DailyFX Research

David Rodríguez Quantitative Strategist [email protected] www.dailyfx.com www.fxcm.com 1.212.897.7600 1.888-50-FOREX

New DailyFX Plus Trading Signals Guide The DailyFX Team is proud to feature alongside the FXCM Systems Desk with the brand new DailyFX PLUS trading systems. The new trading signals are a real turnkey solution. Trade ideas generated by automated trading systems. As smart as algorithmic systems can be, however, nothing quite matches the human eye in seeing trade setups in full. That’s where the human touch comes in. The DailyFX team provides expert commentary to complement the automated trades. This makes it a one-stop shop for trade ideas and analysis.

How much does it cost? DailyFX PLUS users will have access to these trade ideas for free. To gain access to the Trading Signals and other DailyFX PLUS content, speak to your FXCM sales representative.

How does it work? The trading systems are completely automated and are based off of strategies that, with only one exception, once formed part of the FXCM Managed Account trading strategies. We modified strategies that had previously traded live money, and it’s no exaggeration to note that most of these signals are based off of systems with multi-year track records. Please note: past performance is NOT indicative of future results. So let’s take a look at how we access and use the new trading signals. If you’re not there already, log on to www.DailyFX.com. At the top right of your screen, click on DailyFX PLUS. This will take you to the login page, where you will input your live FXCM account credentials. Here you have the DailyFX PLUS page. Go directly to the Trading Signals page and let’s go through this layout together. Here we see a number of trades displayed on the Trading Signals page. The trade is summarized quite clearly: the oneliner tells us what has triggered the entry and which currency pair. Under “Type”, we see whether we have gone long or gone short. The “Entry Zone” tells us the price range in which the system believes that the trade remains valid. The “Time Issued” tells us when the trade was initially triggered, and the “Watch List” button adds extra functionality for those looking to track specific trades. Click on the headline to expand the trade into full details. The full page shows access to all relevant information. Select on the chart to see the levels plotted on an actual price chart—an excellent way to visualize relative levels. More significantly, read the entire text to understand the exact reasoning behind the trade. In this way we’ve made it completely transparent to understand why and how the system has sold. And last but most certainly not least, the bottom portion of the page adds expert commentary from our own DailyFX team. Here is where the true value-added comes in: the analyst will take a look at the system-generated signal and based on their professional opinion, tell you their own outlook on the viability of said trade. In doing so we can take a closer look at whether we think the trade has a likelihood of success or failure, and just as significantly, the analyst will point out their own levels at which they would buy or sell the currency pair.

FXCM, L.L.C.®

NEW YORK LONDON

1.212.897.7660 44.(0)20.7464.8408

TOKYO HONG KONG

81.3.3556.5541 852.2119.0116

DailyFX Research

David Rodríguez Quantitative Strategist [email protected] www.dailyfx.com www.fxcm.com 1.212.897.7600 1.888-50-FOREX

New DailyFX Plus Trading Signals Guide This way, the trader can stay on DailyFX PLUS and have a full team of analysts keeping them updated on trade ideas. If the team has released more in-depth research on a specific currency pair, you can be sure that the analyst in question will post a link directly to that content. The ultimate goal of the DailyFX PLUS trading signals is to give traders a true turnkey solution for trading ideas and analysis. Sort trade ideas by Time issued or grouped by currency pair. Clicking on Signal History will give you access to 100 of the most recently closed trades. Adding individual updates to one’s Watch List lets us access bookmarked ideas under “My Watch List”. Finally, followers can sign up for E-mail alerts for the trading signals. If you use a mobile phone carrier in the US, you can likewise sign up for SMS alerts. Now that we know how to use the trading signals page, let’s take a look at what the trading systems are doing. We’ve preserved four of the six strategies from the Classic DailyFX Plus Signals. Specifically: Breakout2, Momentum1, Momentum2, and Range2 have been kept, but they’ve been giving new names.

