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2012issue C0979

Signed two-currency session spread construction

Two named currencies are translated onto listed futures prices, combined into one signed session score, and then read against a lower band and an upper band that can issue a buy order or a sell order.

  • Choose two names from a shared currency list, then use a translation-map so both legs are listed futures prices before they are combined.
  • Each leg contributes a session-change. The second session-change is multiplied by 10000 and then added for a one-way-pair or subtracted otherwise.
  • The default pair is euro then yen and is not a one-way-pair, so the second session-change is inverted.
  • The combined-measure issues a buy below the lower entry-band of -0.1 and a sell above the upper entry-band of 0.1.
Entries in this reading3 entries
Current trackCurrency translation33 readingsPairs trading70 readingsRule-based entry292 readings

How the score is assembled

The historical workflow begins with two currency names drawn from one shared list. Those names are passed through a translation-map so each leg is a listed futures price series. Only after that translation are the two legs combined.

Each series contributes a session-change. The second session-change is scaled and then signed by a one-way-pair setting. The result is one combined-measure, which is compared with a lower entry-band and an upper entry-band.

Two names and a translation-map

The construction takes two currency names from a shared list that includes euro, sterling, yen, Canadian dollar, Swiss franc, New Zealand dollar, and Australian dollar. Named currencies are translated to listed futures price series before the two legs are combined.

In that translation-map, Swiss franc, New Zealand dollar, and Australian dollar are mapped to the futures roots /6S, /6N, and /6A.

Session-change, scale, and sign

Each currency contributes its session-change, defined as that currency's close minus its open. The second session-change is multiplied by 10000. The scaled second session-change is then added when the pair is marked as a one-way-pair, or subtracted when it is not.

A one-way-pair keeps the second session-change aligned with the first instead of reversing it. The default setting treats the pair as not one-way, so the second session-change is inverted. Default legs are euro first and yen second.

The combined-measure is the first session-change plus the scaled and signed second session-change.

Entry-band orders

A buy order is issued when the combined-measure falls below -0.1. A sell order is issued when the combined-measure rises above 0.1.

Editorial note: between those two entry-band levels the stated rule does not issue an order, so the same procedure can long, short, or stand aside.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
18 of 25 in the Currency translation track
201260-62 pp.Next on Currency translationA two-pass reading of listed currency sleevesA translation-sleeve tracks one exchange rate versus the US dollar and still changes a portfolio's currency mix, even though it does not diversify across several currencies.
All readings on this track · 25 readings
  1. 1989Constructing currency-translated commodity bars
  2. 1992Gold, the dollar, and a foreign-currency proxy
  3. 1993Overseas fund translation after the European currency break
  4. 1995Inflation-ratio overlays, peso breaks and election cycles
  5. 2002A liquidity filter and intermarket overlay for one currency setup
  6. 2002Classify a weak-dollar regime before overseas sales and index proxies
  7. 2003A currency pair as a regime spread with trend and leverage bounds
  8. 2005Score a currency position as a cross-market portfolio
  9. 2005CAD/JPY as an oil translation: correlation, carry, and portfolio role
  10. 2006Placing a currency trade inside a gold, oil, and yield regime
  11. 2006Classifying the yen regime after Japan's liquidity exit
  12. 2006Two horizons in the 2006 euro-dollar advance
  13. 2007Rolling-window tests for gold hedge slogans
  14. 2010Stacking commission and currency costs on international fills
  15. 2010A dollar-pivot intermarket regime for currency pairs
  16. 2010Constructing currency pairs from basket relative strength
  17. 2012Same-way versus opposite-way currency pair construction
  18. 2012Signed two-currency session spread construction
  19. 2012A two-pass reading of listed currency sleeves
  20. 2013Closed foreign futures still leave a leftover currency line
  21. 2014Forex pair ranks from seven cross-currency scores
  22. 2015Currency translation across rate and trade regimes
  23. 2015Ten-year policy phases and FX capital-flow regimes
  24. 2016A peaking dollar and the commodity as a two-market case
  25. 2017S&P 500 energy gauge as a short-horizon regime filter
By fieldIntermarket and spreads264 readingsBy year2012165 readings
All 33 readings tagged Currency translation
Also on Currency translation5 readings
2012Same-way versus opposite-way currency pair construction1989Constructing currency-translated commodity bars1989Constructing currency-translated commodity OHLC bars1992Gold, the dollar, and a foreign-currency proxy1993Overseas fund translation after the European currency break