Trading USDCHF filtered by Gold dynamics via HMM coupling

TL;DR

This paper presents a novel USDCHF trading strategy that leverages gold market dynamics through a coupled hidden Markov model, using technical indicators as triggers to improve trading decisions.

Contribution

It introduces a coupled hidden Markov model approach to integrate gold and USDCHF market dynamics for enhanced trading signal generation.

Findings

The strategy effectively captures intermarket relationships.

Using RSI and CCI as triggers improves trading accuracy.

The model demonstrates profitable trading signals.

Abstract

We devise a USDCHF trading strategy using the dynamics of gold as a filter. Our strategy involves modelling both USDCHF and gold using a coupled hidden Markov model (CHMM). The observations will be indicators, RSI and CCI, which will be used as triggers for our trading signals. Upon decoding the model in each iteration, we can get the next most probable state and the next most probable observation. Hopefully by taking advantage of intermarket analysis and the Markov property implicit in the model, trading with these most probable values will produce profitable results.