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Many readers have asked us about currency trading and if we could help them. Logically, FOREX trading is a very risky task and we are not going to give away our signals which could represent a dangerous tool to most of the investors. However, from some years now we have been playing around with the idea of mean reversion in the EURUSD pair through Kalman filters (link) and we are going to share the information we have gotten purely for didactic purposes.

The idea is once a month finishes we will try to forecast the weekly direction of the pair. First, we won't swim against the tide, meaning we are not going to fight the monthly trend. For instance, December finished with the start of a bullish trend (stronger euro) and during February we only received bearish weekly signals, so no trade was done. Second, we need some "room" to go back to the mean, therefore the price should be a little bit far from the Kalman line. And last, the stop loss range is going to be similar to the initial target.

We hope you enjoy it and learn with us.

Update: February finished with a bear signal (USD stronger).