It is certainly tough trading in the markets at the moment. I hear of lots of traders saying that they just love volatility. All I can think is that they are scalping the market and have a trade horizon of two minutes, no more. I like clear direction and clear market sentiment.
At the moment, the FX market is so choppy and hard to fathom at times I doubt that day traders are even enjoying their trading. As you know, I take a longer view but even I am frustrated by the current market action.
By being more of a POSITION trader and taking a longer-term view, I am removed from the minute by minute chop that describes the peak trading times at the moment, but I have my trades that are not really going anywhere. All of my BREXIT related and RISK related trades swing quite considerably each day. My broker accounts go GREEN then RED and back to DEEPER RED, before the process starts all over again the next day. It is like I am living Groundhog Day with Bill Murray every day at the moment.
Despite this rather glum view during the week I added 432 new pips to my months total which now stands at 978 pips and 12,644 pips for the year so far.
I am achieving this by taking trades off the table when they move into a small profit of 30-60 pips, I am not letting them play out as intended, and posted to subscribers.
It a case of if needs must, needs do.
Moving direction, just a little....
Why are we seeing such massive swings on Wall Street and the equity market sell-offs around the globe? By the way I read somewhere on Friday last week that over 60% of all the bourses around the world are in correction territory. That means more than a 20% fall from the highs.
There are lots of reasons for this volatility in my opinion, BUT, I do NOT think that you can hang your hat on one alone as being the base cause.
- Geopolitical tensions are still with us and have been for several months.
- Trade wars between the U.S. and CHINA.
- CHINA using CNH as a weapon to compensate higher trade tariffs. The USD/CNH currency pair is quickly approaching the key 7.000 level.
- The potential fallout with Saudi Arabia / Turkey regarding the killing of journalist Jamal Khashoggi.
- OIL supply uncertainty fueled by Khashoggi killing
- ITALIAN Budget concerns. They will be challenging the EU rules soon.
- S. future company valuations. Looking harder to meet both the Top and Bottom line targets moving forward.
- S. mid-term elections. Whilst TRUMP has allegedly his highest approval rating since his inauguration, there are serious doubts that the GOP can keep control of both houses of government in Washington.
- FED policy of raising interest rates.
- TRUMP openly disagreeing with FED policy.
- RUSSIAN and IRANIAN sanctions.
- Wall Street fears of majority split houses in Washington.
I can add a few more but within that last above lies the combination of factors that are making the markets jitter.
Taking BREXIT and ITALY out of the above geopolitical event list, the common denominator to the list is TRUMP. I do not want to sound like CNN (USA) by blaming TRUMP for everything even if it rains, but all his policies have created disturbance domestically and internationally.
TRUMP measures a huge part of his success as President on the positive moves on Wall Street. However, following a 600-point DOW 30 decline, followed the next day by a 400-point gain and then the next day another decline, this time by 300 points TRUMP has remained silent.
Never usually frightened to come forward and add his comments to any news event, TRUMP has kept his mouth either firmly zipped or he has a piece of duct
tape covering hit. The silence has been deafening. Comments about Wall Street are missing from campaign rallies.
These are NOT stable market conditions.
I have read several reports about the TRADE WARS and that how after time the effects of tariffs start to come home and have effects in your home market.
The policy of tariffs may have been thought as effective as long as it had the desired effect in the short-term. The simple truth is the world no longer “bends the knee” to the U.S. The U.S. via the G10 alone is seen as an important trading partner, it’s a massive consumer society and an ally vis-à-vis defence to G10 countries, but we now have a world market that is growing in other parts of the world, which provide options medium to long term as alternatives.
I firmly believe TRUMP underestimated the resolve of CHINA, which is at the heart of the sentiment concerns in my opinion. CHINA did not and is not rolling over like a puppy, the opposite in fact. It is a dangerous game being played with prices rises on goods and services, especially OIL and potential massive job losses as demand decreases.
“TRUMP 100% OWNS TARIFFS & TRADE WARS WHEN THE EFFECTS OF THESE FULLY BITE
THEY WILL CAUSE A GLOBAL ECONOMIC SLOWDOWN AND A POSSIBLE RECCESSION”
We are starting to feel the effect of the above in my opinion.
