My Trading Framework – Put To The Challenge

I assume you’ve all got a certain number of “economic indicators” and likely as many “technical indicators” flashing on your screens to alert you to those “specific things” you find most important to your trading. You have yours, I have mine and the key for anyone is to “just find something that works for you”.

Recently my “framework” ( as I assume many others ) has been put to the test, pushing a number of “specific little things” about as far as they could possibly go before consideration that “perhaps I’ve got this wrong” or “maybe this isn’t going to work out”.

Markets have a tendency to do this “no matter what” and at one time or another “everyone” will be pushed to question if “they really know what’s going on out there” or if their “beliefs” will actually come to fruition.

You must have a certain degree of conviction in order to see some of the larger trade ideas realized, as they often play out over weeks and even months.

  • I’ve always suggested that The Japanese “Nikkei Index” would be the first place to look for trouble, and that Japan should lead the charge lower, posting this almost a full week ago then seeing U.S equities have one of their toughest weeks in a while. Coincidence? Of course not.
  • I’ve always suggested that The Japanese Yen has served as the “principal fuel” for the massive rally in U.S Equities, as cheaply printed Yen is converted to USD in order to purchase assets priced in U.S Dollars, while the majority of “U.S printed toilet paper” just sits with the big banks.
  • As well let’s not forget my long-term “short trade” on The Australian Dollar now -700 pips from its high at the beginning of September.

A bottom in Japanese Yen ( and in turn a near term “top” in USD ) appears to be upon us, as The Nikkei has now “double topped” and been handily rejected.

I don’t expect higher prices in Japanese stocks. Period.

I also don’t expect USD goes any higher here, before making a swift ( and likely very painful ) move lower. Considerably lower.

Yen strength means bad, bad things for U.S Equities as well The U.S Dollar, as both are essentially sold on repatriation of Yen back to Japan. The 200 billion printed per month “had to have gone somewhere” right?

Perhaps now they are headed home.

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11 Responses

  1. Michael Penthouse September 29, 2014 / 8:50 am

    Thanks for sharing!

  2. Freddo September 29, 2014 / 9:40 pm

    Careful about $USD.
    Many sources are predicting long term uptrends for the $USD.

    • Forex Kong September 29, 2014 / 9:50 pm

      Not from here though.

      Down first.

      • Leonardo September 30, 2014 / 8:12 am

        nailed it again.

  3. @frenchdna September 30, 2014 / 3:41 am

    The 200 billion printed per month “had to have gone somewhere” right?

    Kong, we’ve been over this in the members forum. It’s never been $200M/month coming from Japan. This figures is a prorata of Japan’s QE if its economy were the size of the US’. The real figure is closer to $60Bn/month (+/- 3Bn).

    This specific point is why i question the size of the “rapatriation trade” as you describe it and its impact on the dollar. I do believe most of the printed money (whether it was coming from the US or Japan) has gone into equities (and bonds) and they WILL tank big time at some point.

    Ukraine (rouble), Irak, Hong Kong (renminbi)… Risk is spreading, we could very well see Yen up and Dollar up… at the same time.

    It’s very hard for me to try to make my own interpretation of things. I’m such a rookie, you’re an experienced trader with proven results (i’ve been following since late 2012 i think. I’ve seen more than enough to know that you know your shit). Hell, i even pay a dollar every day just to read your opinion. It would be much easier for me to follow you blindly but i don’t want to. I want to trade what i see and what i understand on my own.

    EURUSD at 1.20 (remember the ECB deposit rate is at -0.20%. Euro banks are moving their money to GBP and USD, which fuels the rally), $EEM to the toilet, AUD and NZD down as well, while the Nikkei and SPX range/consolidate for ages, and Gold/Precious Metals pick up. Does this scenario really sounds stupid?

    I try to trade with the trend, therefore i’m willing to bet 1R against you… Today. If i’m wrong? Hell, i’ll catch up after the turn, next week!

    You’re often early, and rarely ever wrong. Like you keep saying, it can takes months. And maybe that’s what some readers here feel: that while you say X will happen, life goes by in the meantime. And maybe there are trades to take that go against your fundamental views mid-term but could be just as profitable as any other… in the meantime? Why stay on the sidelines and not enjoy the ponzi while it lasts? Keep small positions and you should be ok if/when reality finally catches up, with your orders picking up below anyway!

    Cheers Kong, always a pleasure to read you.

    • Forex Kong September 30, 2014 / 8:06 am

      Lots to get to here French. Your interpretation of things is excellent if you ask me.

      What I think is missing here is a broader understanding of “what a change will look like” when we all finally “see” a major shift in markets. So far, we’ve more or less seen the same thing for so long, we forget what “other market conditions” ever even looked like. It’s been so long “stuck” here in this “One day up the next day down” type environement that we start “searching” for more things to do.

      Sure I’ll “take a trade” regardless of the fundamental picture, and yes there are lots of “trades out there” just that….to track them all / participate in all is difficult.

      I’ve been thinking about a “trade of the day” that would just outline a purely technical set up with a short range target etc – would that be something that would “fill the gap” for you?

      In any case….we can certainly incorporate some “short term” set ups, and as for the big picuture….yes I’ve been “stalking” this trade for some time now “as opposed” to grinding away in small trades all day in that….catching these “larger moves” really makes up for any smmaler trades you’ve missed.

      • @frenchdna September 30, 2014 / 8:23 am

        Certainly, this would make for some great practice i think. Not necessarily one per day, one or two solid trades per week would be enough i guess.

        • Forex Kong September 30, 2014 / 8:26 am

          Sounds good. Let’s give it a shot.

          And / Or you guys can offer “a trade” or trade idea / set up for us to “throw around” and debate / contribute on.

          Either way…we do need some straight up “trade action” going on so…I’m in!

    • Forex Kong September 30, 2014 / 8:23 am

      Oh as well…..about Yen and USD both moving higher together one day??

      You are bang on man. I imagine a time when both move higher together.

  4. David September 30, 2014 / 9:44 am

    As a paying member I’m really excited about the Trade of the Day idea (or couple Trades a Week); while waiting for the big move (the Whale), lets catch some smaller fish! There are some small trends that seem to play out quite often on a daily basis that should snag us some pips, let’s see what Kong and some other members can come up with.

    • Forex Kong September 30, 2014 / 9:51 am

      Sounds good…..let me get something set up, and we’ll get this up and running.

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