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Scoring Breakdown

Total Scoring

​The total score is the EdgeFinder's overall bias on each asset. The score currently goes from -10 to +10.

After calculating each individual fundamental and technical score, the EdgeFinder then takes the sum of all the scores.

The more negative the number is, the more bearish it is.
The higher the number is, the more bullish it is.

Here is GBPAUD's score as an example. At the top of the table is the overall score. All the numbers underneath are the scores of every other individual category. If you add these numbers up (from COT data to interest rates) you will get a score of +7.

COT

COT Scoring Breakdown

COT is a key way to find a positional bias in the market. When institutions take long positions over time, it can lead to higher prices later on. And the same idea applies the other way.

The number of shorts added and reduced from an asset will impact its score as well.

In this section, we will compare the long and short contracts of individual assets within an index, currency pair or commodity. Here is how we calculate the score for currency pairs, gold and bitcoin:

Currency Pairs, XAUUSD, BTCUSD:
If Change in Currency A Longs % > Currency A Longs % last week, +1
If Change in Currency A Longs % < Currency A Longs % last week, -1
If Change in Currency B Longs % > Currency B Longs % last week, -1
If Change in Currency B Longs % < Currency B Longs % last week, +1
Also,
If Currency A Net Longs > Currency B Net Longs, +1
If Currency A Net Longs < Currency B Net Longs, -1

Take the difference between the long and short change of each index on the Smart Money Tracker
Currency Scanner View
In this example, both currencies saw a decrease in the rate of change of long contracts opened. Because these two assets' change moved in the same way, the scores will cancel out and become a neutral reading. Because of this, our secondary score will trigger, and we will now pay attention to the net positioning on both currencies. Since EUR has a higher net position to the long side of 70.32%, the EdgeFinder will give this pair a +1 in that section.

So, the formula for the total score will look something like this: [(-1) + (+1)] +1 = 1.
The overall COT score for EURCAD will end up being a 1 "Bullish Score" for COT.

This same scoring method applies for XAUUSD and BTCUSD as well.

By the same token, Here is how we score indices and oil:
Indices/USOil:
If +COT Long Contracts, +1
If -COT Longs Contracts, -1
If +COT Shorts, -1
If -COT Shorts, +1
Also
If COT Longs > COT Shorts, +1
If COT Longs < COT Shorts, -1

Here is an example of how an index is scored:
In this example, both currencies saw a decrease in the rate of change of long contracts opened. Because these two assets' change moved in the same way, the scores will cancel out and become a neutral reading. Because of this, our secondary score will trigger, and we will now pay attention to the net positioning on both currencies. Since EUR has a higher net position to the long side of 70.32%, the EdgeFinder will give this pair a +1 in that section.

So, the formula for the total score will look something like this: [(-1) + (+1)] +1 = 1.
The overall COT score for EURCAD will end up being a 1 "Bullish Score" for COT.

This same scoring method applies for XAUUSD and BTCUSD as well.

By the same token, Here is how we score indices and oil:
Indices/USOil:
If +COT Long Contracts, +1
If -COT Longs Contracts, -1
If +COT Shorts, -1
If -COT Shorts, +1
Also
If COT Longs > COT Shorts, +1
If COT Longs < COT Shorts, -1

Here is an example of how an index is scored:

Retail Sentiment

Retail Sentiment Scoring Breakdown

Retail sentiment is the measurement of the overall long/short positions on a pair, commodity or index. Historically, the crowd is rarely correct picking direction. They will usually try to trade a reversal or catch a big swing against strong trends. Although this type of trading can work, it is not often that they are accurate. Sometimes, retail is too early, too late, and even flat out wrong. With that said, the EdgeFinder uses an inverse score to which way the crowd is trading.

Here is how we score 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 (-1). If retail traders are 40% long (or less), then this is a bullish signal (+1).
So the overall, score for retail can only go from -1 to +1.
In this example of CHFJPY, retail is 13% long and 87% short. Since the crowd is under 40% long (60% short), the score will end up being a +1.

