
1.5144 in October / November 2009, just shy of of the entire October 2000-July 2008 .8232-1.6039
the 76.4% Fibonacci retracement of the previous rise / base of the (orange) projected bear channel off
1.6039-1.2329 decline. Initial losses from there the (2008 & 2009) 1.6039 & 1.5144 peaks with the
to 1.4218 were followed by a lower top at 1.4579, (2008) 1.2329 low). Attempts to develop a multi-
just under the double top neck-line at 1.4628, month base may then emerge, setting up a decent
with fresh falls having then gathered pace. A corrective recovery phase to partially retrace the
succession of bearish signals ensued, including bear leg from 1.5144. Longer-term, we see scope
a dead-cross of the (red & green) 13 & 52 week for a move towards the 1.0000-1.0074 region where
moving averages, a breakdown through the (blue) key psychological support and the 76.4% Fibonacci
ultra long-term 260 week (5 year) moving average, retracement of the .8232-1.6039 8 year rise merge.
MACD moving back under the pivotal zero line,
and the (purple) 8 year uptrend line connecting Steve Jarvis

MAJORS REPORT
TREND EURO, US DOLLAR, YEN, BRITISH POUND
SPOT PRICE 16/06/2010 01/01/2010 ∆% 01/01/2009 ∆%
EURUSD 1.2315 1.4331 -14.1% 1.3952 -11.7%

USDJPY 91.39 93.14 -1.9% 90.79 0.7%
EURJPY 112.52 133.22 -15.5% 126.65 -11.2%
EURGBP 0.8301 0.8858 -6.3% 0.9573 -13.3%
DOLLAR/YEN
Dollar/yen has been moving in a major down-trend for a new sell-off, that led the dollar to a new bottom at 84.83
several decades: at the beginning of the seventies it was at the end of November 2009. Since then the pair started
trading at around 350, since the mid-eighties it went moving sideways, below the resistance at 95.
stably below 175. After having collapsed to a historical As long as the pair keeps moving within the 84.83 – 95
low at 79.75 in April 1995, the dollar started a strong trading range we do not have any directional signals.
reversal, reaching a top at around 147.65 in August 1998. A break above 95 would trigger a buy-signal, targeting
From that level, the major down-trend resumed, with a the strong resistance at 101.50. Only above that level
series of falling highs and “raids” below the key support at (premature) there would be a clear buy-signal for the
115 (a level repeatedly supported by the Bank of Japan’s coming months. Renewed weakness is expected below
interventions). The dollar reached a bottom at around 88, for a new test of the 84.83 lows, below which the pair
101.35/85 at the end of 1999, support tested again at the could fall, in the coming months, towards the April 1995
end of 2004. The break of that support during 2008 caused low at 79.75.
TREND SUPPORTS SPOT PRICE RESISTANCES

Trend 3-6 months side-up S1 88 R3 110+
Trend 6-12 months side S2 84.83++ 91.39 R2 101.50+
Trend 12-18 months down-side S3 79.75+++ R1 95+

EURO/DOLLAR
Euro/do l lar wa s first trade d in Januar y 1999, at Novemb er 2009. From that le vel the p a ir
aro un d 1 . 1 8 0 0 - 1.1900 and fel l to a h istorica l star te d to de cl ine a g a in, with a sel l- off at the
l ow at 0 . 8 2 3 1 on O cto b er 26th, 2000. From brea k of 1.3000 and a ne w low at 1.1875, on
that b o ttom , the euro b e g an ac cumu lating the le vels of b e g inn ing 2006. The la st we ek s’
an d – s in c e summer 2002 – moving upwards, b ounc e broug ht the p a ir b ack at 1.2300.
entering pro g ressively a maj or up -trend and As long a s the p a ir stays b elow the ke y
re a ch ing a top at 1.6038 on Ju ly 15th, 2008 resistanc e in the 1.2800-1.3000 area , the
( + 9 5 % vs . th e h istorica l low). The f a l l b elow te chn ica l p icture rema ins ver y wea k , with the
th e strong supp or t at 1.5275 on Aug ust 8th, p ossib il it y of se eing ne w lows . A va l id supp or t
2 0 0 8 ( l e ve l that had supp or te d the p a ir in the is lo cate d in the 1.1640.1.1800 area : a brea k
p eri o d Apri l- Ju ly) cause d a maj or re versa l , b elow there wou ld trig g er a ne w sel l-sig na l ,
wi th a strong de cl ine and a ne w b ottom at and the p a ir c ou ld f a l l to 1.1100, then 1.0765
1 . 2 3 3 0 at th e end of O cto b er, 2008 (during and e ventua l ly c o l lapse to the ps ycho lo g ica l
th e wor s en ing of the financia l crisis). supp or t at 1.0000. For the c om ing months,
S in c e Marc h 2 009 the euro trie d to re c over the up -trend wou ld resume on ly ab ove 1.3500
an d re a c h e d a p ea k at 1.5145 at the end of (un l ikely).

