By IFCMarkets

Good afternoon, dear investors. Today we consider the example of spread currency trading, an efficient trading method used within the Personal Composite Instruments – PCI technology. The basis of this method is the expression of the underlying asset in units of the quoted asset based on the cross course model. At the same time the underlying asset and the quoted one may act as instrument portfolios.

Today at 14:30 (CET, server time) two key macroeconomic indicators of the Canadian economy are to be released: Core CPI, m/m and Wholesale Sales, m/m. Both indicators characterize the purchasing power of the population and, as a result, the economy attractiveness for investors. There is a high probability that the indicators release results in increased volatility of the Canadian Dollar against major currencies and the possible trend movement.

Here we consider the synthetic instrument built in NetTradeX trading platform using the GeWorko Method: CAD/[AUD+CHF+EUR+GBP]. The price of each of the currencies included in the instrument is calculated automatically by the program in U.S. Dollars. The price of the pair trading tool is expressed on the basis of the Canadian price (expressed in USD) relative to the quoted uniform-weighted portfolio price: AUD(25%), CHF(25%), EUR(25%), GBP(25%). The investment share in each portfolio asset is selected at the level of 25%. Buying a synthetic spread is identical to purchasing CAD (USD) and the simultaneous selling of the quoted portfolio consisting of 4 currency pairs AUD(USD)+CHF(USD)+EUR(USD)+GBP(USD). We would like to note that quoting of the Canadian against the base currencies portfolio allows diversifying short position risks and at the same time increase the instrument reaction intensity on fundamental changes in the Canadian economy.

After the formation of PCI price history in NetTradeX we have the opportunity to conduct technical analysis and to open pending orders. Note that in order to save the calculation time the program calculates only the candle body (new versions are expected with OHLC). The price is moving within daily and weekly uptrend channels. Graphic analysis of RSI(13) signal fully confirms the bullish direction. However, at the moment there is a temporary consolidation observed before a new large-scale impulse. We believe that it makes sense to place a pending buy order above the nearest fractal peak at 1.00515. Parabolic reversal and the upward moving average intersection will occur at this level’s breach. The weekly trend completion is unlikely, but quite possible. Active selling may start below the support at 0.98446. It makes sense to place the spread instrument pending sell order at this particular mark.

After two pending orders opening, we expect the first of them to be executed and the second one to be closed: let the market chaos decide the behavior. After position opening, Stop Loss is to be moved after the Parabolic SAR values, or near the next fractal peak (trough, in case of long position). Thus, we are changing the probable profit/loss ratio to the breakeven point.

Creating synthetic instruments using the GeWorko Method: trader guidelines

Market Analysis provided by IFCMarkets