Donald Trump can line up as many scapegoats as he wants but the simple truth is, it is his policies and his actions that have created the market uncertainties.
He will no doubt blame someone like FED Chair, Jerome Powell, but in the name of sanity how can Powell be responsible? TRUMP has his fingerprints over everything, it’s his style.
TRUMP does not understand that actions have consequences, but the U.S. is no longer the power it was. Single handedly, TRUMP has moved the world stage view of the U.S. to a protectionist country.
Whilst I can see why this has been done the shake the tree approach used by TRUMP simply does not work in the timeline required. As mentioned before, countries around the globe will NOT just “Bend the knee” like they may have done in the past. He is playing a dangerous game by allowing both CHINA and RUSSIA to step in where the U.S. fails to act.
Moving on to the Forex opportunities...
Trading this current market situation to be frank is a fecking nightmare. I have been trading FX for over 10 years and this for me has been awkward. During the GFC trading was wildly volatile BUT directional.
At the moment, inter-market correlations are sometimes in line and other times not in sync. This is a gamblers market if you are a short-term trader and if like me, you take a longer term view the correlations are not happening so trades are NOT moving in the direction you would expect.
My example of this are the cross-rates EUR/AUD and EUR/NZD. RISK OFF classic long trades. Recently, they have dis-regarded RISK and tracked the EUR. As soon as the EUR rises (strengthens) they do their own thing.
Let me re-iterate what I wrote earlier. It is hard at the moment. If you are keeping your head above water, you are doing very well.
There are opportunities though and you need to research as much as you can to gather the correct data to trade with a wider vision. That statement fits for longer term trading horizons.
If you are short term scalper, opportunities exist, Technical traders will always offer up options, but candle patterns have NOT been reliable of late in most cases. They look great when they are highlighted but only a few follow the usual route. Finding the “High Probability” trades is hard because of volatility and lack of commitment to sentiment.
It is almost gambling at times and when I feel that this is the case, I STOP trading, and take a step back.
I look at influential pairs, my lead indicators such as, EUR/JPY, AUD/USD, USD/CAD, USD/SEK and EUR/USD together with AUD/JPY, OIL, COPPER, GOLD, US 10 YEAR, the VIX, DAX and SPX. I look at the correlations, examine reactions to economic data and try to establish if the market reactions are usual.
If I cannot get a consistency I STEP AWAY from the screens and I use my notes as a reference moving forward.
The days of me giving back badly executed and poorly thought out trades to my brokers have long gone. I would rather sit in cash for a month than do that, but it’s all down to yourself and what you want to achieve with your trading. I am here for the long haul, it is a marathon not a sprint.
I do not want to be seen as a drama queen, but it’s hard earned money you are risking here.
Personally, I had a fantastic week one this month, gave 50% of week one’s gain back in week two. Week three, I stabilized and clawed a bit back and in week four this month I added back at a reasonable rate, but I am holding a RISK going into November as I trade longer-term. I am not uncomfortable but in the same breath the market uncertainty makes me less comfortable than maybe I would usually be.
I am not saying that you stop trading but remember at all times: -
- It is you versus the market.
- The market will survive even if you do not.
- Trading is NOT a level playing field.
- There is a market 5 days a week (24 x 5).
- You do not want the RISK of paying for POOR POSITIONING.
- No one is going to come and save you.
Maybe, sometimes it’s better to step aside until calmer conditions prevail.
1. FX - FORWARDS, BACKWARDS & SIDEWAYS:
1.1. THIS WEEKS TRADE INFORMATION: ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.
1.2. THIS WEEKS TRADE INFORMATION: GEOPOLITICAL EVENTS:
1.3. BIAS CHART - USD MAJORS SUPPORT and RESISTANCE:
1.4. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:
The DXY broke out higher from the triangle pattern but could not re-test the 97.00 highs. It fell short on the back of good GDP numbers.
Have we seen the highs, or are we going to roll over and head a great deal lower?
It is very hard to say, with Central Bank divergence, the FED on an interest rate hiking policy, it's a very brave call to say that we have not seen the highs.
However, with all the uncertainty, GOLD and OIL are performing very well and they are helping to push the USD lower.
