Total Score / Bias
Our scoring system takes into account all metrics applied to a particular assets, and reflects a total sum of all
For each asset in the EdgeFinder, we use a total scoring system to compute an overall bias. This scoring system takes into account all available metrics, and returns the sum of each. Generally, a higher number indicates a bullish reading, and a lower number indicates a bearish reading. The higher or lower the output value, the stronger or weaker the bias.
The output bias can be one of the following: strong sell, sell, neutral, buy, or strong buy. If a score has a -5 value, it will receive an output bias of "strong sell". If a score has a +0 value, it will have an output bias of "neutral". If a score has a +4 value, it will have an output bias of "strong buy".
Please note, this is not a recommendation to buy or sell any financial asset. The EdgeFinder is intended for informational use only. Please refer to our disclaimer for more details. https://a1trading.com/disclaimer/
Retail Sentiment
The retail sentiment metric displays data based on the positioning of retail traders. For us, this is a contrarian signal producer.
If retail traders are 60% long (or more), then this is a bearish signal, and this metric receives a score of -1. If retail traders are 40% long (or less), then this is a bullish signal, and this metric receives a score of +1.
Trend Reading
To define trend reading, we use the daily chart, and 3 exponential moving averages: the 5 day EMA, 8 day EMA, and 21 day EMA
W = 5 day EMA
X = 8 day EMA
Y = 21 day EMA
Here is our calculation for trend, in the backend:
=if(and(W2>X2,X2>Y2),2,
if(and(W2<=X2,X2>Y2),1,
if(and(W2=X2,X2<Y2,-2,
if(and(W2>=X2,X2<Y2),-1,0))))
Inflation
For currency pairs:
When comparing a currency pair, the inflation metric may indicate which economy is in better monetary condition. Higher inflation is a sign of currency weakness, and lower inflation is a sign of currency strength.
If currency 1 inflation < currency 2 inflation, +1
If currency 1 inflation > currency 2 inflation, -1
If currency 1 inflation = currency 2 inflation, +0
For commodities:
If latest inflation change in the US > 0, +1
If latest inflation change in the US < 0, -1
If latest inflation change in the US = 0, +0
For indices:
If latest inflation change in the US > 0, -1
If latest inflation change in the US < 0, +1
If latest inflation change in the US = 0, +0
Interest Rate
For currency pairs:
A higher interest rate is generally considered bullish for the value of a currency, but for pairs, we will need to compare both currencies in the equation.
If currency 1 interest rate < currency 2 interest rate, -1
If currency 1 interest rate > currency 2 interest rate, +1
If currency 1 interest rate = currency 2 interest rate, +0
For commodities:
If latest interest rate change in the US > 0, -1
If latest interest rate change in the US < 0, +1
If latest interest rate change in the US = 0, +0
Risk Sentiment Gauge
This metric is good for indicating which assets are going to be bullish or bearish. For example, if the risk meter is at -4, it suggests that USD, CHF and JPY could be bullish. If the risk meter is at +4, it suggests that AUD, CAD, NZD, GBP, EUR, XAUUSD, SPX500, could be bullish.
If VIX is up >5%, score of -1
If SPX500 is down >1%, -1
If XAUUSD is up >0.5%, -1
If US10Y is up >1%, -1
If DXY is up >0.5%, -1
If JXY is down >0.1%, -1
—--------------------------------
If VIX is down >5%, score of +1
If SPX500 is up >1%, +1
If XAUUSD is down >0.5%, +1
If US10Y is down >1%, +1
If DXY is down >0.5%, +1
If JXY is up >0.1%, +1
COT Data
The COT metric displays institutional positioning, according to the commitment of traders report filed each week. The scoring sequence for this metric is as follows:
For currency pairs:
This metric will display a side-by-side comparison of COT data for each currency.
If currency 1 long % > 60%, +1
If currency 2 long % > 60%, -1
If currency 1 short % > 60%, -1
If currency 2 short % > 60%, +1
Output value is the total sum of all
For commodities & indices:
For individual assets, COT data for that isolated asset its considered. If there is "significant" long or short exposure, a bias is generated, as defined below:
If asset long % > 60%, +1
If asset short % > 60%, -1
If asset long % is > 40%, and < 60%, +0
This data comes from the commitment of traders report filed weekly by the CFTC. We specifically use the non-commercial positions found in the legacy report filed, as we believe these are the most useful to traders. The non-commercial positions include that of large trading speculators. Note: we ignore the commercial positions as they are not specifically speculating on future prices, but instead often using the markets as a hedge.
Seasonality
The seasonality metric compares the historical performance of the market in question, month to month. If historically the current month was a positive month for the market, the score is +1 for this metric, otherwise if it is negative, it receives a -1 score for this metric.
Our data goes back as far as 2012 on most assets, and utilizes daily open and close data to derive an approximate monthly performance.
GDP Growth
The GDP indicator pins the most recent change in GDP growth numbers. A positive change in growth would suggest a sign of expansion, and the asset would receive a worse score than an asset that is showing economic contraction.
For currency pairs:
This metric will display a side-by-side comparison of historical GDP data from each respective market.
If currency 1 GDP < currency 2 GDP, -1
If currency 1 GDP > currency 2 GDP, +1
If currency 1 GDP = currency 2 GDP, +0
For commodities & indices:
If most recent change in GDP is +/-, it may have varying impacts on assets. This is explained on each individual sheet. A simple example is gold. If the most recent GDP change in the US is positive, this is expected to have a slightly negative impact on the price of gold, due to more confidence in US economy.
Unemployment
For currency pairs:
The unemployment metric determines a currency’s strength compared to the other’s unemployment rate. A lower unemployment rate would indicate strength while higher unemployment means a weaker score.
If currency 1 unemployment < currency 2 unemployment, +1
If currency 1 unemployment > currency 2 unemployment, -1
If currency 1 unemployment = currency 2 unemployment, +0
For commodities:
If latest unemployment change in the US > 0, +1
If latest unemployment change in the US < 0, -1
If latest unemployment change in the US = 0, +0
For indices:
If latest unemployment change in the US > 0, -1
If latest unemployment change in the US < 0, +1
If latest unemployment change in the US = 0, +0
Valuation Metric
This feature is specifically catered to a country’s stock market. The valuation metric determines whether an index is overvalued or undervalued based on its PE ratios, forward PE, past EPS growth, projected growth, and sales growth in a five-year period.