In the history of my career, never in my life have I seen a week as flat, and as dull as this one.
If you’ve survived great, and if you’ve managed to “squeeze” a little money out of it – even better. Putting it in perspective can help you cope. “Knowing” the week’s trade volume was so slow and “knowing” it’s pretty irregular has one better manage their expectations for profit. Sitting there staring at it minute by minute questioning “what am I doing wrong” doesn’t do a guy any good. It’s not your fault. It’s one of the dynamics of trading forex that we just have to accept. A dud. Clearly – the week that “wasn’t”.
It’s obvious to me now that the Fed’s impending decision to “taper or not to taper” later next week, has the entire planet’s investment community sitting on their hands. As much as I truly don’t believe any “actual tapering” will take place ( as it’s will only manifest as an accounting entry of a “few less zero’s” for a couple of weeks/months ) I have come to realize that an “announcement of tapering” (however small and meaningless) may certainly be in the cards.
If it’s 10 billion or 15 billion again….the number is meaningless. The puppet strings moving behind the curtain will continue to pull markets as they see fit. If we do get a significant “sell off in risk” ( as emerging markets will stumble on the suggestion of less stimulus) it may only be further manipulation to “further justify” more QE down the road. If tapering “isn’t” announced, I would have to assume markets to perceive trouble in the U.S to be “worse” than previously thought ( as QE “full on” is still needed ) which may also contribute to a selling event.
Either way, it’s a very good idea for any trader to “buckle up” , manage their risk , and not get caught leaning to heavy in either direction.
I currently hold “no position” in USD, and have previously held long JPY’s as well a couple “stragglers” short commods ( AUD and NZD) that have not moved more than a hair for the entire week. The “insanity trade” finishes the week 65 pips in profit and holding.
written by F Kong
Hey Kong, do you have a “rip cord” number (e.g., 2%) after which you’ll cut loose something that’s not working? I’m assuming you must, as even though you like to add to trades when price action is not confirming your bias, at some point you have to avoid the “shark bite” when the market disagrees with your opinion or new information changes things. Best, Andrew
You bet Andrew, although this doesn’t happen very often with the staggered entry approach.
What does it take? Yes a complete and total “smash in the face” with some kind of “unforseen event” or “amazing change” in market fundamentals.
I’ll usually look at the entire “account value vs the total current outstanding loss/drawdown” and not as much “one pair or another” – then blow the entire thing away. If it amounted to a 3 – 4 % loss I’d be choked, but also of the mindset that – for something like that to happen “equal” opportunites should be “immediately available”, and I’d likely jump right on it via other pairs / means to take advantage of the move in real time.
It “has happened” and it”can happen” again – you bet.
Kong! Reading all your stuff… love it!
Dear Tio, and Anon (below),
Your question in the prior post was a great one. Kong’s answer was a powerful method to yet again have more confidence in a trade.
>>When I look at a specific currency say….GBP for example. OF COURSE I LOOK AT IT ACROSS ALL PAIRS BEFORE >>MAKING A DECISION. “Relative strength” ( or weakness ) in any given currency “pair” is merely that! BUT “OVERALL >>STRENGTH or WEAKNESS” can only be truly seen when you look at a “specific currency” and it’s movement in “many >>pairs”.
Here is how I do it:
1. My platform allows me to plot many symbols on the same chart and even on the same sub-graph. Exactly like K’s example of GBP.
2. It also allows me to plot the chart and all symbols as a “percent change chart” from any starting point I choose. That “normalizes” the prices of all so easy to compare.
3. From a Buy perspective, I trade the strongest or near strongest pair based on the biggest profit potential to the targets I use.
Reverse to weakest for Selling, of course.
4. All of this is based on an old saying: “The strongest horse doesn’t always win, but that is the way to bet”.
You are in a good place. I learn a lot from Kong and the subscribers’ comments.
Awesome stuff Dev.
I think we’ve nailed it down pretty good.