Seasonality

Seasonality Scoring Breakdown

Description: The Seasonality Tracker averages the last 5 (red line) and 10 years (blue line) of price performance and plots these averages on a bar chart. You will be able to see how price has performed historically each month. Also, each bar is a weekly average for the last 10 years (default setting). You can change the time period to reflect the average of however many years in the drop down menu where it says “Year”.

Functionality: Traders can use this to help make directional decisions on each asset with this tool. For example, if the price of EURUSD tends to fall by 1% in March for the past 5 and 10 years, the likelihood of that happening again is probable.
What We Need:
Daily price changes in % from January 1st - December 31st
Weekly price changes in % from January 1st - December 31st
Average monthly return for the past 5 and 10 years
Average weekly return for the past 5 and 10 years
MoM Seasonality
Average % price change for each month in the last 10 years
Plot them on a bar chart for 12 months of the year

Scoring Method:
If 10 year > 5 year > 0, +2
If 5 year > 10 year > 0, +1
If 10 year < 5 year < 0, -2
If 5 year < 10 year < 0, -1
If 10 year < 0 AND 5 year > 0, 0
If 5 year < 0 AND 10 year > 0, 0

GDP Growth

GDP Growth Scoring Breakdown

Concept: The GDP growth scanner offers a visual representation of GDP growth among major economies globally.
A higher GDP growth reflects a stronger and more robust economy, while a lower GDP growth reflects a weaker economy.
The statistics shown are the most recent data pulled in by our software.

How We Score:
Any increase in GDP will be good for the currency of that country. So, if GDP rises by any amount, GDP will give that currency a +1 score.
If the base currency sees an increase in GDP, you will see a +1. However, if the quote currency's GDP rises, that will be a -1 for the asset.
So, if both currencies' GDP in the pair see a rise, that will be a 0 neutral GDP score. Here is a visual of how we score:

Inflation

Inflation Scoring Breakdown

Concept: Consumer Price Index (CPI) and Core CPI are primary measures of inflation central banks use to make monetary policy decisions. Assets respond to changes in these indexes differently. The chart shows a visualization of how this particular asset will most likely react to changes in CPI.

Consumer Price Index (CPI) is the metric we use to measure the current strength or weakness of a currency pair. In order to do this, we must evaluate the change in inflation levels for both currencies. Changes in CPI will affect the pair accordingly:

Change: Recent change in CPI will affect score in a certain type of way depending on the asset. For instance, a rise in CPI would be a bearish indicator for the indices because it might influence the Fed to raise interest rates. However, seeing this same sort of news would be bullish for the dollar, since higher interest rates usually lead to a stronger USD.

Location: Not only does the change in inflation matter, but also where the rate is currently. Even if CPI falls, it could still be well above the inflation target set by the central bank. This concept applies to the indices, gold, oil and bitcoin. Currencies don't take into account the location of CPI, but rather compares the two currencies' recent CPI changes.
Currency Pairs:
1:
If currency A has a + in CPI, +1
If currency A has a - in CPI, -1
If currency B has a + in CPI, -1
If currency B has a - in CPI, +1
If currency A has a 0 in CPI, 0
If currency B has a 0 in CPI, 0
2:
If Currency A CPI > Currency B CPI, +1
If Currency A CPI < Currency B CPI, -1
If Currency A CPI = Currency B CPI, 0
XAUUSD
If CPI < 1%, +1
If 1% <= CPI >3%, 0
If CPI > 3%, +1
Also
If +CPI, -1
If -CPI, +1
If +Core CPI, -1
If -Core CPI, +1
Indices & BTCUSD
If CPI <= 3%, +1
If CPI > 3%, -1
Also
If +CPI, -1
If -CPI, +1
If +Core CPI, -1
If -Core CPI, +1
USOil
If CPI < 1%, -1
If 1% <= CPI >3%, +1
If CPI > 3%, +1
Also
If +CPI, +1
If -CPI, -1

Labor

Labor Scoring Breakdown

Description: The labor breakdown segment takes a combination of metrics.

For US indices, gold and oil, we look at weekly Unemployment Claims, Unemployment Rate, and NFP. Having 3 separate indicators, the score for labor may result anywhere between -3 and +3.