Trend 3-6 months down S1 1.1875+ R3 1.3500++
Trend 6-12 months udown S2 1.1640-1.1800++ 1.2315 R2 1.2800-1.3000+
Trend 12-18 months down S3 1.1100 R1 1.2570

EURO/YEN
The cross euro/yen was first traded in January 1999, decline of the US dollar versus the yen. After the break
at around 132.50-135.50, and fell to a historical low of 156 in September 2008 – in correspondence with
at 88.96 in October 2000. From the bottom, the euro the trendline that sustained the major up trend), the
began moving upwards, entering progressively a major cross collapsed to a low at 112.10 in January 2009: the
up-trend, and reaching a historical high at 169.95 in following bounce ran out of steam in the 138.50-139.20
July 2008 (+91% vs. the October 2000 bottom). The area, during June-October 2009. Since the beginning of
strong depreciation of the yen during last years has May 2010 the cross started going down again, with a
been mainly caused by the so called “carry trade”, i.e. sell-off – at the break of 120 – that led to a new low at
the funding in low-yield currencies like the Japanese 108.10 on June 8th (-36.4% from the historical high).
yen with the contextual reinvestment in asset classes The last weeks’ bounce brought the cross back at around
in other currencies (i.e. stocks and bonds in euro, 113.
Australian and American dollars, etc.). After the burst As long as the cross remains below the resistance at 120,
of the real estate and financial bubble – begun in the the technical picture remains bearish. A break below
2007 summer, with an acceleration after September the 108.10 low would trigger a decline towards 105 and
2008 – a progressive strong disinvestment from Stock then a test of the psychological support at 100, where a
Exchanges around the world led to massive yen buying in technical reaction is to be expected. For the coming weeks,
order to square up carry trade positions. That provoked a positive signal would be triggered by a break above 120
a crash of euro vs. yen, driven by a double source: the (premature) but only above the strong resistance at 127
fall of euro against the dollar and, at the same time, the should there be a bullish signal for the coming months.

Trend 3-6 months down S1 108.10+ R3 127++
Trend 6-12 months down S2 105 112.52 R2 120
Trend 12-18 months down S3 100++ R1 115

EURO/GBP
The cross euro/g bp was first trade d in Januar y As long a s the cross stays b elow 0.8700 the
1999, at around 0.7100, and fell to a historica l te chn ica l p icture rema ins b earish . A brea k
low at 0.5683 in May 2000. From the bottom, b elow the low at 0.8210 wou ld trig g er a
the euro beg an moving upwards, entering ne w sel l- off, with first targ et the supp or t
prog ressively a major up -trend, and reaching a at 0.7700. The downward pressures wou ld
historica l hig h at 0,9809 on Januar y 1st, 2009 d im in ish ab ove 0.8700 but on ly a brea k ab ove
(+72.6% vs. the May 2000 low). From that the ke y resistanc e in the 0.9150-0 .9200 area
pea k a strong corre ction drew the cross down (un l ikely) wou ld g ive a ne w bu l l ish sig na l for
to a low at 0.8400 in June 2009, followe d by the c om ing months .
a bounce to a top at 0.9410 on October 13th
2009. From that le vel the down-trend resume d,
with an acceleration in the last months and a
new low at 0.8210 in the last we eks. Maurizio Mil ano

