It’s Friday afternoon and thus far – the world has not ended. Another week has passed, and regardless of how completely boring it’s been – all is well. I’ve had opportunity to do some casual “forex blog surfing” and just couldn’t help myself – in sharing with you (my valued readers) a few of my findings. Please ( as I do know a thing or two about search engine positioning) try your best to excuse the blatant repetition of the phrase “forex trading blog” in the following rant.
Forex Trading Blog
Ooops……yes I believe I was talking about forex trading blogs, and oh so hope the kind editors at the helms of google are listening – as my ultimate fate so clearly rests in their hands. In searching for the latter – I found this:
What on earth does it mean? This – from what I understand to be a leading forex trading blog! Is this fellow long or short? What the hell is “dynamic support”? – and what’s with the question mark at the top?
In my view, the commentary on this “forex trading blog” indicates that the writer doesn’t have a freaking clue as to where the price action is headed – and only motivates me further to continue posting the hard cold facts – and the brutal truths of trading forex for a living. It’s Friday after all – and I appreciate most of you have heard enough – and are likely sipping a cold one after a long hard week.
Kong is too – and “here’s to google” – I hope your spiders get just as big a laugh outta this one as I did.
Sideways is not a direction I am particularly fond of. You can’t make money, and for those unable to distinguish the characteristics of “sideways” – you can also lose money – very fast.
Traders dream of mounting profits – with day after day followed by yet another tall green candle, with trend so clearly in place that a five-year old could trade it effectively. This is rarely the case. Where as – we are most often faced with ambiguity, trendless markets, ranging stocks or currency pairs and a general sense of confusion as to “where the market is going next”. In fact, they say that markets are generally only trending 30% of the time – and that the remainder of time is spent grinding traders accounts to dust in the dreaded direction of….you guessed it – “sideways”.
Lets look at a quick example.
In the example above – clearly no trend is in place – and a trader is left struggling for days, looking for a definitive sense of direction. This (more often than not) pushes a trader to do things such as:
- Dump the position at a loss (even though – it’s just as likely that the direction will eventually turn in your favor).
- Add to the position (creating even more exposure and risk) with thoughts that the small dips or bumps are buying or selling opportunities.
- Hold the position – but with considerable stress – with funds now tied up (day after day) and no profits to speak of.
For the inexperienced “sideways” is almost certain to cause significant emotional pain, and even more so – pain to their account balance. I do my absolute best to avoid this at all costs but still – with years of experience, have learned to accept it as a part of trading, and that is virtually impossible to avoid 100%.
Patience is the key – as making decisions during times of “sideways” will almost certainly take its toll on both your account….and your emotions.
If you’ve never been “whipsawed” before well…..you sure where today.
Whipsaw – A condition where a security’s price heads in one direction, but then is followed quickly by a movement in the opposite direction. The origin of the term, is derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name.
There are two types of whipsaw patterns. The first involves an upward movement in the share price, which is then followed by a drastic downward move, which causes the share’s price to fall relative to its original position. The second type involves the share price to drop for a little while, and then suddenly, the price abruptly surges towards positive gains relative to the stock’s original position.
Now I’ve been suggesting that the big boys have been quietly buying behind the scenes for several days, but today may well have been the first day that their activity was clearly seen by all. What did you think – a bunch of angry hippies (with their trade signals now honed to perfection) all got the same green light this morning to “buy like the wind”? Or better yet – some rinky-dink investment group of a couple angry old men (with actual belief that their combined buying power is sure to move the needle) all pooled their beer money and “rocked the markets” today?
Please…these characters are the largest contributors to the entire process, as once again weak hands are whipsawed and BAM! – There go your shares!
The short dollar positioning begins….as whatever gas the dollar may still have left will sputter out quickly – here in the days ahead.
When looking at trading markets in general – I always consider a single (and very important) overlaying theme. Superceding all others, and guiding my decision making process – regardless of asset class, current news headlines, technical indicators, price and sentiment (which has now become a commodity itself – being “resold” across the internet at any number of bogus websites) I will always look for the answer to one fundamental question.