For currency pairs, we focus on the macro data provided in the Unemployment Rate and Employment Change. This can lead to a score anywhere from -4 and +4

The score will be different depending on which asset is being evaluated. This is how we score each index, USOil & BTCUSD:
Hard Scores
If +NFP, +1
If -NFP, -1
If no change, 0
If +Claims, -1
If -Claims, +1
If no change, 0
If +Rate, -1
If -Rate, +1
If no change, 0
Here is how we score labor on XAUUSD:
Here is how we score labor on currency pairs:

Interest Rates

Interest Rates Scoring Breakdown

Scoring Concept:
The interest rate breakdown is designed to measure changes in the 2-year yield in the US and forecasts from central banks.
1:
Take the 7 day moving average of the US02Y (2-year treasury yield)

For Indices, XAUUSD, USOil, BTCUSD
If price is above the moving average, -1
If price is below the moving average, +1
In this example, the interest rate forecast for the GBP is unchanged. This means that UK100 will receive a 0 score for interest rate.

If the forecast happened to be higher than current rates, UK100 would get a -1. And if the forecast was below current rates, the index would receive a +1.
Scoring Interest Rates for Currency Pairs


For currency pairs
Concept: Uses current and next quarter’s forecasted interest rate for both currencies (Data from the Central Bank Forecast Page)

Currency A
If forecast > current, +1
If forecast < current, -1
If forecast = current, 0
Currency B
If forecast > current, -1
If forecast < current, +1
If forecast = current, 0
In this case, the forecast rate is higher than the current rate. So the NZD would get a +1 score.
Meanwhile, the EUR’s current and forecast are the same. No change will give the currency a 0 score.
If we’re looking at the EURNZD pair, we would get a -1 because a positive score for NZD would result in a negative score on the pair.
EdgeFinder Features

Risk on /Risk Off Gauge

Risk on /Risk Off Gauge

Understanding the Risk Gauge
Description: The Risk Gauge Meter combines the price action of various risk-on/off assets and measures risk sentiment of the overall market. The score goes from -6 (strong risk-off reading) to +6 (strong risk-on reading).

The assets used are a combination of indices, commodities, and 10-year bond yields (VIX, SPX500, Gold, US10Y, DXY, JXY).
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.
In this current example of the Risk Gauge Meter, monthly performance of risk-off assets is positive, the weekly performance is mixed, and the daily performance is risk-on.

If following days are also risk-on, this could be an indication of a shift in sentiment from risk-off to risk-on.
The bias output is scored this way:
-2 to +2 = neutral
-3 to -4 /+3 to +4 = “risk-off”/”risk-on”
-5 to -6 / +5 to +6 = “heavy risk-off/ heavy risk-on”

Price Forecast

Price Forecast

​Scoring Trend Reading (Price Forecasts)
The price forecast feature displays short-term projections for each asset, based on the trend reading metric, and standard deviation. Please note, these are general projections and may adjust as time passes or trends change.

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 the trend, in the backend:
=if(and(W2>X2,X2>Y2),2,
if(and(W2<=X2,X2>Y2),1,
if(and(W2=X2,X2=X2,X2
The example above is a price forecast chart of USDJPY. The price is clearly in an uptrend for the last 3 weeks. Because the 5-day exponential moving average is above the 8-day, and the 8-day is above the 21-day, we would give this asset a +2 score on the trend reading.

Carry Trade Scanner

Carry Trade Scanner

​Understanding the Carry Trade Scanner
Want to collect swaps on the daily? The Carry Trade Scanner is a helpful tool to show you which pairs are the best ones to hold on to for positive swaps.

What is a Carry Trade? A carry trade is the process of borrowing an asset with a low-interest rate and reinvesting it into another currency with a higher interest rate. In other words, the currency you own is swapped for another by an institution. If the said pair you own yields a positive rate if you buy, then you will get paid when it’s swapped. On the other hand, if the pair yields a negative swap rate, you would need to short it to get paid at swap.

