Thomas, nearly one year ago we discussed with you trading and all the things around it. What has changed for this year, in your opinion?

The main currencies are more volatile since then and since April they are more or less in a trading range. Daily ranges are common with now more than 150 pips in both directions, whereas last year the dollar was in a downtrend against most currencies.

Expert Advisors that succeeded last year could have a hard time in this competition, if no new trend starts - either up or down.

You work at TRADERS-TV (TTV). Please describe your work there: what topics do you cover there?

TRADERS-TV is a unique place, where I analyze all kinds of markets using technical analysis and some of my own techniques invented over the years. Cycle analysis is the one part, and for two years I have been using more and more data from option markets.

That means, by analyzing the changes in this data from day to day, I have a better feeling of what the big money (it means the option writers) is thinking and doing. I found out that these guys with billions of dollars behind them knew what they were doing most of the time. In case of failure, on the other side, I know if they get in trouble and a big move is expected to happen. I call this technique "option zones".

TRADERS TV gives me the opportunity, nearly in real time, to tell people via interactive charts what I think will happen.

Very interesting, Thomas. Can you give us any details about this technique, Option Zones?

Well, because it took more than 15 years to develop it, I just can tell that I use the freely available Changes in the Open Interest, combine several months, see whether there is a huge shift on special areas, and use this as a hint.

I have statistics on several markets going back 15 years, how many percents of Calls/Puts expire worthless in trend or on non-trend markets. Because this can't be programmed, it is another way to get an edge over other analysts/traders.

For example: Early in this year, using this technique, I did shows (TTV-Shows) telling that Wall Street and German DAX would drop to new lows the third week of January. My target on the DAX was 600 points down. This was a little bit too short, because the index dropped more than 1500 points the third and the fourth week.

My options data told me exactly where the big money got hit on the wrong foot and had to hedge their open puts by selling the underlying future. Sellers of Put options got hurt if they go itm (in-the-money). By selling a future, you win on the future side, what you lose on the Put option.

Selling the future at that time meant an upshift of the dynamics and a very fast move to the downside. That happened.

Click to visit the TRADERS' TV website.

Interesting. Well, Thomas, now you should tell us about your Shows.

TTV has weekly shows with me, where I use this technique on Bund, S&P 500, DAX and the euro against the US dollar. These are the main markets, where the volume is so high that I can use it as a market tool. Other Shows I am responsible for are the Trading Opportunities, where I show 2 German stocks that should go up and down on the next days/weeks.

Of course, we cannot just mention your newly invented technique without even asking about it. Thomas, could you tell us about this technique and about how you invented it?

Well, I have been writing options for many years. I thought it might be a good idea to know what the big money (big money is the major hedge funds) was doing. If you know, in an uptrend, if just 30% of Calls expire worthless, then you will sell Options which are in the area of these 30%. I developed my own technique of calculating strike levels. I can write Calls with strikes above this level or Puts with strikes below this level. The level itself, of course, moves together with the price movements. This technique grew over the years and I never thought that it would work that fine.

Option zones show you sometimes more than technical analysis, because you can see the important areas where the big money defends or hedges its open positions. This is not available in existing software products. It is all made manually. For example, my studies have shown that the extreme points are always around the option expiry. If you just look at the euro, the major turning points are often on the last three days around the options expiry day. Now we are approaching the first Friday of the month.

The following chart shows you my option zones for the euro and you see that we got to new lows this week, where the next Friday all currency options for the front month are ending.

Option Zones

I'm sure that it will be interesting to everyone. Can you make a forecast for the Forex Market? What can we except in the nearest future (let's say, till the end of this year)? And how does the USA Crisis affect the market as a whole?

Well, it looks like we see a big trend change to a strong US dollar. The euro failed to go through 1.60. The GBP right now is making a pullback to the broken downtrend and is not far away from new lows - just about 200 pips. But this sideway range is still valid. In my view, we could see a new trend between the beginning and the end of the competition. So, a good EA has to change from one trading style to another to succeed. Last year we had a strong uptrend and trend following was the word.

Now we have a trading range. The last trading ranges lasted 70 weeks. We are now in week 24. That means the environment could last till July 2009. On the other hand, nobody can say that these ranges are always 70 weeks long. It could be a hard time for EAs.

Of course, we'd like to know the fate of your Expert Advisor. A year ago you said that it was a first step. What can you say about your EA development experience now?

Well, my programming is still in trouble, so I did some research and found out that for my trading style a half-automated EA is the best. For example, an EA trades without knowing that a major announcement comes out in 5 minutes. This is not a time to allow an EA to trade, because you make a huge profit one day, while the other day your stop will be hit within minutes.

Right now, I do not allow any EA to open positions automatically, because markets are permanently changing. A system works fine for 3 months, then there is a shift in the market behavior - and it does not work anymore. Right now, I have several indicators attached to different timeframes and, when a system is ready for a trade, a window will go up.Then I decide whether to trade in that direction or not. Maybe this is my own trading style that suits me, but I found out that this worked best for me.

By the way, what happened with your BullBreath indicator? Are you still using it or have you developed a new analytical tool?

I still use this indicator, but accompanied with others, like the ADX. I use the ADX as a trend-change indicator. If it is over 50 and the next bar has a lower closing in the indicator, then we see a top if we had an uptrend, and a bottom, if the previous trend was down.

Also I use Momentum and Money Flow Index on a 5-minute chart. Momentum (15) is good, if you draw a trendline and the indicator is at an extreme. MFI shows tops and bottoms above 80 and below 20.

The more of these indicators are in several zones, the better are the signals on a short-term basis. On a 15-minute basis, I have also an Envelope (18), 0.30%. If the market gets above or under these extremes, I look for a countertrend move. These are more than 4 systems that work together and then it means: Waiting!

Did you use any information you had got from the previous ATC? Did it help you in your analytical work? Did you use the ideas of some Expert Advisors participated last year?

Well, I found the scalping EA of Winwin very interesting, because sometimes I was several pips in front and gave all back because of a short-term trend. Now I use the scalping EA from the article Comfortable Scalping as the main EA several times a day. For me, it is the best tool ever found in your CodeBase, because you can train your intuition and still trade. Since I use this with a target of 5-10 pips per trade, I have more confidence in my trading.

In your opinion, what trends do now exist in the industry of automated trading?

Well, there are a lot of ideas around the internet. The trend in my opinion will be an EA with more than one technique. These EAs see that the environment changes and decide just by themselves whether to switch from EA-Part 1 to EA-Part 2 or EA-Part 3.

As I told you, in my trading the best thing for a trader is an EA that uses several systems in one program. I think that the main trend would be the complication of EAs and combining several trading strategies with some switcher in one Expert Advisor. It's a hard task for programmers.

Thank you, Thomas.