Trend 3-6 months down S1 0.8210+ R3 0.9150-0.9200+
Trend 6-12 months down S2 0.7700+ 0.8301 R2 0.9000
Trend 12-18 months down S3 0.7400 R1 0.8700

FX INTERNATIONAL DATA
FX SPOT MONITOR
Country Flag USD Spot Last vs USD % Ch 3M % Ch 12M 12mth High 12mth Low
Eurozone EUR= 1.2399 -8.1% -10.5 % 1.5139 1.1914
UK GBP= 1.4868 -1.1% -9.0 % 1.6981 1.4301
Japan JPY= 91.31 1.0 % -4.8% 97.55 86.34
Switzerland CHF= 1.1084 4.9 % 2.1% 1.1634 0.9958
Australia AUD= 0.8834 -3.8 % 12.5% 0.937 0.7784
Canada CAD= 1.0171 0.1% -11.9% 1.1671 0.9981
New Zealand NZD= 0.7133 1.0% 13.5% 0.7585 0.6253
Sweden SEK= 7.6599 6.7% -4.2% 8.1217 6.7781
Norway NOK= 6.334 6.6% -3.4% 6.708 5.529
Iceland ISK= 126.2 -1.0% -2.1% 132.39 121.11
Israel ILS= 3.811 2.3% -4.2% 3.984 3.674
South Africa ZAR= 7.42 1.7 % -9.4% 8.23 7.2069
Egypt EGP= 5.6746 3.2 % 1.3 % 5.68 5.415
Saudi Arabia SAR= 3.7503 0% 0.1 % 3.7515 3.7347
Czech Rep. CZK= 20.726 10.1% 10.8% 21.778 16.972
Poland PLN= 3.2503 13.1% -0.7% 3.4852 2.7047
Hungary HUF= 224.32 14.8% 10.8% 240.7 175.91
Russia RUB= 30.7686 4.2% -1.8% 32.7529 28.6585
Turkey TRY= 1.551 1.0% -1.8% 1.6085 1.4431
China CNY= 6.7968 -0.4% -0.5% 6.8358 6.8229
Hong Kong HKD= 7.7727 0.1% 0.3% 7.8039 7.749
Singapore SGD= 1.3758 -1.7% -5.7% 1.4627 1.3662
Taiwan TWD= 31.74 -0.2% -3.5% 33.13 31.3
India INR= 45.71 0.6% -5.8% 49.13 44.15
South Korea KRW= 1173.6 3.3% -8.2% 1309 1103.8
Thailand THB= 32.27 -0.1% -5.4% 34.14 32.15
Malaysia MYR= 3.185 -4.0% -10.0% 3.5995 3.1725
Indonesia IDR= 9010 -1.1% -12.7% 10350 9000
Philippines PHP= 45.44 -0.4% -5.6% 48.75 44.215
Mexico MXN= 12.4187 -0.5% -6.7% 13.7608 12.1495
Brazil BRL= 1.7708 -0.3% -12.7% 2.0295 1.6999
Chile CLP= 534.7 0.4% 0.5% 559.5 488.75
Venezuela VEB= 2144.6 0.0% 0.0% 2144.6 2144.6
Colombia COP= 1908.9 0.2% -8.2% 2178.5 1824.5
Levels Date:21-Jun-10 Source: Thomson Reuters

