This is going to be a huge week and you’ll need to be ready.
Regardless of which asset class you’re currently trading or holding – I strongly suggest that you’ve got your eyes open and your “fingers on the button” as my expectations for the coming week include fireworks, tidal waves , meteorites and circus clowns.
As early as Tuesday, I’ve got it that things are going hard in one direction or another, and at break neck speed may clean out your accounts or make you filthy rich. If the week goes by trading flat – I will post video of myself eating an entire handful of raw Habanero peppers, and subsequently dieing shortly there afterwards.
The most significant concern will be that of the “existing correlations” and weather or not this “proposed turn” will have them turn on their heads – or continue as they have recently.
Let’s have a look.
- USD is going to turn lower here, the question is “will stocks turn lower along side USD”?
- USD is going to turn lower here, and another question is “will that in turn have JPY move higher”?
- USD is going to turn lower here, and yet another question is “will gold finally find support and move higher”?
I think you’ve gather how I feel about the U.S Dollar – as I have absolutely no question at all that it will head lower, but am concerned that the “flipside” of this move “could” go like this as well:
- USD down and US stocks up ( if a “true” risk rally develops then we’d also see commod currencies head for the moon too.)
- USD down AND JPY down ( if a “true” risk rally develops then BOTH safe haven currencies will be sold and again the commods will head for the moon.)
- USD and Gold up ( in this case if a “true” risk rally develops then the normal correlation as to the value of gold in dollar terms may finally make a showing.)
So – all eyes on the U.S Dollar here as everything else will quickly come into focus as soon as we see the turn.
Frankly, I’m on the fence about it and can’t say for certain which way things are going to go – but will be watching very, very closely and will post / tweet literally at the very second that I confirm the move.
I get this question a lot – a whole lot. Should I buy gold? Is gold going back up?
Interestingly, if you zoom out to a much longer time frame chart (maybe a weekly and even a monthly chart) you’ll see that Gold has suffered recently – yes…..but is “still” in an uptrend (pending it slows down and looks to reverse in and around this area sometime soon).
I would have to consider 1155.00 as a level of considerable importance and significance.
But please keep in mind (as we’ve discussed with respect to long-term charts) that turns on a weekly chart can take “literally” weeks, and weeks to stop then consolidate and finally turn to reverse course. Even at that ( considering we are looking at an asset that costs 1190.oo dollars) a hundred dollars here, a hundred dollars there – these aren’t “large swings” percentage wise. Putting an exact number on it is a fools game.
More important than the question of “should I buy gold?” would be the matter of “how do I buy gold?”
Don’t charge in there looking to call it a “trade” as you’ll likely miss on nailing an entry, but rather “build” a position over time “smoothing out” this volatility and not sweating the 50 buck swings.
Patience is your greatest asset here. You really can’t rush this one.
You can pull up a chart of virtually any JPY cross but lets look specifically at USD/JPY on a 1 hour time frame.
Looking back from June 20 to present ( so lets say 5 or 6 full trading days ) you can clearly see that price has ranged “sideways” within a very small range of around 100 pips. If you’d have been lucky enough to “short” at the exact top of the range….or gone “long” at the exact bottom – you may have been able to squeeze off a decent trade depending on your TP ( take profits) and who know’s maybe you grabbed 25 – 50 pips somewhere in there. Great.
What most likely happened ( as with any most trade systems ) is that you got confirmation to enter about 25 pips late on either side, and ended up entering either long or short dead smack in the middle – and have now spent a full week wondering daily – “Is this thing going up or down?”.
For the new comer there really is no easy answer here. The smaller time frames will grind both your emotions and your account to dust. The absolute best suggestion I can make is again -TRADE SMALL.
Now pull up a daily of USD/JPY – Is “that” trading sideways?
Here you’ve got alot more information to go on – a downward sloping trend line, horizontal lines of support and resistance, you’ve got lots of historical price action to look at, as well all the longer term moving averages and indicators you may also have on your screen.
Trade small over time and look to the larger time frames for direction – and ideally you WILL survive the dreaded “sideways”.
An oldie but a goody, as my thoughts truly do go out to those who’ve been “caught holding” through this terrible slide.