How it works: The table shows several different currency pairs. In order to calculate the swap rate, it takes the base currency rate minus the quote currency rate to get the interest rate divergence. The positive carry direction tells you which direction you would have to trade in order to collect a positive swap. For instance, if the base minus quote is positive, you would need to buy in order to get paid interest. If the difference between base and quote is negative, you would need to short in order to get paid interest.
Functionality: This metric is good for finding which pairs will pay positive swap rates. If you’re looking to take a carry trade, this table will show you which pairs to long or short in order to collect a swap. So why would traders want to see this? Some traders may look to avoid paying swaps so they’ll make sure they don’t hold a pair through the swap. Others might just want to collect interest through the carry trade regardless of price action because of their tolerance to potential lower moves.

Example:
For example, the table above shows a list of currencies. If you were to buy and hold USDJPY through the swap, you would collect interest. However, if you were to short and hold USDJPY through the swap, you would pay interest. The pairs marked in blue will tell you which pairs you should buy to collect a positive swap, and the pairs in red show you which to short if you want to collect a swap.

The dollar carries a 5.5% interest, while the quote currency, JPY carries a negative interest rate. To calculate the approximate interest you would earn on each swap, we simply take the difference of the base rate minus the quote rate. In this case, We will subtract -0.10% from 5.50%. It will look something like this:

[(5.5 - (-0.10)] = 5.60%

This means you will collect around 5.6% for holding this pair to the long side during each swap.

Historical Backtest

Historical Backtest Feature

​Understanding the Historical Backtest Feature
Concept: The Historical Backtest section will show a 30-day look-back period on the EdgeFinder, showing the recorded scores each day for the selected asset. This feature is designed to show traders the change in EdgeFinder sentiment and price moves over time. This will help traders know when sentiment might be starting to switch from one bias to the other.

Functionality: When a trader sees an asset's score become weaker to the long or short side over time, it could suggest that sentiment is going to flip.

Example:
Here is an example on the SPX500. As you can see, price was moving higher at the same time the EdgeFinder's sentiment was at a strong bullish reading of +7. However, as price begain to show sings of bullish weakness, the scanner downgraded its score from a +7 to a +6. And eventually, the score reached as low as -3.

The EdgeFinder has the ability to adapt to market conditions based off a series of fundamental and technical data. The first sign of weakness in score led to over two weeks of selling on this index.

EdgeFinder Smart Alerts

EdgeFinder Smart Alerts

Purchased Separately
Very Bullish Alert
Conditions: If the score changes to a 6 or higher from a score of 5 or lower, Very Bullish Alert
Frequency: Update times hourly

Very Bearish Alert
Conditions: If the score changes to a -6 or lower from a score of -5 or higher, Very Bearish Alert
Frequency: Update times hourly

COT Bullish Alert
Conditions: If an asset’s Net Change is 2% or more on the Smart Money Tracker Page, Smart Money Went Long. If an asset’s Net Change is -2% or less on the Smart Money Tracker Page, Smart Money Went Short.
Frequency: Update times hourly

COT Bearish Alert
Conditions: If an asset’s text title is highlighted in red on the Smart Money Tracker Page, Smart Money Went Short Alert
Frequency: Update times hourly

New Edge Alert (Bullish)
Conditions: If an asset’s score changes from a <=2 to a >=3, New Edge Alert
Frequency: Update times hourly

New Edge Alert (Bearish)
Conditions: If an asset’s score changes from a >=-2 to a <=-3, Turned Bearish Alert
Frequency: Update times hourly

Discord Formatting Example
1)
:warning: New Strong Bias Alerts!:muscle:
Strong Bullish:chart_with_upwards_trend:
[pair]
[pair]
[pair]
Strong Bearish:chart_with_downwards_trend:
[pair]
[pair]
[pair]
_______________________________________________________________________
:warning: Latest Score Flips!:repeat:
**Bull to Bear**:ox: :arrow_right: :bear:
[pair]
[pair]
[pair]
**Bear to Bull**:bear: :arrow_right::ox:
[pair]
[pair]
[pair]

2)
:warning:New Smart Money Positions!:bar_chart:
**Net Short Bias**:small_red_triangle_down:
[pair]
[pair]
[pair]
**Net Long Bias**:small_red_triangle:
[pair]
[pair]
[pair]
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There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
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