The trend line resistance breakout at 96.00 now becomes support on the move lower. How the DXY reacts here will give me an idea of what is going on. Never write off the USD. In the past it has been crazy to do such a thing. We may simply be consolidating before moving higher once again. I need more information.
1.5. USD MAJORS - TRADING CHARTS and MY THOUGHTS:
The monthly chart below shows that the EUR/USD is in a down sloping channel.
As I see it, we have an outer range and an inner range. The BLACK trend lines denote the outer range 1.0350 to 1.2550.
With small time framed charts there is a descending wedge chart pattern that has played out causing a spike from Fridays lows of 1.1335.
The question is will this spark a much larger retracement with this pair? Many analysts have 1.1800 on their RADAR. They could of course be correct but with BREXIT, ITALY and ECB v FED issues in mind, personally I just can’t see it. So, I remain a “SELL THE RIPS” trader.
As you know, I am expecting quite a sizeable pullback with the cable.
We are at the moment on trend line support confluencing with a 50% Fibonacci retracement level.
Until a BREXIT deal is on the table, this pair will pursue the line of least resistance and head lower in my opinion.
If we get a bout of volatility and a sudden drop lower the 61.8% level of 1.2450 looks an obvious level.
Some institutional traders have spoken about 1.1000. In my mind that would be a BLACK SWAN, ARMEGEDDON, CAPITULATION, GENERATIONAL move. Great if we get the bounce back across all GBP pairs, it would be awesome awesome, awesome.
Focusing longer-term on the upside, 1.3600 is a major Fibonacci confluence area, then 1.4200 and then 1.5000.
Between now and all that, we need to wait, watch and be ready. Above all be patient with GBP/USD it is liable to huge swings in price on headline news and is now simply a news driven pair.
We are still in a down sloping channel as shown on the daily chart below. We ended the week with a bullish candle. Will it carry through to this week? Who knows...
We need to rise thru 0.7170 in my opinion to give the AUD bulls a chance, in the interim we are still bearish in my opinion and this pair is a “SELL THE RIPS” trade.
The range in play is 0.7020 to 0.7170.
Lots of multi-year trend lines on the weekly chart below.
This pair is still very bearish. Like the AUD/USD and EUR/USD I see this pair as a “SELL THE RIPS” pair.
The BOC met and raised rates. In true “Loonie” style big fall on the announcement and then fully retraced and more.
What to do now?
This pair is closely aligned to the VIX and is often a lead indicator of moves with the USD.
Long term I am looking for this pair to fall lower. Selling “RIPS” would be my preferred trade, maybe back at 1.3160.
I am looking at a BULL FLAG pattern with a measured move to 1.0230. I have really missed out with this pair this year primarily due to the markets “Flight to safety” reasons. It used to be a permanent feature of my live trades.
I have not played the JPY well at all of late and this is consistent since I first started trading the FX market. I have always struggled to get traction with JPY trades. This current marketplace is NOT the time to start trying to get a feel for JPY trades either.
I do, however, still believe that its going much lower at least 110.00. We have a very bearish weekly candle in play that concluded last weeks trading. Let’s see if we get some follow through.
2. THE WEEKLY FX PREMIUM TRADING SUMMARY:
2.1. SOMETHING TO CONSIDER:
You can get on board and join my FX PREMIUM subscribers and subscribe to the “10,000 pips a year” group from as little as CAD$10 for the first 10 days and then CAD$150.00 per month, currency conversions for CAD$150 are roughly as follows: -
GBP £90 per month
EUR €100 per month
USD $115 per month
JPY 12,500 per month
AUD $160 per month
NZD $170 per month
CHF 115 per month
Go to my website www.weeklyfxdrivethru.comfor more details of all the subscription options under the TAB– “SUBSCRIBE”.
2.2. WEEKLY FX PREMIUM PERFORMANCE:
October 2018 so far: 978 net profitable pips
(432 fresh additional pips last week)
2018 to date: 12,644 net profitable pips
2.3. WEEKLY FX PREMIUM PERFORMANCE SUMMARY:
(Incorporating the last 5 completed WEEKLY FX PREMIUM TRADES)
3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
4. THE FINAL SHOT:
Nothing more to add here, I have said enough except,
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
The Pip Accumulator
BLOG VERSION: #298 FREE NEWSLETTER
DATE: 28thOctober 2018