There’s very little to say here this morning.
You just sit back on a day like today….and know that all the hard work is worth it.
Boom.
Massive trades/profits short USD and risk in general.
Month: October 2014
Stay In The Trade – Or Re Enter On Momentum
When you are actively trading a given asset or currency pair, you often run the risk of “missing out” on large movements in price, as you’ve taken profits and then try to find the best way to get “back into the trade”.
Obviously I would generally “look for a bounce” in order to re-enter the trade at higher prices when shorting, but what if that “bounce” doesn’t come? You’ve booked profits on only a small portion of the move, and now run the risk of “missing the crash” as you sit on the sidelines “hoping for the ultimate level” to re-enter the trade.
It’s always a tough spot. And I can’t tell you how many points I’ve missed over the years, exiting a trade then watching it go “much further” without me. You can’t catch every single one, and you can never go wrong taking profits.
I employ a simple strategy of “getting under the asset” – placing orders several pips “below current price” when shorting ( and obviously “above” current price when getting long ) with hopes that my orders will get picked up on “further momentum” in said direction. It’s really all you can do.
If you just sit patiently waiting for a bounce, there are times ( such as these last few days with our general position long JPY ) that you may just miss the bigger ride lower, so having a couple of orders in the system “below or above” the current price “should” allow you to participate further, should the move continue.
It’s always tricky looking to “actively trade” as opposed to looking at larger time frames and holding trades longer, and it’s really a matter of preference, but I can say from experience – It’s almost “always” more profitable if you are able to just “stay in the trade”.
Selling The Rip – Earnings To Disappoint
The SP 500 has now broken below a critical area, suggesting that further losses ( over the next several weeks ) will be seen. But of course, right around the time you figure that out – markets also look set to bounce.
This “bounce” ( however great or small ) will only provide greater opportunity to continue shorting – just at higher prices.
Dip buyers will unfortunately be met with “the dip that turned into a dive”.
Regardless of near term price action over the next couple of days, what people need to understand is that we’ve turned a corner, and that as per The Nikkei in Japan ( leading us lower for several days prior to The SP finally rolling over ) any idea of a “new string of higher highs and higher lows” is very likely out of the question.
I don’t expect higher prices in Japanese stocks period so……as nearly every single index globally has now broken below significant lines of support it’s fair to say that indeed – a significant top has finally been reached.
“Selling the rips” now, not “buying the dips”. That’s the road we’re on.
Sinking below 1904 has solidified a much larger and more serious correction ahead, so investors / traders need to be aware that we’re on the other side of the mountain now. This earnings season is also expected to bring disappointement so look ahead to lower stock prices in coming weeks.
Short Term Trading – When Volatility Returns
The current framework has been performing well. We’ve had several days “short” USD while the majority of market participants are “just now” starting to see the weakness in USD, as well the big jump in Gold down around 1180.00 ( we saw that too ).
We’ve banked several hundred pips just over the past few days in a number of currency pairs.
Volatility is certainly “back in town” so I’ve been more inclined to “take profits fast” and then look to re-enter trades on pullbacks or momentum – depending on the timing.
Today has again provided opportunity to “bank profits” and look to re-enter on any kind of bounce, perhaps “after” the U.S data comes out.
A quick look at AUD/USD with identification of the current “channel” on a 1H.
AUD_1H_Forex_Kong
You can see that taking profits at the “top of the channel” ( just within the last hour or so ) makes total sense, but then of course you have the difficult job of “re-entry“.
Depending on the “angle of the trade channel” as well the “width” ( this one being around 120 pips! ) you’ve got a couple of choices.
1. Put in orders “above” the recent high and catch “momentum” ( only that you leave some 75-80 pips of potential movement).
2. Wait for price to find an MA that you generally see it turn / follow along from prior price action ( in this example the blue 200 SMA may serve this purpose ), or wait until price comes “all the way” to the lowest part of the channel, and try to pick it up “on the cheap”.
I’ll often look to do both. or follow price action very closely and look for a reasonable “swing low” on perhaps a 15 minute chart ( although this could occur “several times” within a 12 hour period and isn’t so reliable ) still attempting to put my orders “a few pips above price action” to catch things only when they start moving my way again.
I wanted to get this out early enough for it to be relevant to today’s action / taking profits etc….and will plan to re post again here mid day.
Remember…I’m here and available “most of the day” for any questions or more “real-time discussion“.
Lead A Horse To Water – Can't Make Him Drink
Feeling a little nervous here? You should be.
Maybe all this nonsense about “tops” and “global appetite for risk” and Japan isn’t such nonsense after all then?
Screw it.You’re smart.
You’ll figure it out on your own. All be it…..far too late.
When do finally decide “it’s time to ring the bell?” ( Cuz no one in the financial industry is gonna call you up and let you know )
Selling at the bottom is for retail suckers.
You’re supposed to sell when you have profits, but I can only imagine the majority of those “paper profits” have already been sizeabley reduced.
You’ll hang on another day…then another…..then likely a couple of days more, until you are so far in the red that the tiny profits you “could have had today” look like gold.
Think about for a second. You’ve heard it a thousand times over…..
Buy low. Sell high.
So why the f/#%K are you considering the complete and total opposite?
That’s just sooooooo retail.
JPY Center Stage – Reversal Complete
The near term bottom in Japanese Yen ( JPY ) marks the top in Japanese Equities, and subsequent fall in “global risk for appetite”.
Wouldn’t you say?
Down -420 points in Japan,with U.S Equities falling past “any idea of near term support”, and fast.
This would only make today “Day 1” in a new investors cycle in JPY ( generally playing out over many weeks ) so one can only imagine the trade implications here.
You can get under just about anything JPY related and short.
Risk moves lower from here.
The Top Is In – In Japan That Is
It’s been interesting to see how currencies have been doing very little, all the while The Nikkei as well SP 500 – continue to weaken.
We’ve now got a “weekly swing high” in Nikkei ( where this weeks “low” takes out the low of the previous week ) which is ( in general ) a pretty solid suggestion of future direction, although still no “reversal” in Yen.
The top in Japanese stocks looks to be “confimed”.
It’s interesting to note “the degree” of selling in risk, and it’s effect on any individual currency as with the example of Nikkei and Yen….it appears we “really need to see some selling” to get that Yen up off it’s bottom ( jumping a little bit this morning ).
USD continues to push at it’s near term highs…high’s that are “far higher” than they should be at this point as the USD / EUR / GOLD / COMMOD cycles are all ( as they are all so connected ) completely stretched “past” stretched.
I’m holding short USD on first round of entries – currently only a couple pips in the red.
Volatility ( all the way around ) is DEFINATELY picking up, and it would be my thinking that the degree of selling we are seeing “increases” – considering that most of the Major Indexes are again in the red / weak.
A turn in USD has to factor into all of this here soon, and Yen so close to finding it’s low.
You don’t want to be on the wrong side of a rising Yen.