Author: Forex Kong

EU Zone Catalyst – USD Saves Face

Forex Kong 15 Comments

It’s been my belief for some time now, that the eventual turn in markets will be sparked by news out of the EU. With Greece forgotten, Spain in the headlines only briefly, but now Italy getting some attention – it has become increasingly clear to me that things in the EU continue to deteriorate. The unemployment numbers out of all three of these countries are truly staggering….coupled with banking systems on the brink of collapse.

With the “fear machine” in full swing there in the Unites States – it makes even more sense to me, that risk coming out of Europe will be an easy “scape goat” for the rampid printing and spending coming out of Washington – pinning blame overseas  and further justifying the cause.

As I understand it – The Unites States goes bust on March 27th (please correct me if I’m wrong) as the debt ceiling will yet again be breached – short of some type of “deal” out of Washington. This has gone past “hilarious” as even the American people are starting to figure it out. What perfect timing for a big “news flash” out of Europe – “EU Zone Threatens Recovery” or “Global Risk Appetite Wains On EU Fears”.

Regardless – all things considered we are getting much, much closer to the turn (mid March as previously suggested), and as the “media machines” start spinning their stories ( as to best keep U.S.A lookin good! ) we can add this to the growing list of things to consider.

I say – “EU Zone Catalyst and US Saves Face”

SDR's First – Then The Gold Standard

Forex Kong 3 Comments

Special Drawing Rights (SDR’s)

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries official reserves.

Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on August 28 and a special allocation on September 9, 2009, the amount of SDRs increased from SDR 21.4 billion to around SDR 204 billion (equivalent to about $310 billion, converted using the rate of August 20,2012).

So in other words – the U.S has a printing press, the ECB has a printing press, Japan’s of course, Great Britain’s got one and the freakin International Monetary Fund ( operated primarily by a small group of “financial elite) can rattle off “SDR’s” and distribute them (as freely tradeable currency) to its members – at will.

This will clearly be the next step in resolving the current global financial crisis as the printing continues.

With everyone devaluing their currencies at the same time ( and Central Banks suppressing the value of gold as a price spike would undermine the entire plan) it’s very likely that the next “crisis” event will simply be “papered over” with the issuance of “SDR’s” and the “can kicking” will continue down the “global road”.

Anyone expecting some “massive rise in the price of gold” overnight –  is likely in for a longer wait in that……the “paper game” has miles to go before your “$7000 oz” will be realized. As well – if you live in the U.S, I’d look forward to any large profits being made  subject to a “newly formed gold tax” – likely in the neighborhood of 80%.

Have you considered that “the power’s that be” already have this worked out?

So Much To Say – So Little Time

Forex Kong Got something to say?

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.

Exhausting……yes.

 

 

Waiting On The Dollar Trade – USD

Forex Kong 7 Comments

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.

Normalcy Bias – You Have It

Forex Kong 6 Comments

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.

Buy USD and Sell Stocks – Soon

Forex Kong 11 Comments

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.

Media Scare – And The Drones Fly

Forex Kong 2 Comments

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.

Day Trade – Stop And Reverse

Forex Kong 3 Comments

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 Trade – The Day After The Trade

Forex Kong 11 Comments

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.

Day Trade – Don't Try This At Home

Forex Kong 34 Comments

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.