III.

 RESEARCH METHODOLOGY
In this paper a new strategy proposed with better accuracy and Results. This strategy will generate good results in
forex trading. This strategy contains 7 technical analysis indicators like currency strength matrix, bank entry,
support and resistance levels, cot report, swaps and seasonal cycles. After draw a matrix a specific pair figured out
then goes through this pair from the indicators. Every indicator is briefly discussed below.

A. Currency Strength Matrix

The Currency Strength Matrix used for market analysis to trade in forex market. It measures the strength of
8 major currencies based on the trends in their respective pairs, making it simpler for traders to choose the
best currency pairs to trade and then apply trading strategy on the specific pair. The FX market is a highly
difficult and distinctive market to trade, not least because it is two-sided, which makes trade selection more
difficult than in other markets. As a result, even seasoned traders frequently find themselves in trades that
they later come to regret. With knowledge of matrix, traders may eliminate "poor pairs" and concentrate on
better probability trading pairs.
In CSM the main point is how to score a matrix and how to draw it. For make a matrix, analysis of all 28
pairs and according to trend score +1 to uptrend and -1 to downtrend for every single currency. The
secondary currency depends on base currency e-g for EURUSD if EUR score +1 then USD score will be
-1 or vice versa
The matrix table is shown below.

We consider 3 pairs by examined the matrix CADJPY (+7,-7), GBPUSD (+5,-5), GBPJPY (-5,+7)

B. Bank Entry
In forex trading there are 3 type of traders Institutions, Banks and Retailers. Institutions are major players
in the market like financial institutions, money managers and hedge funds. A legal entity engages in
institutional trading where it manage money of different investors by investing in a variety of financial
instruments, such as stocks, bonds, real estate, etc. In a nutshell, large corporations carry out institutional
trading on behalf of clients. Many other instruments, including futures, swaps, and others, may not be
accessible to private traders because they need substantial money and are often profitable long-term
investments. Institutional investors also receive the best trade prices. Institutional investors are the trading
firms which have ability to trade exotic financial instrument and also the ability to manage a significant
amount of funds for the client.
Banks also plays a major role in trading when banks make entry in the market they start to retest the market
because they don’t want to trade anyone with them. In this strategy we detect the banks move and do
trading with banks.
Retailers are small traders who have small accounts with 500 to 5k$. When bank makes entry they start
issuing retailers. Market started to trap where some of the accounts being washed and some lose their major
equities. We detect the bank move with the candle stick pattern. The pattern is shown below
 Fig 1 Fig 2

Buy Rules:
 Break the low of last candle.
 Close above the high of last candle.
 Volume of this candle should be high from the previous candle.

Sell Rules:
 Break the high of last candle.
 Close below the low of last candle.
 Volume of this candle should be high from the previous candle.

C. Support and Resistance Levels

The market’s movement is limited by the two price charts namely, 'Support' and ‘resistance'. The point
where the market price usually stops rising and sinks downward is called resistance level. On the other
hand the point where the market stops going downward and push backs is called support level. The levels
of the market depend on the supply and demand rule. The price will go up if the buyers in great numbers
and vice versa. The levels are shown in fig below.

Fig 1
In terms of forecasting future price changes, a level is more likely to be accurate the more frequently a
price touches it. Since traders tend to buy or sell after a level is achieved, both levels frequently become
into psychological hurdles for them. The outcome is only strengthened by this. The price traps the market
in such a way that it crosses the resistance level but returns exotically. If the price cross any level for a
longer period of time then most probably it will continue to follow the same trend.
D. COT Report
To aid the general public in understanding market dynamics, the Commodity Futures Trading Commission
(Commission or CFTC) produces the Commitments of Traders (COT) reports. For futures and options in
futures markets where 20 or more traders hold positions equal to or over the reporting requirements
required by the CFTC, the COT reports specifically offer a breakdown of each Tuesday's open interest.
The position data provided by reporting businesses is the foundation for the COT reports (FCMs, clearing
members, foreign brokers and exchanges). The actual trader category or classification is based on the
 primary business purpose traders self-reported on the CFTC Form 40 and is subject to review by CFTC
staff for reasonableness. Reporting firms provide the position data, but the actual trader category or
classification is based on that information. The CFTC staff does not know the particular reasons behind
trader’s positions; hence this information is not taken into account when classifying traders.
In actuality, this implies that all of a trader's holdings in a commodity, whether held for hedging purposes
or speculation, will be included in the position data for a trader designated as a
"producer/merchant/processor/user" for that commodity. Due to the fact that traders can disclose their
business purposes per commodity, various commodities may have distinct categories in the COT reports.
The traders are included together in the same category for all commodities in one of the publications,
Traders in Financial Futures.
The COT reports typically use data that was collected on Tuesday and made public on Friday. The CFTC
obtains the data on Wednesday morning from the reporting companies and corrects and confirms it before
releasing it by Friday afternoon.
E. Swaps
In forex, a swap is the interests you either pay for or get on a deal that you hold overnight. Swaps come in
two flavors: swap long (used to maintain open long positions overnight) and swap short (used for keeping
short positions open overnight). Depending on the financial instrument you're trading, they are stated in
pips per lot and might change. On the Contract Specifications page in FXTM, you can check which swaps
are relevant to whatever instrument.
F. Seasonal Cycles
There are two positions that traders might take in the currency market: pro- or anti-dollar. The U.S. dollar
has long been the main cause of changes in exchange rates since it makes up more than 85% of all currency
transactions. Most traders either use fundamental, technical, or a mix of the two to forecast the future
movement of the dollar. But the time of year may also affect how the American dollar reacts to other
currencies. Using indicators, technical analysis examines historical price behaviour.