If any of you are a touch “frustrated” with your forex trading as of late – perhaps I can give you a little more insight.
It’s important to note that throughout the trading day ( that being 24 hours ) there are very specific times when markets tend to make their moves. Missing these times of high liquidity, and entering the market during times of low liquidity can be extremely frustrating for a newbie trader – and can really make the difference in your overall performance.
There is absolutely nothing worse than having your trade order filled, only to see within a matter of minutes that the trade has moved a considerable distance against you – or even worse that you’ve been “stopped out” before you’ve really even gotten started. It’s very likely you’ve simply been caught, entering the market at the wrong time – and not that your trade idea wasn’t valid.
If you want to trade effectively during the N.Y session, you’d better be prepared to get up early – very early.
I don’t have any supporting data to further verify this – short of my own experience, but what I can tell you is that 90% of the time the larger part of the move has already been made “before” the U.S pre-market equities session even gets started.
What you are “really seeing” is the last bit of Asia and the larger part of London’s session that have already made the majority of the move – while the U.S session tends to grind your account and ( for the most part ) move counter trend.
If you want to get a jump on the N.Y session – you need to be at your terminal and planning your trades at least a full hour before the open, then wait until the last hour of trading for further confirmation – or for opportunities to add.
Very often you’ll find that your trade ideas are actually fantastic, but it’s your market entry timing that needs a bit of polishing.
As suggested some months ago – I had envisioned a time where “all things U.S” would likely be sold. We saw the trend appear first in bonds, then considerable US Dollar weakness and finally the inevitable spill over into U.S equities.
Trouble is that now….we need to consider that indeed rates in the U.S will be on the rise (not “tomorrow but in general), and in turn hurt corporate borrowing ( and the ability for companies to increase profits ) which in turn will create even “further” weakness in the U.S economy in general….as earnings will likely suffer as a result.
The bond market is much, much larger than Ben Bernanke – and all the printing in the world can’t change that. When fear sets in and sellers “sell” – the 20% that Ben doesn’t control can bury him in a second.
I don’t see the “flight to safety” being U.S Dollars this time around folks.
I’m leaning LONG JPY here as of this morning, as well looking to limp into SHORT USD trades over the next couple of days.
In general I’m not really much for the whole “self-help movement” and all that stuff about “channeling” and “finding your spirit guide”. For the most part I’ve been far too busy working my ass off my entire life, to have stopped and spent too much time “hoping for a miracle” or “rubbing some crystal”.
But I must say…for those that do find it beneficial – “if it ain’t broken why fix it right”?
When it comes to trading though, I have learned that one must do everything in their power to stay positive and continue to move forward at any cost – as it’s those first few years that will break your spirit….and in turn your account.
As opposed to looking for “answers from above” I’ve found it helpful to read / and at times “re read” motivational anecdotes from some of the worlds most highly respected thinkers, visionaries and pioneers. In a sense “putting myself in their shoes” with the knowledge of what great obstacles they’ve overcome – and in turn the challenges I face.
I might suggest printing a number of these that strike you directly – and keeping them near your terminal for some “quick reference” when things get tough.
- “Obstacles are those frightful things you see when you take your eyes off your goal.” – Henry Ford
- “Only those who will risk going too far can possibly find out how far one can go.” -T.S. Eliot
- “Great spirits have always encountered violent opposition from mediocre minds.” – Albert Einstein
- “Knowing is not enough; we must apply. Willing is not enough; we must do.” – Goethe
- “The best way out is always through.” – Robert Frost
- “When the water starts boiling it is foolish to turn off the heat.” – Nelson Mandela
- “It’s kind of fun to do the impossible.” – Walt Disney
- “Stay Hungry. Stay Foolish.” – Steve Jobs
- “The distance between insanity and genius is measured only by success.” – Bruce Feirstein
- “I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’ ” – Muhammad Ali
- “I am always doing that which I cannot do, in order that I may learn how to do it.” – Pablo Picasso
- “I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite.” – G. K. Chesterton
You can find a pile of this stuff on the net, along with tonnes of other material on positive thinking etc, the point being – it’s unlikely that anything else you will choose to do in your life, will present you with the unique challenges trading has to offer.
You MUST stay positive.
