You can look at this “8 million ways to Sunday” – and still sit back at the end of the day wondering…. if you’ve got a freakin clue as to what’s really going on. I feel for you, and to a certain extent share your pain. It’s hard work no question….as the “risk vs reward” should have most people running for the hills – not jumping into markets. Yet here we are day in and day out……searching for returns.
I’m up a piddly 3% on the day (and the month for that matter) – as it’s been tough out there. The easy money “trending environment” has quickly morphed into its evil brother the “meat grinder” – as my afternoon’s sipping high end mezcal, and swimming with sea turtles takes a back seat to “grinding it out” in front of the computer screen.
Well…..not this time.
A valued reader recently asked me why I don’t like “sideways action” – as there are trade opportunities abound, should one choose to “nickel and dime it” in the trenches of smaller time frames and ranging currency pairs. Psychologically – I really don’t care for that. I’ve learned to step on the gas in the straight aways……and ride the brakes through the corners.
Most importantly – we all need to find what works for us. No one is right. No one is “better than the other” as the “trading experience” is unique to every individual.
Finding your “own way” is an important step in becoming successful.
I’m still of the mind set this is setting up for the “blow off top” and likely see a couple weeks holiday in my immediate future as I’ll take it for what it’s worth…and trade sharp as a knife.
I had hoped / assumed the USD strength would have subsided a little earlier in the week – but it appears that we have a daily “swing high” here as of today. I would expect that we get several days of continued USD weakness and the inverse of course – higher prices in equities.
If this goes as I imagine – this may very well be the last “blast” up ward in equities, and final “dip” in the USD before we’ve got an official top in place and an actual “change in trend” established. I also imagine this is where things are going to get tricky.
One could consider “getting long risk” here later today / possibly tomorrow morning – but with such headline risk in front of us ( ie……the ridiculous U.S Government’s fumbling of the sequestration) it is difficult to “assume” markets will just continue moving higher. News often plays a role in market dynamics and movement – and this could be considered a “wopper” as I have come to understand it. I don’t think the U.S general public and business community are going to be very happy if / when this program goes through – regardless of how ridiculous I think it is.
Unfortunately – I will be sitting on my hands for the most part, but will be more than ready to jump on a continued run up in “risk”, keeping in mind it will likely just be for a quick trade. My call on EUR/USD at 1.3170 is now in play – but I can’t say I’ll take the trade until I see more.
The normalcy bias, or normality bias, refers to a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring – and its possible effects.
The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It also results in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before.
People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.
I continue to endure the “blind optimism” I am faced with day in day out – as the general masses do their best to bury their heads a bit deeper in the sand.
An aside…..Spain only just squeaked through 2012 by using 90% of its social security fund to buy Spanish debt. The country now has over €200 billion in new debt to issue in 2013. The EU Crisis is still very much in play – just not on your local T.V screen.
If you seriously think this thing is going up “forever” or perhaps just drunk on the “Fed’s Kool-Aid” – Normalcy Bias might be a concern.
I expect the USD to turn downward here in the coming week for a final swing – and then resume its upward direction.
As difficult as it is to understand/accept (as the USD is still the world’s reserve currency – and commodities are priced in US Dollars) when money flows out of “risk” and into “safety” – the USD generally takes top spot.
This time around should be interesting though, as this will be the first “genuine risk off behavior” we’ll have seen since the currency wars took their toll on several of the majors (obviously the Yen)- so the landscape has changed considerably. It will also be interesting to see if perhaps gold and the precious metals find their legs here as well – again… if only as a flight to safety. On a purely fundamental level it pains me dearly to consider getting long USD – but with emotions and opinions sidelined a trader needs to look at the situation at hand, and trade accordingly.
Timeline wise I had suggested mid March as a time to consider “getting safe” – and it looks like I’ll be close, as this could very well bump around up here for a week or two before any large-scale damage is done. The “blow off top” is most certainly in play here as well – as the last to the party will look at this as a pullback…. and buy.
Stay on your toes everyone – and for the most part, I would look for any and all strength in stocks / equities as a last stop chance to sell.
