Divergence Scores Table
See a history of the divergence scores here.
Friday 7/03/2009: Happy Weekend! It's a late update due to my holiday activities here in the U.S. w00t! There were no changes in any of the divergence score directions today, but the scores for EUR, AUD and NZD dropped back down again. I've added back to those short positions. Keep pipping up!
See more detail on my trading activity in Caution: Math Geek at Work, my trading journal at Forex Factory. Also, you can see a history of the divergence scores for each currency here.
Welcome,
I'm Scott, an aspiring full time FOREX trader. I'm also sort of a "math geek in training" so I frequently apply the tools of mathematics and science to my study of FOREX price behavior. This site is where I store my research notes (rambling as some of them may be...) as well as my more coherent mathematical market musings. In the table above you can see my current bullish/bearish scores on various individual currencies as well as certain currency pairs. Below you can see details on how I arrive at these scores. I currently update the information on this page at approximately 2:00 AM GMT (10:00 PM New York time) but that may change occasionally.
My current positions, shown at the top of the page, are based on the scores of the individual currencies. Basically, I buy the strongest and sell the weakest, all against the U.S. Dollar so that my USD exposure reflects its current score as well. The score of each currency is based on the divergence between how it "should" be performing based on fundamental factors (reflected in cumulative economic news releases) and how it is actually performing based on its buying power. Thus, I hope to identify potential trend changes before they begin.
The above table shows today's scores for each pair. Positive (green) scores are bullish and negative (red) scores are bearish. The pair scores are based on the divergence scores for each individual currency. For example, the score for AUD/USD is simply the divergence score for AUD minus the divergence score for USD.
The divergence scores are the difference between the News Pressure rankings (how the currency should be performing based on economic news) and the Buying Power rankings (how the currency actually is performing in terms of buying power). So a currency with a very high News Pressure ranking and a very low Buying Power ranking is fundamentally undervalued and I'm looking for buying opportunities there.
The ranking values for News Pressure and Buying Power are based on raw scores generated by my analysis of each. In the table above, they are normalized on a 0% to 100% scale with the lowest raw score in the 0% spot, the highest score in the 100% spot, and all the others placed according to their relative positions between the highest and lowest scores. Below are details on the methods I use to come up with the News Pressure and Buying Power scores.
News Pressure: How each currency "should" be performing
The chart below shows the cumulative pressures on price resulting from economic news releases. The method behind this analysis is here.
Buying Power: How each currency is actually performing
The chart and tables below show the relative strengths of eight major currencies over the past 20 days based on the buying power of each with respect to oil. The chart ranks the currencies on a normalized scale, with the highest performing currency in the 100% spot and the worst performing currency in the 0% spot.
FOREX Market Mathematical Musings
Note: "Intellectual property is neither." Anyone who wishes to copy and use these articles elsewhere is free to do so. I only ask that you credit me as the author and include a link back to this site.
Four Problems with Technical Analysis
Backtesting & Data Mining
A Random Rant on the Random Walk
Beyond the Random Walk - A New Market Paradigm
Statistical Trading - Getting the Edge
New Frontiers in FOREX Market Analysis
"Stop Hunting" -- What is it?
Placing Better Stops
