Review: TradingFX's New Pip Range Bar Charts

Is this the future of candlestick charts and can you make money using them?

Reading a chart is one of the first things that people learn when they first start trading. I often realise how much traders take for granted when I show a friend or family member a candlestick chart of something like oil. All the different colours and blocks can seem meaningless initially until you explain that each candlestick represents all the action within a certain time period.

Unlike line charts, which are usually just based on the closing value, candlestick charts display so much more. In one bar you can see the high, low, open and close of a particular period of time.

Candlestick charts only really started to make an appearance in the 1990s as traders such as Steve Nison highlighted their benefits after extensive research in Japan. Candlestick charts are now de rigueur, but like all innovations, it doesn’t take long for the status quo to become upset when a new method appears on the horizon.

Over the last month I have been tracking a service which offers innovative charts that could really upset the apple cart if they take off in popularity.

Pip range bar charts

Traditional candlesticks are time-based, which means that each bar represents a set segment of time. On a page you might have one days action with each candlestick representing the high, low, open and close of every five minutes. The longer term trader might look at a chart with each candlestick representing 4 hours worth of action. The candlestick could be length if there was a lot of action in that period of time, or small if the price didn’t move much. Importantly the next candlestick wouldn’t form until the time was up.

But why do we construct charts based on time? Why should each bar represent 5 minutes action? Why not have each bar represent a certain number of pips and only move on to the next one when that pip limit has been reached? This is the question Trading FX asked and their innovative pip range bar charts are the answer.

Unlike traditional time-based charting, each bar represents action, not time. They have a variety of options available, but I’ll use the 8 pip range bar chart for the moment.

On the 8 pip range bar chart, each bar has a maximum range of 8 pips. Once the price has moved 8 pips, a new bar will form. If you have a fast moving market, you might get new bars forming every few seconds as the market moves 8 pips very quickly. In a slow moving market, it might take several minutes for the market to move 8 pips and therefore form a new bar.

It’s probably useful to do a recap and summary of the difference between time and pip range bar charts.

Time-based charting:

Each bar/ candlestick represents the action from a set period of time. The size of the candlestick will vary depending on the amount of action during that period. The disadvantage is that freak spikes can distort your charts and make your page hard to read.

Pip range charting:

Each bar/candlestick represents 8 pips worth of movement. In a fast moving market, a quick 80 move will result in 10 candlesticks being printed in a short space of time.

Example pip range bar chart

Below you can see a pip range bar chart in the upper window, with a time-based chart beneath it. In the pip range bar chart, each bar represents 8 pips worth of movement, while in the lower window you have a more traditional 3 minute chart with each bar representing 3 minutes of time. You can see how the pip range bar chart is much more smooth with no untidy spikes.

The Trading FX Service

The whole TradingFX.com service is more than just the pip range bar charts though. TFX is a trading community which uses the charts as its centre point, but there other things you can benefit from as part of your membership.

Your first port of call will probably be a free trial membership which provides you with Temporary access to the Live Trading floor. This live trading room uses the same Omnovia chat room software that Phil Newton uses with his Trading-Strategies website.

The live trading floor displays the pip range bar charts for four currencies with a special focus on one currency in particular (usually EUR/ USD). This means that all members can access the live pip range bar charts without having to download any software themselves. The live trading floor also displays the currency strength chart which I’ll explain in a little more detail later.

The disadvantage is that you can only view the default chart displays that the moderator is showing. This could actually be a real benefit as you get started, because it is easy to get lost in any new software when you first get hold of it. By spending some time watching how other people use the software, you get a better idea of its capabilities.

The chat room moderators are all based in the US, but TFX users come from all over the world. It also helps that there are some insomniacs amongst the moderators so there is usually someone in the room to help you out pretty much 24 hours a day. The idea is that there is at least one moderator to hold the fort during one of the major Forex trading sessions (Asian,London, US).

The moderators help you understand the suggested TFX trading strategies as well as outlining reasons for and against various trades. There is a nice community feel to TFX with moderators being patient with new members and existing members helping each other out. Derek, the lead trainer, also recently organised a trading buddy system.

Example live trading room

In the screenshot example below, you can see a typical live trading room. There are pip-based charts for four of the main currencies with the currency strength chart displayed in the middle. Apologies if you can’t see this, TFX had trouble converting it to a white background for me. Below all the charts you can see the text chat area. As well as using text chat, the moderators will often use the microphone throughout the session.

The Primary Cross Over system

TFX do state that the pip range bar charts are meant to be used as a confirming tool to your existing strategies, but for those who want to learn from the ground up, there are some off-the-peg strategies suggested that make use of the pip range bar charts.