Looking for the strongest currency “across the broad market” and pitting these against the weakest. It takes a bit of time / practice to get “zoomed out” far enough to distinguish “what’s doin what” and “compared” to what but is a “golden moment” for a new trader….when the big picture comes clear.
Tio is a hard worker, and has all the right tools to get this licked!
Thanks for the great posts this week Kong. Ya super boring week but the Yen longs are starting to perform. I think we are starting to see risk breaking down rather than consolidate and continue. I would suppose to that it takes risk longer to break down in a highly supportive (central bank stim) environment. I’m being patient. Short GBPUSD is on my radar. Have a great weekend!
Do fundamentals matter as much since the start of QE by so many central banks? Everything seems to be moving around the wimps n shouts from the central bankers. Look at the crap of europe but indices making new highs. As long as the working culture of europe remains the same, sadly they are not going to be able to compete
I consider the “start of QE” and “QE in general very much so as a “fundamental”. This being such a large influence in markets / global picture , its absolutely impossible to ignore. BUT…….it’s clearly not a matter of “OK…they are printing so just buy, buy ,buy right?
Fundamentals are a tricky thing to define, as you can’t really just “compare working culture of E.U” with let say…”rampid unemployment growing in the U.S” and expect to trade it. It’s more like a “fundamental puzzle” where many moving parts need to be evaluated, and interpreted in order to see the pieces falling into place.
I wish I could simplify it, and make it easier…but it’s quite the puzzle indeed – hence my interest in forex.
Ya some questions the market will ask would probably be the following: Is QE working? Can QE be cranked up and get better results if job conditions slip? If the answer to the second question is yes and Bernanke has clearly stated he will move asset purchases up then we still have further up to go, probably. I’m personally not thinking that is how it will work but I am quite sure questions similar to the previously stated are driving the confusion in the market right now due to the bad numbers we have seen.
My take….plain and simple.
QE is “by design” the biggest money maker the FED could ever hope for ( lending money to a government hell bent on spending every penny – and making interest payments to the FED!?). The FED does not act in the interest of anything “other than itself and it’s shareholders”, and will choose to print / lend print / lend print / lend as much as it can….as often as it can – until every single citizen of the U.S is essentially living in “slavery” ( as most already are ).
War would be even better as the Gov will need to borrow more money…..
I think the larger “overlaying problem” is……………most Americans dont have a f#(/%kin clue what’s happening.
The FED IS NOT A PART OF GOVERNMENT! IT’S AN INDEPENDENTLY OWNED BANK WITH A LICENSE TO PRINT MONEY! (google it people – this is common knowledge)
IT’S COMPLETE AND TOTAL CONTROL OVER GOVERNMENT (AS THE GOV NEEDS TO ACTUALLY “BORROW MONEY WITH INTEREST OWED”) HAS TO MAKE AMERICAN CITIZENS QUESTION WTF IS GOIN ON NO? BUT NO……..
For some reason Americans still live under the illusion that these guys have the average “joe citizens” interests in mind.
Yup. One can’t point and say “conspiracy theory” but whether its intentional or not that is how its working. Scary sad stuff for the average dude.
And so it goes ma man……so it goes!
I definitely think the market is being set up for a sell off next week, especially since this week is set to be the biggest gain since January. Could be in for some fireworks next week! I’ll definitely plan to be buying some EM currencies back again if they get smashed.
Fireworks to say the least!
As well…….you can imagine this offers the “big boys” fantastic opportunities to “shake the tree” so…….reducing exposure, then letting the dust settle and THEN moving into trades makes sense.
It’s very rare ( very, very rare ) that an entry price in forex IS NOT hit again ( and likely even again ) within 24 / 48 hours after a larger move so……as I’ve suggested in the past – don’t get all bent out of shape banking cash “on the move” as it’s very likely the same opportunity will be made available AFTER the move.
Have a great weekend everyone! It’s time for a beer!