INTERNATIONAL DATA FX
CENTRAL BANKS
Country Flag Central Bank Rate Name Actual Previous
USA FED Fed funds 0-0.25 0-0.25
Eurozone ECB Refi 1.00 1.00
UK BOE Bank Repo 0.50 0.50
Japan BOJ O/N Call 0.10 0.10
Switzerland SNB 3 mth Libor 0.25 0.25
Australia RBA Cash 4.50 4.00
Canada BOC O/N Funding 0.50 0.25
New Zealand RBNZ Cash 2.75 2.50
Sweden Riksbank Repo 0.25 0.25
Norway Norges Bank Depo 2.00 1.75
Iceland CBI Policy 8.50 9.00
Israel BOI Short Term Lending 1.50 1.50
South Africa Reserve Bank Repurchase 6.50 6.50
Egypt CBE O/N Depo 8.25 8.25
Czech Rep. CNB 2 Week Repo 0.75 1.00
Poland NBP 28 Day Intervention 3.50 3.50
Hungary MNB 2 Week Depo 5.25 5.50
Russia CBR Refinancing 7.75 7.75
Turkey TCMB O/N Borrowing 7.00 7.00
China PBC 1 Year Lending 3.33 3.60
Taiwan CBC Discount 1.25 1.25
India RBI Repo 5.25 5.00
South Korea BOK O/N Call 2.00 2.00
Thailand BOT Repo 1.25 1.25
Indonesia BI BI 6.50 6.50
Philippines BSP Repo 4.00 4.00
Mexico BDM Target 4.50 4.50
Brazil BCB Selic 10.25 9.50
Chile CBC MPR 1.00 0.50
Levels Date: 21-Jun-10 Source: Thomson Reuters

FX INTERNATIONAL DATA
ECONOMIC DATA
GDP CPI Industrial Production Unemployment
y-o-y y-o-y y-o-y level
USA 1.10 2.00 1.20 9.70
Eurozone 0.60 1.60 0.80 10.10
UK -0.30 3.40 -0.40 7.90
Japan 1.20 -1.50 1.30 5.10
Switzerland 2.20 1.10 4.00
Australia 2.70 2.90 5.20
Canada 6.10 1.80 8.10
New Zealand (partecipation) 0.40 2.00 68.1(partecipation)
Sweden 3.00 1.20 0.90 9.50
Norway -0.10 2.50 0.20 2.70
South Africa 1.60 4.80 8.70 25.20
Czech Rep. 1.10 1.20 10.90 8.70
Poland 3.00 2.20 14.00 12.30
Hungary 0.10 5.10 9.70 11.80
Russia 5.50 0.50 12.60 7.30
China 11.90 3.10 16.50
India 7.40 17.60
Mexico 4.30 0.24 6.10 5.42
Brazil 9.00 0.43 17.40 7.30
FX POLL
3 Month Days since Poll Poll Median Poll Min Poll Max Poll Mean Std Deviation Spot@Poll Date
EurUsd 18 1.207 1.15 1.35 1.215 0.047 1.2247
GbpUsd 18 1.45 1.36 1.61 1.454 0.054 1.4648
AudUsd 18 0.86 0.72 0.95 0.856 0.054 0.8421
UsdJpy 18 93 85 98.3 92.9 2.4 92.22
UsdChf 18 1.157 1.04 1.23 1.155 0.042 1.1544
UsdCad 18 1.024 0.97 1.12 1.031 0.039 1.0383
EurJpy 18 112.8 103.4 128.1 112.9 5 112.84
EurChf 18 1.4 1.299 1.476 1.399 0.034 1.4138
EurGbp 18 0.833 0.742 0.915 0.837 0.031 0.8358
GbpJpy 18 134.9 121.1 153.7 135.1 6.4 135.06
1 Year Days since Poll Poll Median Poll Min Poll Max Poll Mean Std Deviation Spot@Poll Date
EurUsd 18 1.175 1 1.6 1.194 0.106 1.2247
GbpUsd 18 1.45 1.26 1.69 1.464 0.097 1.4648
AudUsd 18 0.89 0.6 1 0.863 0.081 0.8421
UsdJpy 18 100 70 115 98.6 6.9 92.22
UsdChf 18 1.19 1 1.4 1.19 0.085 1.1544
UsdCad 18 1.035 0.947 1.2 1.039 0.061 1.0383
EurJpy 18 115.6 102.9 155.3 117.5 10.1 112.84
EurChf 18 1.4 1.3 1.625 1.404 0.066 1.4138
EurGbp 18 0.813 0.712 1.185 0.815 0.067 0.8358
GbpJpy 18 145 94.5 175 144.4 13.9 135.06