The Systems Breakout Opportunities – We’ve taken the most popular system off of the Classic DailyFX Plus Trading Signals page and simplified it. The system off of which it is based has been trading live money for a number of years now. This strategy will buy or sell a currency pair when it breaks above or below its 24-hour trading range, but it will only take the trade if our proprietary Speculative Sentiment Index (SSI) shows that price is likely to continue in that direction. Thus to take a short position, the SSI ratio must be at or above 1.22. To take a long, it must be at or below -1.22. Its stop loss is based off the 24-hour highs and lows. Thus if it is long, the stop will be at the 24h low. If it is short, the 24h high. The limit is based off of the pair’s Average True Range—i.e. how much it moves on average on a day to day basis. Breakout Opportunities seem to do best when markets are very active. Keep track of our weekly forex strategy outlook report http://www.dailyfx.com/forex/fundamental/article/weekly_strategy_outlook for a better sense on when this strategy is likely to outperform. Optimal Entry – This is the only trading system that was not part of the original DailyFX Plus trading signals page. It is likewise the only strategy that is not based off of a system from our original Managed Accounts program. That said, its backtest results look promising and it uses an SSI filter that has worked for Breakout Opportunities in the past. System logic – The strategy looks to buy dips within an uptrend, sell rallies within a downtrend. If the SSI is above 1.22, the system is poised to sell rallies within a downtrend. If SSI is below -1.22, it will buy dips. It uses a very short-term RSI to determine whether markets are overbought or oversold and trade accordingly. Its stops and limits are based off of the pair’s Average True Range on a 12-hour chart. Tips – Optimal Entry works best when markets are in an extended trend. Our best trend indicator remains the SSI. The speculative sentiment index remains the edge for any of these systems. Our confidence on the Optimal Entry system increases as SSI grows to further bullish or bearish extremes. FXCM, L.L.C.®

NEW YORK LONDON

1.212.897.7660 44.(0)20.7464.8408

TOKYO HONG KONG

81.3.3556.5541 852.2119.0116

DailyFX Research

David Rodríguez Quantitative Strategist [email protected] www.dailyfx.com www.fxcm.com 1.212.897.7600 1.888-50-FOREX

New DailyFX Plus Trading Signals Guide Trend Follower – This system is a renamed Momentum1 from the Classic DailyFX Plus Signals. The system off of which it is based has traded on live money accounts since 2006. System Logic – It looks for extremes in sentiment then looks to the opposite direction. If SSI is at or above 1.5, the system will go short. If SSI is at or below -1.5, it will go long. It does not use a fixed profit target, but instead uses a trailing stop-loss based on the 14-day Average True Range for the pair. DailyFX Analysts will likely set a general profit target for trades in the attached commentary. Tips – Trend Follower is our most long-term system and tends to do well in times of extended trends. Its best trades will last weeks at a time. We use the SSI itself as a trend filter to gauge the relative likelihood of success for these trades. Tidal Shift – This system is a renamed Momentum2 from the Classic DailyFX Plus Signals. The system off of which it is based has traded on live money accounts since 2006. It had an especially strong 2008 during strong market volatility and sharp trends. System Logic – It looks for changes in sentiment and trends to take trades. If the SSI is the most net-long as it has been in the past 150 hours, it will go short. If it is the most net-short in the past 150 hours, it will go long. It does not use a fixed profit target; instead it trails the ATR-based stop loss as the trade moves in the system’s favors. Tips – Tidal Shift works best during times of trend reversals and/or corrections within a trend. Since it trades the shift in sentiment and not the extreme, it will tend to enter trades much more quickly than the longer-term Trend Follower system. Yet this also means that it will likely exit and switch directions more quickly during long-term trends. Congestion Opportunities – This system is a renamed Range2 from the Classic DailyFX Plus Signals. The system off of which it is based has been trading on live money accounts since 2006. System Logic – It uses a very simple 28-period Relative Strength Index (RSI) indicator on a 60-minute chart and buys when markets are oversold/sells when overbought. Yet it won’t take trades if the SSI ratio is above 1.5 or below -1.5, as that would indicate that the currency is in a strong trend. Tips – Congestion Opportunities trades do well when markets are range-bound and volatility is low. Have traders look at the Volatility numbers on http://www.dailyfx.com/technical_analysis. If the number for that currency pair is above 75%, our research shows that Congestion Opportunities trades will tend to do poorly. *Please be advised that past performance is not indicative of future results.*