The bar charts themselves come with a number of bespoke indicators that have been especially formulated to work with the pip range bar charts such as a special MACD indicator. This reformulated MACD shows momentum with a score of +/- 7 or 8 indicating overbought and oversold conditions.

The primary crossover system takes a four-pronged attack.

1. The first input is the trend as represented by the pip range bar charts. The advantage of the charts is that as each bar is the same length, your charts are less noisy, potentially allowing you to spot the trend momentum with more clarity.

2. The second input is the reformulated MACD crossing down from an overbought position or crossing up from an oversold position.

3. The third input is two moving averages crossing over.

4. The fourth input is price action around key areas such as support and resistance.

For further confirmation you can check out how the trade is setting up in different pip ranges.

In general the 8 pip chart is used for entries, while the 15 pip chart is your guide.

Another key feature of your Trading FX website is the currency strength chart which is used as an extra trade filter.

When trading a Forex pair like EUR/USD, you are trading the euro as the base currency and the dollar as the quote currency. The euro will also be trading against a whole host of other currencies as will the dollar, so it might make sense to double-check that the move you have just spotted on one currency pair isn’t just an isolated event.

The bottom line

Members can have full access the Pip Range bar charts on their personal PCs to do a variety of technical studies and unique display configurations. At the same time they can also access the trading rooms to discuss trades with the team, interact with the moderators, take classes and share ideas.

With the software you can set things up to your own liking or use default templates to spot the primary cross over trades better.

You don’t have to purchase the software and this is potentially a good thing depending on your budget. To join the service you need to pay a one off membership fee then monthly payments thereafter. Access to the software comes on top of all this so your costs could mount up.

Thankfully you don’t have to jump in at the deep end, you can start with a free trial of the live trading floor and feel your way from there. If you decide to join, it’s probably still better to start slowly and watch how the moderators use the software on the live trading floor before splashing out yourself.

Overall, there’s a lot to like about TFX. The moderators are extremely helpful and patient with group numbers small enough to warrant individual attention. The pip range bar charts are a fantastic innovation, I found them to be a very useful tool, as did other traders in the room.

There are lots of helpful training videos on the website, but I did get the feeling that TFX would be more suited to someone with a reasonable amount of experience rather than complete beginners. Some of the moderators use the pip range bar charts in conjunction with their own time-based chart studies. This is potentially a very powerful trading set up, but one which may confuse the complete beginner.

The software and live trading room are not cheap, but thankfully you have the ability to sample the service for free. There are regular webinars.

While in the room, there were a number of fellow traders who were using the software to great effect. Each person seemed to have their own spin on the strategies which is great, but may disappoint those looking for set strategies to follow. The instructional videos at the Youtube page are a great help, but some written documentation would also be useful.

Overall, I like what TFX have done and there’s clearly a lot of time and effort put into the new charting. TFX have something different here and I hope it goes from strength to strength. I recommend WRP readers take a look, especially if you already have a modicum of experience.

Contact Details:

http://www.piprangebars.com/

http://www.youtube.com/user/TradingFXcom

Reprinted from:
What Really Profits?

Canonbury Publishing Ltd.

An Independent Review of Trading Systems, Stock Market Tipsters & Investment Strategies
Written By: David Evans

March 2009 Issue

Japan's Shrinking Economy & Strong Yen

If Japan's economy has hit bottom, it's pretty far down. The world's second-largest economy marked its worst-ever quarter of GDP, with a contraction of 4%, government figures revealed. That's far worse than the U.S., where the economy shrunk 1.6% last quarter, or Europe, which saw a 2.5% hit.

Japan has suffered from a strong yen, which has crippled its exporters, who are finding it difficult to drum up demand overseas for their goods. Companies' capital spending dropped 10.4% as they declined to invest in new factories or equipment. Deflation has hit as wages drop, unemployment proliferates, and households ruthlessly cut their budgets. In addition, the Japanese consumer has retreated even further into frugality, with consumer spending dropping 1.1%.

The biggest problem is in private spending, always an issue in Japan, where it's considered inappropriate to spend lavishly. Now that the traditional lifetime guarantee of a steady, well-paid corporate job no longer exists, consumers are afraid to spend money on themselves. "I believe that a worsening of conditions in the corporate sector is starting to have an impact on households," said the prime minister, Taro Aso, speaking to parliament after the GDP figures were released.