INTERNATIONAL DATA FX
MARKETS VIEW
Stock Indices Last % Ch 6M % Ch 12M Commodities Last % Ch 6M % Ch 12M
Gold 1257.25 16.06% 36.38%
MSCI World 1123.62 -2.5 16.4 Silver 19.32 13.98% 40.82%
Dow Jones Ind. 10450.64 1.2 22.1 Brent DTD 78.98 9.69% 18.80%
S&P 500 1117.51 1.4 21.7 WTI 77.16 5.01% 15.01%
Nasdaq 100 1913.48 5.9 31.6
Eurostoxx 50 2773.94 -4.7 13.4 Bonds Last % Ch 6M % Ch 12M
UK FTSE 100 5300.68 1.0 22.7 5Y Euro 1.614 -0.636 -0.982
Dax 6292.05 6.6 28.5 10Y Euro 2.73 -0.534 -0.719
Cac 40 3741.84 -2.8 15.4 10Y US Treasury 3.225 -0.533 -0.460
FT MIB 20872.36 -7.7 7.9 30Y US Treasury 4.148 -0.463 -0.290
Swiss SMI 6522.42 -0.3 19.9 10Y UK Gilt 3.53 -0.370 -0.212
Nikkei 225 10238.01 -1.4 3.0 10Y CH Govt Bond 1.619 -0.344 -0.752
Australia AORD 4632.702 -2.1 17.7
HK Hang Seng 20912.18 -4.2 14.1 Money Markets Last % Ch 6M % Ch 12M
Shanghai Comp. 2586.209 -19.3 -11.9 US 6M Depo 0.7506 0.3194 -1.4106
Singapore StraitT. 2885.64 1.1 26.6 EUR 6M Depo 1.0190 0.0260 -0.4090
India BSE30 17903.15 5.1 23.2 GBP 6M Depo 1.0181 0.1813 -0.4331
Brazil Bovespa 64437.58 -3.5 26.6 CHF 6M Depo 0.2050 -0.1350 -0.3033
Russia RTSI 1448.69 -0.1 41.3 JPY 6M Depo 0.4450 -0.0353 -0.2675
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FX Economic Calendar
JULY, AUGUST, SEPTEMBER 2010
GMT London Time
July 1:30pm USD Trade Balance
12:50am JPY Tankan Manufacturing Index 3:30pm CAD BOC Business Outlook Survey
Tue 13
2:00am CNY Manufacturing PMI 11:45pm NZD CPI q/q
2:30am AUD Building Approvals m/m 11:45pm NZD Retail Sales m/m
2:30am AUD Retail Sales m/m 9:30am GBP Claimant Count Change
Thu 1
9:30am GBP Manufacturing PMI 1:30pm USD Core Retail Sales m/m
Wed 14
1:30pm USD Unemployment Claims 1:30pm USD Retail Sales m/m
3:00pm USD ISM Manufacturing PMI 7:00pm USD FOMC Meeting Minutes
3:00pm USD Pending Home Sales m/m - JPY BOJ Press Conference
1:30pm USD Non-Farm Employment Change 1:30pm USD PPI m/m
Fri 2 Thu 15
1:30pm USD Unemployment Rate 1:30pm USD Unemployment Claims
Sun 4 11:00pm NZD NZIER Business Confidence 3:00pm USD Philly Fed Manufacturing Index
8:15am CHF Retail Sales y/y 9:30am GBP Retail Sales m/m
- GBP Halifax HPI m/m 1:30pm USD Core CPI m/m
Mon 5 Fri 16
9:30am GBP Services PMI 2:00pm USD TIC Long-Term Purchases
3:00pm USD ISM Non-Manufacturing PMI 2:55pm USD Prelim UoM Consumer Sentiment
2:30am AUD Trade Balance 2:30am AUD Monetary Policy Meeting Minutes
5:30am AUD Cash Rate 9:00am EUR German Ifo Business Climate
Tue 6 5:30am AUD RBA Rate Statement Tue 20 1:30pm USD Building Permits
9:30am GBP Manufacturing Production m/m 2:00pm CAD BOC Rate Statement
1:30pm CAD Building Permits m/m 2:00pm CAD Overnight Rate
Wed 7 3:00pm CAD Ivey PMI Wed 21 9:30am GBP MPC Meeting Minutes
2:30am AUD Employment Change 1:30pm CAD Core Retail Sales m/m
2:30am AUD Unemployment Rate 1:30pm USD Unemployment Claims
- GBP Asset Purchase Facility Thu 22 3:00pm USD Existing Home Sales
- GBP MPC Rate Statement 3:30pm CAD BOC Monetary Policy Report
Thu 8
12:00pm GBP Official Bank Rate 4:15pm CAD BOC Press Conference
12:45pm EUR Minimum Bid Rate 9:30am GBP Prelim GDP q/q
Fri 23
1:30pm EUR ECB Press Conference 12:00pm CAD Core CPI m/m
1:30pm USD Unemployment Claims 2:30am AUD PPI q/q
Mon 26
- CNY Trade Balance 3:00pm USD New Home Sales
9:30am GBP PPI Input m/m Tue 27 3:00pm USD CB Consumer Confidence
Fri 9 12:00pm CAD Employment Change 2:30am AUD CPI q/q
12:00pm CAD Unemployment Rate 4:00am NZD NBNZ Business Confidence
1:15pm CAD Housing Starts - GBP Nationwide HPI m/m
Wed 28
2:30am AUD Home Loans m/m 1:30pm USD Core Durable Goods Orders m/m
Mon 12 3:00am CNY GDP q/y 10:00pm NZD Official Cash Rate
3:00am CNY Industrial Production y/y 10:00pm NZD RBNZ Rate Statement
9:30am GBP CPI y/y Thu 29 1:30pm USD Unemployment Claims
Tue 13 10:00am EUR German ZEW Economic Sentiment 10:30am CHF KOF Economic Barometer
Fri 30
1:30pm CAD Trade Balance 1:30pm CAD GDP m/m