FXCM, L.L.C.®

NEW YORK LONDON

1.212.897.7660 44.(0)20.7464.8408

TOKYO HONG KONG

81.3.3556.5541 852.2119.0116

DailyFX Research

David Rodríguez Quantitative Strategist [email protected] www.dailyfx.com www.fxcm.com 1.212.897.7600 1.888-50-FOREX

New DailyFX Plus Trading Signals Guide

FAQ’s What’s different about the new signals? We are taking away the simple robotic interface and replacing it with words. Along with the addition of expert commentary, it will be significantly easier for users to understand. What’s better about the new signals? / How have the signals improved? We are taking a much more active approach to our signals. We previously posted strategies across a number of currency pairs and asked clients to do a lot of legwork. This time we’re making it much simpler. Our aim is to have much fewer signals that are easy to use and understand. We will actively filter those signals. What do each of the tabs along the top mean? By Time – Sort all trading signals by time released. By Currency Pair – Group signals per currency pair. Signal History – The last 100 signals closed. My Watch List – Users may click on the green plus sign next to each signal. That puts the signal on their “Watch List”, and users can monitor any number of open and closed trades via this interface. E-mail and SMS Alerts – Users can sign up for e-mail and SMS alerts (US only) for all trading signals according to which currency pairs they are trading. They can likewise set hours in which they would not like trading signals. Are the same strategies being used? / What type of strategies are being used? Four of the systems have been ported from the classic signals, three of which remain exactly unchanged. We have added an additional system that is brand new in this version of the signals. How can I find out how well the new signals have been performing? Look at “Signal History” and/or keep track of your preferred trades under “My Watch List”. Are the signals being fully automated just like before? The initial entry is completely automated. Yet we are now adding a completely human touch in the attached commentary on each strategy. The aim is to make this a one-stop shop for full analysis and actual trade ideas. Are the classic signals still available? Yes. The classic signals will be available indefinitely. To access them, click on the “Classic Signals” link at the top of the DailyFX Plus Trading Signals page.

FXCM, L.L.C.®

NEW YORK LONDON

1.212.897.7660 44.(0)20.7464.8408

TOKYO HONG KONG

81.3.3556.5541 852.2119.0116

DailyFX Research

David Rodríguez Quantitative Strategist [email protected] www.dailyfx.com www.fxcm.com 1.212.897.7600 1.888-50-FOREX

New DailyFX Plus Trading Signals Guide Which languages do we support? The automated signals will be published in English, Spanish, French, German, Greek, Russian, Turkish, Arabic, Simplified Chinese, Traditional Chinese, Japanese, Italian, and Korean. One caveat is that the DailyFX team commentary is not translated into any of these languages. We have no immediate plans of doing so. Why is risk/reward on certain signals worse than 1:1? Our Breakout Opportunities signals sets the stop for the trade at the trailing 24-hour high or low, while profit targets are 1 Average True Range away from price. This means that risk/reward on certain automated trades will be worse than 1:1. Yet analysts will always advocate that traders stand to gain at least as much as they have to lose in the attached commentary. Where can I see more performance? We don’t share further performance data beyond the past 100 trades. The reasons for which are actually straightforward: we’re de-emphasizing performance. This isn’t because we don’t believe in our systems. Instead the thrust of the new trading signals is teaching traders how to trade and not depend on an automated robot for trade ideas. This encourages the user to think for themselves. Where can I see more pairs? The number of pairs is set by strategy performance and what we believe looks likely to do well within a given week. Why do charts not appear in Spanish/Korean/languages other than English? Due to the format in which we publish them, we can’t simply upload a chart and have it post across all of our languages. In the future we hope to automate this process so that it will appear for all languages.

FXCM, L.L.C.®

NEW YORK LONDON

1.212.897.7660 44.(0)20.7464.8408

TOKYO HONG KONG

81.3.3556.5541 852.2119.0116