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Originally Posted by paydebts
The last signal to buy EUR/USD proved utterly wrong to some traders despair (not mine). The SSI is good in telling traders positioning but the comments which follow such as "indicating more USD losses or gains is totally false. The EUR/USD lost 500 points this past week, with central bank intervention no doubt.
Example: If 80% of traders are long USD, the way the market gets more shorts is to continually keep the USD rising. As a result more traders go short and balances the equation back to 50/50 (long/short ratio).
A recent example is the GBP/USD. The ratio should stand now around 65% long as a result of a declining GBP in the past week. More traders are now long as oppose to short. If the GBP keeps declining we will see more traders long GBP/USD. The same holds true for all the other currency pairs. The SSI needs a better gauge for pulling the trigger on trades. I have yet to see the SSI get it right after about a month of monitoring the SSI. The performance is totally dismal in the short term.
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First, Thanks for your comments.
Second, the SSI is far from being 100% correct and can in many circumstances mislead you in the future direction of the price action. However, we are confident the best way to interpret the numbers is using a contrarian stance. We backtested the indicator over the last 4 years and across 5 different currencies and results were clear enough for us to launch a Managed Funds based on this proprietary customer flow information.
For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at:
http://www.FXCMManagedFunds.com.
Thank you
