Page 79 - Ultimate Guide to Currency Trading

The Last Step of Gathering Data

The last step of this part of gathering the data is to take each ETF work-book and copy the entire
columns that have the percentage-changed information that you created with the formulas and paste
them all into a newly created Excel workbook. To do this, highlight the column you wish to copy, click
"Copy" and then place your cursor in the topmost cell of the first column, and click "Paste Values."
This will make sure that the formulas do not copy over, which would cause your data to read false, as
the formulas would overlap with unrelated data. Continue this process with each column of
"Percentage-Changed" data, pasting the values of each column right next to each other with no blank
columns in between.

Depending upon what version of Excel you are using, you might not have the
additional add-ins to perform regression analysis. Go to

ALERT http://office.rnicrosoft.com/en-us/excel-help/load-the-analysis-tool-pak-
HP010021569.aspx to load the "Data Analysis Pack" on your Excel program if it hasn't
come with it or you haven't installed it already. It's free!

The last column you should copy and paste values for should be your target currency pair. In
this case, your target currency pair is the ETF FXA. Be sure to make certain that the dates line up
correctly.

After you have all of your information on the spreadsheet in columns of information, the next
step is to spin the numbers using regression analysis. Go to the tab in Excel that has the "Data
Analysis" section. Click on "Data Analysis" and select "Regression" from the info box that appears.
Follow the instructions on the regression section of Excel to fill in the areas that you would like to
analyze. After all the fields have been filled in, click the calculate button. The Excel program will then
offer a formula that includes each data point as input in a formula.

Using the Regression Analysis

Your regression analysis is now complete. You have used Excel to determine which of the eight factors
affects the price of the AUD/USD currency pair, and by how much. Depending upon what eight factors
you have selected (or however many you use), some will have a high degree of influence and some
will have a lower degree of influence on the price of the AUD/USD pair.

To carry the experiment one step further, you could track the inputs at the close of each
trading day. You could then enter in each of the eight inputs you have chosen into the model you have
created and then calculate the expected direction of the AUD/USD pair the following morning.
Depending upon the quality of your inputs, your model will be more or less accurate.

It will take a bit of time getting used to selecting and gathering data points to build a good
model. Professional trading houses that use regression analysis usually employ math majors to work
on setting up the experiment and analysis to determine what indicators to use. You will have to learn