V.13:3 (127-131): A Trade in Foreign Currencies by D.W. Davies

A Trade in Foreign Currencies by D.W. Davies

Here's a recent trade in foreign currencies what was used, the reasoning behind it and the outcome. Take a look.

Without a universal truth to define the beginning and end of trends, most successful traders choose to trade using a system. For me, that meant combining a moving average percentage channel (MAPC) and a dual commodity channel index (DCCI). While this combination has worked well for me, I have had my doubts on occasion; in deteriorating trends the outer channels may not be reached before reversal occurs, while at other times, outer channels are torn asunder in blow-off moves. The DCCI often has a series of price divergences before reversals occur, while at other times we get a DCCI overbought/oversold reversal without divergence. As a consequence, I am always investigating new systems or aids to confirm my system.

In this spirit, I recently bought Thomas DeMark's The New Science of Technical Analysis and within days of receiving it, I was able to put it to good use. Among other concepts, he describes in the book his Sequential system, a fairly simple method suitable for intermediate-term traders using daily data. While it is not for the active trader who trades constantly, it is suitable for position traders who want in as close as possible to the top or bottom of a trend reversal.