I find it fascinating that the U.S media is absorbed with the potential cuts of some 85 billion dollars – while the printing presses currently rattle that off – every single month. How interesting it is, as the media suggests “country-wide job losses” as a result – that 85 billion in printing per month can’t produce an increase in jobs!
The graphic in the post below puts things in perspective:
Quantitative Easing For Dummies
The gig is up here soon I imagine – as I seriously can’t understand for the life of me – how American citizens continue to accept/trust that the “powers that be” have their best interests in mind.
You’ve got 85 billion a month going up in flames ( well…..actually just being deposited with the big banks on Wall Street ) while the “media machine” continues to scare the living daylights out of you – with concern of potential “cuts” – and how they will affect your daily lives.
These are not cuts – the “proposed cuts” only mean – LESS GIVEN.
So…..If I told you I was gonna give you ( a defense contractor ) “x” number of dollars MORE next year in INCREASED SPENDING…..then call you back and let you know that I’ve got a couple other bills to pay etc…and the amount of “EXTRA MONEY” will be a touch less – THEY CALL THAT A CUT?
And the drones fly.
Click and read.
I realize now – that any kind of “day-to-day” documentation of my trade activity will be near impossible…..let alone extremely time-consuming and more than “just a little tedious”. I imagine I’ll have to pullback here, and continue with the outline of general concepts and background fundamentals as – the day-to-day stuff is just too fast n furious to blog in real-time.
For what it’s worth – I’ve held on to my “short USD” trades through today – and will plan to add to them when the turn presents itself. Looking at as many charts as I can – this looks more like a “cleansing / rinse” if anything else – and I would need to see a lot more ( as this move has primarily been in the EUR – with the USD barely gaining an inch on most) before considering switching gears and getting long.
HOWEVER – I did pull a complete “stop and reverse” in the short JPY pairs as of last night – to eliminate loss in the trades – and immediately switch to a profitable position. (please Google it.) This is not for the faint of heart, and not commonly practiced – but in this case did the trick. Net result being break even on JPY trades and still in the red ( for now) on the few dollars out there – short USD.
If this is any example of what you have to look forward to over the coming year ( which I feel it most certainly is ) you’ll need to find a way to survive. Holding “old turkey” is for the birds – and trading this is gonna be a task and a half.
The “chop” up here at the highs will do everything it can to empty accounts, as the day to day action will continue to confuse and confound.
Are we going higher? Is this the plunge? Should I get short? Are you buying here? ……………………Welcome to 2013.
Day trading refers to the practice of speculation in securities, specifically buying and selling financial instruments within the same trading day, such that all positions are usually closed before the market close for the trading day. Traders who participate in day trading are called active traders or day traders. (Thanks Wiki!)
Yesterday I took a number of positions – under the general premise that:
- Risk on will continue.
- Safe haven currencies will continue to be sold.
- Technical analysis suggested a reasonable place to enter.
A full day later and “good ol Kong” is clearly in the weeds on the trade. The USD has continued its upward move, and the Yen has clearly not “sold off” any further.
Reflecting on this we have much to learn:
- My position size ( my entry position ) is so small that I could really care less.
- If indeed I choose to remain in the trade ( which I do ) I will easily double my position at any given time…and then again double…and then again double if greater opportunity presents itself – If I choose.
- I can easily enter new positions in other currency pairs to “off set” further downside, as I will have learned from this “poor entry” that other “good entries” must be available in the opposite direction.
- I can blow the entire thing out – cry about it for about 10 seconds, and get my ass back at it as I’ve done countless times before.
Hmmmmmm…….decisions decisions……point being – If you swing for the fences and trade too large vs your actual account size / bank roll you don’t allow for this kind of scenario. Anyone who thinks they can pick a “magical entry” time and time again – will be back working at McDonald’s by weeks end.
You get good at this by checking your emotions at the door – and trading within your means. I’ve got more options than I could imagine in a market that can only go up, down or sideways…..and we all know I hate sideways.
In a general sense I’ll give it another day or two in that…..I fully understand that pushing the upside here is exactly that – pushing. Frankly – I still don’t see a single fundamental change and have a hard time seeing the USD do anything more than this before rolling back over. “Tops” don’t just flop over in a day – but I am very aware that the process is underway. I still think we see some kind of “euphoric blast” upward before this thing hits the skids as this just looks to easy. Wall Street needs to take things “past extremes” to get the last one of you off the couch and on the phone with your broker in fear you’re gonna miss it. That’s when we see the top.
