TCI+ Forex Trading System

Introducing a New Era in Forex Technical Analysis

TradingCenter community is familiar with the TCI technical analysis system. TCI aims to indicate exaggerations in the short-term fluctuations of the World’s Financial Markets. Based on a complex algorithm of measuring abnormal fluctuations, TCI is able to generate trading signals regarding every popular Financial Market (Forex, Commodities, Stocks & Indices).

But how can an exaggerated price movement be identified?

Aren’t financial markets efficient enough to balance price exaggerations through financial arbitrage? The answer is no, and that is because new daily fundamental changes in the real markets are too complex to be evaluated instantly by arbitrage. Therefore new developments in real markets are not incorporated under the right extend nor the right time into financial market prices. New developments may need days or even weeks to be correctly evaluated and thus incorporated into financial prices. That is why we are using TCI technical analysis in the first place. Technical analysis can be used in general to identify overbought and oversold levels and thus forecast future price corrections.

Financial Markets Tend to Exaggerate and TCI Analysis Aims to Indicate it

But what does exactly technical analysis is able to forecast? It is able to forecast changes in the demand and the supply of a particular financial asset. In a narrow timeframe without news, the demand and the supply of a financial asset are determined by two factors of equal importance:

1) Psychology of the Market Participants

2) Global Arbitrage Movements

Entry and Exit Points & Targeted Timeframe

Usually a simple technical analysis system is able to determine:

i) The overbought and the oversold price levels of a financial asset

More complicated technical analysis systems are measuring changes in the demand and the supply of a financial asset and thus are able to identify:

ii) Optimal Entry and the Exit points

What makes the TCI technical system unique is that it can also generate forecasts regarding the future timeframe of price changes:

iii) Entry and Exit Timeframe

So trading becomes much more precise in timing and thus much more effective.

 

The new TCI+ System for Forex Trading

TCI is a system developed during the last decade originally to forecast future fluctuations in the prices of Stocks and Indices. Afterward, it was adopted in the Forex Market and the first Forex Trading Signals are published already in TradingCenter.

TCI is re-engineered in order to adapt and to fit 100% into the unique trading conditions of the currency market. TCI+ innovation is based on a new multiple-currency analysis framework that it is described below.

TCI+ Analyzes many Forex Pairs in a Single Price Model

Currencies are traded into pairs so what TCI+ is designed to do, is to take into consideration the trading activity not of a single Forex pair but of many different Forex pairs, and to combine them all into a single-price technical analysis system.

TCI+ for Euro

In order to distinguish TCI from TCI+, here is a simple example: TCI is able to evaluate EUR/USD pair individually when TCI+ is able to evaluate EUR/USD, EUR/GBP, EUR/JPY and EUR/CHF, all at the same time. How can that be done? It can be done by evaluating all individual TCI prices and then by summing them all into a single TCI+ price.

TCI+=Σ(TCI)

Making TCI+ a more Sophisticated System

But we went a little bit further than that and actually gave special weighs to each Forex pair according to their volume activity in the Forex market. The following table presents
Forex Volume Activity per currency traded and the weight in our TCI+ model for Euro.

Table: Forex Currencies % Turnover Activity & TCI Weight

FOREX CURRENCY	% FOREX ACTIVITY	TCI+ WEIGHT (%)
USD	85.0%	68.83%
JPY	19.0%	15.38%
GBP	13.0%	10.53%
CHF	6.5%	5.26%
		100%

■ EUR(TCI+) = {(EUR/USD x 0.6883) + (EUR/JPY x 0.1538) + (EUR/GBP x 0.1053) + (EUR/CHF x 0.0526)} = 100%

The forecasting results of TCI+ are more balanced in the current Forex market conditions than individual TCI results. As concerns future Forex Trading Signals in TradingCenter.org, both TCI and TCI+ results will be taken into consideration.

Chart: 4 Individual TCI charts

Here is the first Euro TCI+ chart based on data of 4 Forex pairs for the period January 1999-March 2013.

Chart: TCI+ on Euro Currency and the EUR/USD 1999-2013

 

 

 

■ Giorgos Protonotarios, Financial Analyst

TCI+ Forex Technical Analysis System, for TradingCenter.org