Are investors currently considering taking on risk? – or looking to protect themselves against. Very simple and to the point.
Is risk on or is risk off ?
When risk is considered “on” – money flows to those assets where investors feel there is opportunity to see a return on their hard earned dollar. A time when things are “looking up” and investors feel somewhat safe in taking their money out of savings – and placing it elsewhere (the biggest measure of risk on this planet is currently the U.S stock market).
When risk is “off” – money flows back into savings accounts, back into “security” (out of risk and U.S equities) – and subsequently back into currencies such as the U.S dollar and the Japanese Yen ( are you starting to see how this works? ).
So……if nothing else – a fundamental knowledge/feel as to weather or not the current investment environment is “risk seeking” or “risk averse” can go a long way in keeping an investor / trader on the right side of the market.
And the question begs to be asked – is it risk on? – or risk off?
If you’ve never heard the term “dead cat bounce” – here it is. A dead cat bounce is an industry term used to describe the upward movement of a given asset “contrary” to a larger degree down trend.
Dead Cat Bounce – In finance, a dead cat bounce is a small, brief recovery in the price of a declining stock.Derived from the idea that “even a dead cat will bounce if it falls from a great height”, the phrase, which originated on Wall Street, is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline. (thanks Wikipedia)
In this case – I guess it’s not exactly a dead cat bounce, as the dollar has only just recently begun it’s expected downward fall – but I do expect a “bounce” all the same. As far as trading it goes – if you are an equities buyer – I imagine you should get some nice opportunities to buy in coming days, before this thing lifts off to new highs.
As a currency trader – I am not going to bother doing anything short of watching the dollar closely – and aim to catch it at its peak (perhaps around 81 late in the week) before re-entering “short dollar” positions across the board. It’s not worth trying to squeeze every single penny, and push any further short dollar positions now ( considering I am 100% in cash).
Best trade is no trade at all here – and as I’ve said many times before – I am not missing anything – there are a million trades – and chasing anything is a fools game.
$dxy november 26th
Being 100% in cash is one of the best feelings a trader can have. You’ve reduced your risk to absolutely zero and have effectively “brought the soldiers home” – now free to do any number of things. You can choose to take a break – if that’s whats needed. You can regroup / step back and take a new look at the field. You can heal (if by chance your last battle has left the troops – how shall we say….”defeated”?) – or you can use the opportunity to do what I always do. What I always do!
Plan the next attack.
There is no room for complacency anymore. The times of making an investment decision and “checkin on it next month” are well behind us now – anyone suggesting otherwise is a complete and total fool. If investing is a battle – then we are at war every single minute of every single day, for the rest of our god given lives – period. Accept it….deal with it – own it.
My plan (oh yes – you guessed it) is to get on the offensive, mobilize the troops and “take it to em” with everything I’ve got. You see……the enemy has already shown it’s hand. Giant “printing presses” now in place along the lines. Aimed at the sky with such power and might as to “rain down dollars” on the innocent children and families below.
The plan is flawed. And the spoils of war will soon go to those who have found ways to move quickly through the trenches, stay nimble, alert – and attack when given opportunity.
I plan to get ridiculously short the dollar in coming days – and expect and equally powerful move upward in all asset classes – as the “rain of dollars” floods markets and trenches alike….
What’s your plan?
(Seriously everyone – lets try to get in here this week and contribute – good or bad etc……lets hear what everybody’s thinking – It says “leave a reply” so……LEAVE ONE!)
I rarely sleep….I never have. And these days as a full-time currency trader, its more than reasonable to assume – I never will.
It’s a problem I’ve been struggling with for as long as I can remember. No matter how minute, no matter how distant – any, and everything that makes even the tiniest of sounds (god forbid anything repetitive) has me hooked. Counting the intervals in between, doing long division, tapping my toes or clicking my teeth. I’ve got drum beats going behind the drip from the tap, symphonies playing with local birds, a quick estimation of speed from the passing kid on a skateboard – all the while wondering “what’s the story with that damn fan in the living room?”.