Economic Calendar FX
Fri 30 1:30pm USD Advance GDP q/q 10:30am GBP BOE Gov King Speaks
10:30am GBP BOE Inflation Report
Wed 11
August 1:30pm CAD Trade Balance
2:00am CNY Manufacturing PMI 1:30pm USD Trade Balance
8:15am CHF Retail Sales y/y 2:30am AUD Employment Change
- GBP Halifax HPI m/m 2:30am AUD Unemployment Rate
Mon 2 Thu 12
9:30am GBP Manufacturing PMI 1:30pm USD Unemployment Claims
3:00pm USD ISM Manufacturing PMI 11:45pm NZD Retail Sales m/m
11:45pm NZD Labor Cost Index q/q 7:00am EUR German Prelim GDP q/q
2:30am AUD Retail Sales m/m 9:30am GBP PPI Input m/m
5:30am AUD Cash Rate 1:30pm USD Core CPI m/m
Tue 3 Fri 13
5:30am AUD RBA Rate Statement 1:30pm USD Core Retail Sales m/m
3:00pm USD Pending Home Sales m/m 1:30pm USD Retail Sales m/m
2:30am AUD Building Approvals m/m 2:55pm USD Prelim UoM Consumer Sentiment
2:30am AUD Trade Balance 12:50am JPY Prelim GDP q/q
9:30am GBP Services PMI Mon 16 2:00pm USD TIC Long-Term Purchases
Wed 4 1:15pm USD ADP Non-Farm Employment Change 11:45pm NZD PPI Input q/q
3:00pm USD ISM Non-Manufacturing PMI 2:30am AUD Monetary Policy Meeting Minutes
11:45pm NZD Employment Change q/q 9:30am GBP CPI y/y
11:45pm NZD Unemployment Rate Tue 17 10:00am EUR German ZEW Economic Sentiment
- GBP Asset Purchase Facility 1:30pm EUR Building Permits
- GBP MPC Rate Statement 1:30pm EUR PPI m/m
12:00pm GBP Official Bank Rate Wed 18 9:30am GBP MPC Meeting Minutes
Thu 5 12:45pm EUR Minimum Bid Rate 1:30pm USD Unemployment Claims
1:30pm CAD Building Permits m/m Thu 19
3:00pm USD Philly Fed Manufacturing Index
1:30pm EUR ECB Press Conference 9:30am GBP Retail Sales m/m
1:30pm USD Unemployment Claims Fri 20
12:00pm CAD Core CPI m/m
2:30am AUD RBA Monetary Policy Statement 4:00am NZD Inflation Expectations q/q
12:00pm CAD Employment Change 9:00am EUR German Ifo Business Climate
Tue 24
12:00pm CAD Unemployment Rate 1:30pm CAD Core Retail Sales m/m
Fri 6
1:30pm USD Non-Farm Employment Change 3:00pm USD Existing Home Sales
1:30pm USD Unemployment Rate 9:30am GBP Revised GDP q/q
3:00pm CAD Ivey PMI Wed 25 1:30pm USD Core Durable Goods Orders m/m
2:30am AUD Home Loans m/m 3:00pm USD New Home Sales
Mon 9
1:15pm CAD Housing Starts 2:30am AUD Private Capital Expenditure q/q
Thu 26
- CNY Trade Balance 1:30pm USD Unemployment Claims
9:30am GBP Manufacturing Production m/m 10:30am CHF KOF Economic Barometer
Tue 10 Fri 27
7:15pm USD FOMC Statement 1:30pm USD Prelim GDP q/q
7:15pm USD Federal Funds Rate 4:00am NZD NBNZ Business Confidence
Mon 30
3:00am CNY Industrial Production y/y - GBP Nationwide HPI m/m
Wed 11 - JPY BOJ Press Conference 2:30am AUD Building Approvals m/m
Tue 31
9:30am GBP Claimant Count Change 2:30am AUD Retail Sales m/m

