Know Your Data

BarroMetrics Views: Know Your Data

FX trading has a peculiarity that exchange traders don’t face: in FX the same instrument charted on the same timeframe across two different platforms may take different shapes. This does not happen with exchange traded instruments – the S&P daily chart on Esignal will look the same as the chart provided by CSI-data.

Let me show you what I mean.

Figure 1 is a daily chart of the EURAUD  derived from GFT data; Figure 2 is the same chart using CMI data. Now they look more or less the same/ But take a closer look at the two bars in the rectangle. Now you see what I  mean. The second last bar looks very different in both charts.

In Figure 1 it would be appear that the buyers have taken control. The EURAUD opened, tried to go lower and failed. It then pushed through the open, closed on its highs, and closed line ball with the previous close. If short we may be tempted to least tighten stops.

In Figure 2,  we see a day where, on balance, the sellers seemed to remain in control. True the attempted sell off failed; but the buyers were unable to push through the open, the day closed below the open of today and close of yesterday. If short, we may be tempted to see what the next day brings.

So why the difference?

It’s because the GFT ‘day’ starts and ends at 12:00 GMT; whereas the CMI starts and ends at 5:00 PM EST. Most days there is no difference; but as we saw, there will be times when there can be.

So, of the two, which do I prefer?

CMI because it better reflects what is going on in the market. In FX a trading Monday begins at NZ 7:00 am and end at 5:00 PM EST.  We can say a trading day begins at 7:00 am NZ and ends at 5:00 PM EST. Right now there is an overlap between 7:00 am NZ and 5:00 PM EST. With daylight saving there’s about a 60 min gap between US close and NZ open.

Hence, a data base that shows a day beginning and ending with the US close better reflects the trading for the day.

GFT’s approach includes in yesterday’s bar some of today’s sentiment and price action; that can cause distortions.

gft.png

FIGURE 1 GFT

cmi.png

FIGURE 2 CMI

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