Aso's government is spending $160 billion to stimulate the economy. Measures include cash payments to residents and tax incentives to buy eco-friendly cars, among other programs. In response to the stimulus checks that are arriving in the mail, many businesses are running "stimulus specials" for 12,000 yen ($120), the amount of the checks per adult. (Children received $200 from the government.)

But many Japanese consumers will likely save the money instead. All but the youngest workers remember the country's "Lost Decade" in the 90s, and few want to live through the privations of a long recession without money in the bank.

Reuters contributed to this article.

http://www.tradingfx.com/
http://www.youtube.com/user/TradingFXcom

Fundamental Currency Analysis

Those trading in the forex market rely on the same two basic forms of analysis that are used in the stock market: fundamental analysis and technical analysis. The uses of technical analysis in forex are much the same: price is assumed to reflect all news, and the charts are the objects of analysis. But unlike companies, countries have no balance sheets, so how can fundamental analysis be conducted on a currency?

Since fundamental analysis is about looking at the intrinsic value of an investment, its application in forex entails looking at the economic conditions that affect the valuation of a nation's currency. Listed below are some of the major fundamental factors that play a role in the movement of a currency.

Retail Sales
Industrial Production
Producer Price Index (PPI)
Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Purchasing Managers' Index (PMI)
Employment Change & Unemployment Claims

Since economic indicators gauge a country's economic state, changes in the conditions reported will therefore directly affect the price and volume of a country's currency. It is important to keep in mind, however, that the indicators listed above are not the only things that affect a currency's price. There are third-party reports, technical factors, and many other things that also can drastically affect a currency's valuation. It is important to take the time to not only look at the numbers, but also understand what they mean and how they affect a nation's economy. When properly used, these indicators can be an invaluable resource for any currency trader.

www.PipRangeBars.com

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Using The Revolutionary TFX Pip Range Bar Charts

Euro/US Dollar Volatility

The coming week promises no shortage of Euro/US Dollar volatility, and economic sentiment could take a further turn for the worse on key PMI data. Much has been made of the fact that Euro Zone Purchasing Managers Index reports have shown clear signs of economic recovery. Yet the “hard data” in Industrial Production and other timely data releases have not shown commensurate improvement. It will subsequently be important to watch whether the recent pickup in investor sentiment is warranted and sustainable. Consensus forecasts call for a noteworthy jump in the German ZEW business survey’s “Economic Sentiment” index—implying that business conditions are steadily improving. Of course, that data could just as easily reflect the effects of a fairly substantial rally in global equity markets. A worse-than-expected result would likely deflate domestic indices and force a commensurate drop in the EUR/USD.

Later Purchasing Managers Index data likewise remains important, and disappointments in said releases could also herald a turn in financial market sentiment. Recent Euro Zone Industrial Production figures showed record year-over-year drops in domestic activity. Such data stands in stark contrast to improving trends in PMI indices, and one of these pieces of data must shift. Unless we see sustained improvement in PMI figures and commensurate gains in Industrial Production, recent signs of economic recovery will amount to little.

US Dollar Outlook

Following up on a period of fundamental abundance with dramatic market events (the Fed Stress Test) and high-level economic indicators (non-farm payrolls), the dollar was put through its staid phase this past week. A round of indicators that included the April retail sales and May University of Michigan consumer confidence survey have put the focus back on the supposed ‘green shoots’ that so many policy officials and market commentators have noted recently. This will be the primary concern for dollar traders next week: is the United States leading the gradual economic recovery? However, this broad and speculative fundamental driver will only be able to guide price action if it is not interrupted by a more immediate concern – like a sharp rise or plunge in risk appetite.

Working with the anticipation that there will be no unforeseen event that sweeps over the market and stirs sentiment, we will have a series of indicators and meetings that could guide the measured race for establishing the leader of the global economic recovery. As it stands, most of the major, industrial powerhouses are mired in recession; and the immediate outlook is far from promising. However, the currency market is a relative one and speculators are willing to look well into the future to discount the macro trends. So far, the US has shown signs that the pace of deterioration in employment, factory activity, consumer spending, confidence and the housing market are slowing. It should be noted that these trends are not positive, just less aggressive in their decline. We will see whether the Fed sees the same signs of hope with the minutes from the Federal Open Market Committee’s (FOMC) last policy meeting over April 28-29th. In previously released statements, the group has maintained its forecast for a contraction through the rest of the year and a slow recovery through the first half of 2010. If perhaps the central bankers are more encouraged by recent data, and they project perhaps a recovery sometime before the turn of the year, it would be a big vote for the US outpacing Japan, the UK and perhaps even the Euro Zone.

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Using The Revolutionary TFX Pip Range Bar Charts