FX Economic Calendar
1:30pm CAD GDP m/m Fri 10 2:55pm USD Prelim UoM Consumer Sentiment
Tue 31 3:00pm USD CB Consumer Confidence Mon 13 11:45pm NZD Retail Sales m/m
7:00pm USD FOMC Meeting Minutes 9:30am GBP CPI y/y
September 10:00am EUR German ZEW Economic Sentiment

Tue 14
2:00am CNY Manufacturing PMI 1:30pm USD Core Retail Sales m/m
2:30am AUD GDP q/q 1:30pm USD Retail Sales m/m
8:15am CHF Retail Sales y/y 9:30am GBP Claimant Count Change
Wed 1 - GBP Halifax HPI m/m 10:00am GBP Inflation Report Hearings
9:30am GBP Manufacturing PMI Wed 15 10:00am NZD Official Cash Rate
1:15pm USD ADP Non-Farm Employment Change
10:00am NZD RBNZ Press Conference
3:00pm USD ISM Manufacturing PMI
10:00am NZD RBNZ Rate Statement
2:30am AUD Trade Balance
8:30am CHF Libor Rate
12:45pm EUR Minimum Bid Rate
8:30am CHF SNB Monetary Policy Assessment
Thu 2 1:30pm EUR ECB Press Conference
1:30pm USD PPI m/m
1:30pm USD Unemployment Claims Thu 16
1:30pm USD Unemployment Claims
3:00pm USD Pending Home Sales m/m
2:00pm USD TIC Long-Term Purchases
9:30am GBP Services PMI
3:00pm USD Philly Fed Manufacturing Index
1:30pm USD Non-Farm Employment Change
Fri 3 - JPY BOJ Press Conference
1:30pm USD Unemployment Rate
Fri 17 9:30am GBP Retail Sales m/m
3:00pm USD ISM Non-Manufacturing PMI
1:30pm USD Core CPI m/m
5:30am AUD Cash Rate
Mon 20 11:45pm NZD Current Account
Tue 7 5:30am AUD RBA Rate Statement
2:30am AUD Monetary Policy Meeting Minutes
9:30am GBP Manufacturing Production m/m
9:00am EUR German Ifo Business Climate
2:30am AUD Employment Change
12:00pm CAD Core CPI m/m
1:30pm CAD Building Permits m/m Tue 21
1:30pm USD Building Permits
Wed 8 2:00pm CAD BOC Rate Statement
7:15pm USD FOMC Statement
2:00pm CAD Overnight Rate
7:15pm USD Federal Funds Rate
3:00pm CAD Ivey PMI
9:30am GBP MPC Meeting Minutes
2:30am AUD Home Loans m/m Wed 22 1:30pm CAD Core Retail Sales m/m
2:30am AUD Unemployment Rate 11:45pm NZD GDP q/q
- CNY Trade Balance 1:30pm USD Unemployment Claims
Thu 23
- GBP Asset Purchase Facility 3:00pm USD Existing Home Sales
Thu 9 - GBP MPC Rate Statement 9:30am GBP Current Account
12:00pm GBP Official Bank Rate Fri 24 1:30pm USD Core Durable Goods Orders m/m
1:15pm CAD Housing Starts 3:00pm USD New Home Sales
1:30pm CAD Trade Balance Mon 27 - GBP Nationwide HPI m/m
1:30pm USD Trade Balance Tue 28 3:00pm USD CB Consumer Confidence
1:30pm USD Unemployment Claims Wed 29 10:30am CHF KOF Economic Barometer
3:00am CNY Industrial Production y/y 12:50am JPY Tankan Manufacturing Index
9:30am GBP PPI Input m/m 4:00am NZD NBNZ Business Confidence
Fri 10 Thu 30
12:00pm CAD Employment Change 1:30pm CAD GDP m/m
12:00pm CAD Unemployment Rate 1:30pm USD Unemployment Claims

