{"id":52727,"date":"2014-06-13T06:53:03","date_gmt":"2014-06-13T10:53:03","guid":{"rendered":"http:\/\/countingpips.com\/?p=52727"},"modified":"2014-06-13T07:10:36","modified_gmt":"2014-06-13T11:10:36","slug":"pci-forex-technical-analysis-june-13-2014","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/pci-forex-technical-analysis-june-13-2014\/","title":{"rendered":"PCI Forex Technical Analysis June 13, 2014"},"content":{"rendered":"
June 13, 2014<\/div>
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By IFCMarkets<\/a><\/p>\n

Good afternoon dear investors. Today we traditionally consider examples of the PCI<\/a> technology application for generating synthetic instruments: paired spreads, portfolios and composite instruments: portfolio spreads. We return to the simplest case: pairs arbitrage trading of the two related assets. Let us recall that the contraposition of two assets is determined by the ratio of their prices according to the given volumes.
\nConsidering a high relatedness of assets the investor has the opportunity to monitor a personal composite instrument (PCI) instead of two elementary instruments. One of the traditional methods of determining the degree of colligation is the linear correlation coefficient, or “correlation”, which indicates the linear dependence of the value of assets. This coefficient, r lies in the range [-1,1]. Considering negative correlation values, the underlying asset value growth leads to a drop in value of the quoted asset and vice versa: the flat market condition becomes unstable. Thus, the correlation difference of values -1, i.e. r +1 indicates the potential for the trend movement, “a composite”. We believe that the use of the arbitrage spread is advisable under such a condition.<\/p>\n

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Here we consider two commodity futures <a href=”http:\/\/ift.tt\/1p0KbEg \u0438 #C-COCOA<\/b>. The equivalent climatic growing areas of the “chocolate tree\u201d and coffee plants (South America, African coastal regions) suggest a fundamental relatedness of the two products. The hypothesis is tested using the IND_Correlation indicator, one of the many indicators that allows us to construct the correlation coefficient. The indicator is publicly available at the MQL5 forum: http:\/\/ift.tt\/1lo2jsh<\/a>. We attached it to the daily chart COFFEE<\/a> and determined the horizon of 12 days to calculate the correlation between the value of futures on coffee and cocoa. We can see that the signal line is drifting in the vicinity of -1 and the smoothed moving average moves into the lower half plane. This confirms the inverse dependence of assets at the level of 12 days and allows us to analyze the intensive trend movement.<\/p>\n

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Let us consider the daily chart of the #C-COFFEE\/#C-COCOA<\/b> composite instrument, formed in the NetTradeX<\/b> trading platform. The correlation coefficient deviation to the negative half-plane corresponds to the vicinity of May 13: during this period a new downward trend begins on the PCI daily chart. The point corresponds to the zero intersection of the MACD<\/b> indicator. Thus, the correlation can be used as an additional oscillator confirmation. At the moment, the correlation deviated upwards and we observe a correction on the price chart. However, the value is still lying in the lower half plane and there is a high probability of the trend movement. MACD<\/b> expanded upwards, ParabolicSAR<\/b> crosses the price. We expect a new ascending correction impulse.<\/p>\n

Pending buy order can be placed above the mark of 1.0161. It corresponds to the historical values of the parabolic, the moving average and the Bollinger channel<\/b> upper boundary. It is significant to note that we choose 12 days as a statistical volume of all the indicators: the same period that was used for correlation analysis. The consistency principle of the analysis methods is respected. The risk limitation level is selected below 0.9701 fractal support. The recommendation for aggressive traders is to open a short position below 0.9701. Therefore, we find ourselves in the market regardless of the next impulse direction. At the same time, note that the upward correction is more likely to happen. Opening a position, it is recommended to move the Stop Loss after the parabolic values every day after the order execution. Thus, we can optimize the return\/risk ratio in our favor in the process of changing market conditions.<\/p>\n

 <\/p>\n\n\n\n\n\n
Direction<\/b><\/td>\nup<\/td>\n<\/tr>\n
Position opening<\/b><\/td>\nabove 1.0161<\/td>\n<\/tr>\n
Stop Loss<\/b><\/td>\nabove 0.9701<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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By IFCMarkets Good afternoon dear investors. Today we traditionally consider examples of the PCI technology application for generating synthetic instruments: paired spreads, portfolios and composite instruments: portfolio spreads. We return to the simplest case: pairs arbitrage trading of the two related assets. Let us recall that the contraposition of two assets is determined by the […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-52727","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=52727"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52727\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=52727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=52727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=52727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}