Hey…..I trade for different reasons than you. I need to eat, I need to buy new shoes and I need to pay my bills – just like everyone else. The only difference being – this is my job! No trade = no money, and no money is no good.
I am extremely leery of this market as a whole – but need to continue pushing in order to keep money coming in. Regardless of market conditions I need to keep digging, work longer hours, get up earlier, read more, find ways to keep money coming in. Patience in placing trades, is a mastery of human psychology and an absolute “must have” for the successful trader – but times arise when one must rely on other skills, other means to keep that plan moving forward.
With over 25 – 30 currency pairs at my disposal, you’d think I’d be able to find a place to put a buck or two – in order to stick to the plan right? RIGHT. When you win as often as I do, this falls into a simple area / category as what I’d like to call “managed risk”. I made “x” number of dollars last month – and thus far I am willing to “risk x value of that” now – in order to keep the wheels turning. On a fundamental level I’m at odds with markets ( as we are so far stretched, all time highs, currency wars, etc) but can’t allow it to impede my abilities to extract cash.
THIS IS CALLED TRADING – NOT INVESTING.
I already know exactly how much money can / will lose – to the penny I’ve already lost it. I know it, I love it, I embrace it. That’s the psychology of it. That’s what keeps you in the game.
Kong gets short USD as well JPY against the Commods. I can ( and just as likely will) lose money.
Big freakin deal.
The G20 statements more or less give the continued currency war a big fat A O.K – so we can only imagine that the good ol Yen (JPY) will continue to take a pounding. As nothing moves in a straight line… I can’t help but ask “when will we see a counter trend rally?” but all things considered – it may not be quite yet. The trade implications could very well co inside with a couple of my previous posts:
Currency Wars – Japan Turns Up The Heat
Here I outlined the topside possibilities in the pair AUD/JPY being as high as 1.05. As extreme as this may have sounded at the time, the AUD/JPY pair has provided me with some of the largest profits to date – and deserves another look.
Forex – Trade The Fundamentals First
Here I suggested that the long-term trend in the pair USD/JPY has indeed based… and in turn reversed. The trade here has been massive – and as suggested one of the best trade ideas of the coming year.
Blow Off Top – Retail Bagholders
A caution to readers that we are nearing a near term “topping process” – and that often these moves present a massive “spike” as Wall Street hands the bag to the poor retail guys buying at the absolute top.
Now I can only do my best to put the pieces together as I see things happening in real-time – but should “all things Kong” play out as suggested well……..wouldn’t that be dandy? In all – my suggestion / plan to be 100% cash by mid March is soon upon us so…I will be watching closely and suggest you do the same.
The outcome here (whether it be next week …or a couple more weeks) “should” see a very large move UPWARD in USD ( as fear grips markets and safe havens are sought) as well JPY – coupled with a considerable correction in the U.S Stock Markets and “risk” in general.
As backward as it may seem (and almost “sick” in a sense) in the back of mind – I am already formulating LONG USD IDEAS.
With the book deal inked, and most of the movie details pretty much squared away ( although I refuse to be played by Leonardo Dicaprio unless he agrees to lose at least 10 pounds first) I’m taking the rest of the weekend to celebate my small short-term goal of 100 posts here at Forex Kong.
It may not seem like much..to most of you (although I seriously doubt a single one of you will likely even try) but for me….the commitment and labor required to sit down day after day, and bang out a page or so – has been no simple /easy task. A lot of this stuff is pretty damn “dry” at times and believe me – there’s been more than a day or two I’ve sat here scratching my head thinking “what the hell am I gonna say about that?”
I’ve learned to curb my toungue…I’ve learned to respect my audience (to a certain extent) and I’ve proven to myself yet again that if only to try – generally sets you apart from the 99 out of 100 people – who’ll likely never try anything new another day of their lives…….let alone set sites on succeeding at it.
So I trade….I build spaceships….I cook……I play music…I fish/hike and swim………………………………..and now I blog.
Get used to it people – I’m not going anywhere.