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BEST FX

JULY - SEPTEMBER 2010

The codes of Marney Volume

FX TRADER MAGAZINE July - September 2010 

 FX TRADER MAGAZINE July - September 2010

Tumultuous times for Forex traders

FX TRADER MAGAZINE July - September 2010 

to the Live Trading Room

Understanding true concepts of

FX TRADER MAGAZINE July - September 2010 

at the Slow Stochastic in particular. The calculation

So what are other solutions? One obvious alternative

 FX TRADER MAGAZINE July - September 2010

Macd to either crossover or switch back through

My preferred solution is to take a similar concept to

Figure 3 Shaun Downey

FX TRADER MAGAZINE July - September 2010 

10 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 11

FX TRADER MAGAZINE July - September 2010 13

The Marney Volume

For any g iven time of day,

Marney R ange Indictor

A similar technique can be

The MVI line shows the

14 FX TRADER MAGAZINE July - September 2010

The chart below shows the indicators applie d to By b e i n g a b l e t o p l o t e x p e c t e d v o l um e a n d

We a lso se e the hig hest volumes and rang es for T h e c o d e f o r b o th i n d i c a t o r s i s ava i l a b l e

FX TRADER MAGAZINE July - September 2010 15

MARNEY VOLUME INDICATOR™ MARNEY range INDICATOR™ Conclusion

16 FX TRADER MAGAZINE July - September 2010

Euro: Prediction is very difficult, The new

18 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 19

20 FX TRADER MAGAZINE July - September 2010

impossible and not of great use.

FX TRADER MAGAZINE July - September 2010 21

Ma r c h 2009. W i th an h e l d , a r o un d 1 . 5 0 . But i n 2 0 1 0 , somehow sho cke d the market by

24 FX TRADER MAGAZINE July - September 2010

Su c h a re l i e f wa s ver y shor t prom ises of fisca l larg ess . c o n f l i c t w i th th e C entr a l B a n k

FX TRADER MAGAZINE July - September 2010 25

26 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 27

28 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 29

High Frequency Trading

FX TRADER MAGAZINE July - September 2010 31

32 FX TRADER MAGAZINE July - September 2010

argue that high frequency

These funds are highly dependent

content * content * content

E XC LUS I V E I N T E RV I EW – A L E X A N D E R S A I D U L L I N FOR FX TRADER MAGAZINE

34 FX TRADER MAGAZINE July - September 2010

FX Trader Magazine interviewed Alexander Saidullin, Director of Trading Platform Development,

FX TRADER MAGAZINE July - September 2010 35

36 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 37

its possibilities and

38 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 39

How to cope with violent market swings

40 FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010 41

FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010

FX TRADER MAGAZINE July - September 2010