One of the most overlooked and misunderstood areas of trading is the psychology of trading. I am a firm believer that once a trader has a firm grip on their “psychological being” that the daily trade entires and exits, and the significance of any individual wins and losses soon disappear into the sunset – as the larger picture (ie…making a living at this!) begins to take shape.
One of the absolutely most effective ways to “harness the demon” and wrangle those emotions – is to trade small.
I’m not talking “kinda small” either like……you still go to bed the night of the trade with a lump in your chest ( all be it a touch smaller than the night before ) and your heart is still beating like a rabbit ( as opposed to a hummingbird ) I’m talking “super small”. Focus on your emotions for a week, and completely disregard any idea of “getting rich” or even that of making any money at all – and consider the following:
Would you rather trade a single (micro) contract with a full 200 pip stop (essentially risking $200.00), and wake up in the morning to see that:
- You are still in the trade ( and have not been stopped out ) – as the 200 pips has afforded you some breathing room when things are volatile.
- You are a “teeny tiny” ways into profit, with the option to close the trade – or perhaps tighten your stop and let things develop further.
- You are a considerable ways into profit. Woohoo!
- You are a fraction in the “red” and see that your current account balance is down a mere 30 – 50 dollars, and that perhaps news has broken – or something fundamental has shifted, and have option to reassess, close or add .
You traded a full 10 contracts with a 20 pip stop ( again risking the exact same amount of money ) and wake up in the morning to see :
- Of course you’ve been stopped out without even giving the trade a single day to develop / move learn more about the markets direction, no option to add to the position, no idea of what news may have effected further decision-making and……down -200 smackers.
The smaller trade ( regardless of its immediate outcome ) has afforded you a much better sleep, less chance of heart attack, a myriad of further trading options and some very important insight into your trading by allowing you to watch it develop – and just as much likelihood of profit!
Take a full week and take your position size down to near “0”, observe market action in real-time, and you will learn plenty……….not to mention sleep much better.
And hey…”news flash” – you didn’t get rich this week either! – Surprise! Surprise! – Get it?
They can spin this in the media that “China is the reason” – Ridiculous!! China is the only thing “right” in this entire mess.
You all have read and followed along…..and for the most “dropped off” around about the time that I suggested that things where going south. You don’t want to here the truth, you want to believe in a system that is currently “systematically” wiping out your entire retirement.
At this moment I’m about as close as I’ve ever been to completely shutting this blog down, short of putting a big fat price tag on it that none of you can afford.
It’s ridiculous. Shut off your T.V to start…..as the same morons running your countries have long ago bought the television view in front of you. Debate the levels…..consider the “dips” – seriously…..gimme a break.
I’m pissed at you – actually……and totally disappointed to say the least.
Good luck – we “may” see you soon.
We’d all like to think we’ve got a handle on what’s going on out there. Ideally, we make the right decisions and we make money. Over time the day to day decisions made when trading simplify, and for the most part become pretty routine. Should I buy this? How many contracts of that? Is this looking like a turn? Is it time to sell? – All pretty standard stuff.
However once in a while something “else” comes along….”an event” let’s say – that brings with it much larger implications and ramifications should one “not” make the right decision – and unfortunately find themselves on the “receiving end”.
I believe that tomorrow’s FOMC statement from Mr. Bernanke satisfies all the needed criteria, and more than qualifies as such an event.
Event risk is on.
Now. Everyone has it in their mind of course – that they have “foreseen” the likely outcome (as every evil, narcissistic , arrogant, big shot trader normally does right?) But more importantly do they know “how the market will interpret the information”?
Getting it right yourself is fantastic – and good for you! But….will the market see things the same way that you do? Will the market move in the same direction as you? How can you be certain? What makes you so sure? What in god’s name will you do if you’re wrong?? All things to consider.
I for one can only speak of my own experience, and after as many years have found a relatively simple solution. I clear the deck of any and all tiny outlying positions ( for good or for bad ) and look to re-enter the market after the fireworks have played out.
When it comes to forex – any level of price that is seen “frantically flashing in front of your eyes” during the excitement will be found happily waiting for you again on the other side……. only hours later and with a much stronger sense of direction.
I like to pick things up then.