Needless to say I am almost always awake and able to give the computer a quick check, should the need arise.
For the rest of you though – there are some very specific times when it really does pay to get to work. I like to be at the computer and ready to go 2 hours before the U.S session begins – and would usually plan to stay tuned throughout the morning – until the London session ends. Roughly a 4 hour period between 6:30 and 10:30 my time. Then perhaps a look after lunch, and the usual “2 minutes til close”. Currency wise – not a lot of “intraday antics” line up with U.S equities in the afternoon so…if you catch the overlap of the two sessions in the morning – you’re in good shape.
You can then chase tumbleweeds for the entire mid to late afternoon and well into the evenings until around 9:00 pm when a bit of news gets released but even then – usually nothing earth shattering. In general the Asian session is flat , and currency pairs are often observed “frozen in time”. I’ve read that a lot of currency trading strategies are build and designed around the open of London but in my experience – have never really had much luck with that. If anything I would just look to get at it an hour earlier (5:30 a.m) and go from there.
Oh yes and of course – I’ve got to make time to work on this confounded blog and there’s that damn spaceship I’m building on the rooftop. Anyways hope it helps…
There are times in life when things just don’t go your way.
Times when outta nowhere, for no good reason at all …life just decides to “up’n crack you one” right in the face. Commonly, these “times” ride the coat tails of equally “good times” – ultimately doubling their surprise, and significantly magnifying their effect.
Well I’ve had tremendous success in the markets today…..but have failed miserably elsewhere. Unfortunately – I’ve allowed my emotions to get the better of me, I’ve let my discipline slide and I’ve made a costly mistake. I’ve hurt one of those closest to me, and just when I thought everything in life was going great – BAM! – one of those “times”.
You don’t expect it.You dont see it coming but when it does……Ouch.
A lesson in this? I dunno – I guess this being “Thanksgiving” for those of you in the United States, maybe a good dose of respect and appreciation for those you love – and thanks for all they’ve done for you. And for all you traders – putting things in perspective, likely the same……
Respect mother market…and appreciate what she’s given you.
I just had to cut and paste the following graphic ( my apologies if proper credit is not given) as it best illustrates the significance and implications of the Fed’s QE money printing bonanza. Please take a good look at this – a real good look. Then consider the arguement of ”inflation vs deflation” moving forward. I would be hard pressed to entertain idea of the dollar doing anything other than “going down” over the first half of of 2013 – minimum.
Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. (thanks wikipedia) Trading it however – will most certainly not be as cut and dry.
If you haven’t already looked into japanese candle formations – you need to. I use my knowledge of this type af analysis literally every single day – day in day out on all time frames – everywhere and always.
Looking at the symbol $DXY this morning – one can clearly see a very tall “wick” on the daily chart – with a teeny tiny little body right at the very bottom. Known as an “inverted hammer” or possibly a ” shooting star” – this type of candle formation indicates that “price” (was at one point) at the top of the candles wick, but over the course of only one day ( and in this case even less time) selling pressure has taken price all the way down to the bottom of the formation. This is a very bearish formation – indicating that buying interest has all but dried up , and that the “bears” have more than likely – taken over. Commonly, traders will wait for the formation of the “next day’s” candle for some form of confirmation but for those of us who are already in the trade (short the dollar) this type of candle serves as indication that “perhaps we where a touch early” but that good things are likely soon to follow.
I would consider – that the dollar is finally, and I do say finally – as this has been a “grueling correction” to say the least….finally ready to roll over – paving the way for a myriad of trade opportunities including “long” NZD/USD, AUD/USD , EUR/USD, GBP/USD – as well “short” USD/CAD, USD/CHF.
I am currently in all pairs mentioned above as well as holding my “short” JPY’s against everything under the sun.