Page 77 - Ultimate Guide to Currency Trading

S&P 500, gold, overseas indexes, and other currencies. After performing a search, you can choose a
number of ETFs that are traded in the U.S. markets that you can use to build your trading system.

The greater the number of observations you have in your regression analysis model,
the more accurate it will become. The minimum you should aim for is 100. Finding
this many observations should not be a problem: most ETFs have been around for
Essential more than 1,000+ trading days.

As an example, you will learn how to build a model using ETF data and regression analysis that
uses decision science to help you determine the potential direction and percentage movement in the
AUD/USD currency pair. Your first task is to select the Currency Shares Australian Dollar Trust ETF (FXA)
as a proxy for the AUD/USD pair. The second task is to go through your list of ETFs that you found with
a Google search and choose which ETFs serve as proxies for a group of potential influencers in the
price movement in the FXA ETFs.

TABLE 9-1: ETFS TO USE AS DATA POINTS

Influencer of Target FX pair Symbol Symbol
Dollar Index UUP
USD/EUR FXE
USD/CHF FXF
USD/JPY FXY
U.S. Treasury Inflation-Protected Bonds TIP
U.S. S&P 500 Index SPY
USD/SEK FXS
U.S. S&P 500 Volatility Index NIX*

*Not an ETF, but the actual Option Index Symbol

After selecting the above list of potential influencers and noting the symbol of the ETF that
tracks them, your next step is to gather the data. In this example, you would find the data points for
your financial model by looking up the individual symbols on a website such as Yahoo! Finance.

Steps to Retrieving Data from the Web

After you have decided on what indicators you would like to use in your model, the next step is to
begin downloading the information into a useable format. The easiest format to download into is MS
Excel. You can easily look up the historical closes of any indicator or ETF in the world, convert that data
to a spreadsheet, and download it into your Excel program on your laptop.

1. Go to a site such as http://finance.yahoo.com.