Today is Valentine’s Day, of this fact we can all agree. This maybe the only piece of information you will agree with me on in this week’s blog once you’ve read this week’s Soapbox.... more of that a little later.
I am not sure what you guys think of the FX market at the moment, but as an initial Swing Style trader I am finding it basically untradeable most days of late. There is absolutely nothing in it for Swing Style traders. Of my three trade styles my POSITION trades are working BUT only to a point. We are operating in trading ranges and whilst daily indicators are mainly mid-point only the USD/CHF shows the relative strength (RSi) at lows highlighting oversold conditions. I am screen watching most of the day, which is something I vowed not to do. With the alternative being shoveling snow... I screen watch with fingers and toes crossed expecting a move, that to date has simply has not come.
After all was said and done last week, I added pips...+16 pips.
There are traders who will get very emotional over such a small return after the hours sat in front of screens. I completely understand that point of view. However, trading successfully includes trading with longevity and longevity in trading is so important. You have to be able to manage the rough with the smooth.
FX Trading is not a 100 metre sprint, a 60 metre dash; FX Trading is a marathon.
Take a look at the emotions, the stress, the strategies that successful long-distance runners go through, not just in the race itself but in the planning long before the starters gun is fired.
If you are looking for fast instant returns, you are most probably NOT a serious trader.
Trading is about planning and have a strategy that you can execute on your terms NOT the markets.
Finally, count your wins. A +16-pip gain in a week, is much better than a 216-pip loss or whatever.
If you do not have the inner strength to maintain exterior composure and exercise patience during periods of when the market does NOT support your style of trading, here is some advice a broker will not give you; look for something else to do and save your money.
1. THE SOAPBOX:
ONE SLIP... (AND DOWN THE HOLE WE FALL)
Crypto mania has once again hit the market grabbed by the balls off tweets from Elon Musk and followed up with tweets claiming that Tesla earned more $$$ in 30 days following the USD$1.5 million investment in BTC (Bitcoin) that it had done in the previous 14 years selling cars. “Fact or Fiction / News or Fake News”, and do I care, was a question I was asked?
Great question: I replied, “Good for him”, he can place USD$1.5 million in BTC and he can afford to lose it.
For the man on the street who is influenced by moves such as this by Elon Musk does, he have money to invest that he can afford to lose to place into a market very few understand BUT it seems like many pretend to?
There is plenty of FOMO (Fear of Missing Out) in the markets at the moment, especially with retail investors. Last week, FED chair, Jerome Powell did absolutely nothing to stop the search for yield. Junk debt is being bought up because it has a yield, the equity markets look very, very toppy and Cryptocurrencies look like another option. Experienced investors know the risks and they have protection options for positions they are in to be insured i.e., CDS (Credit-Default swaps), BUT the “Robinhood” traders know very little about what they are doing, the risks involved and, they, like general retail investors, do not have the same market protection.
- We have a bubble; many may argue bubbles!
- We have a BLACK SWAN event in the making
- The FED has lit the blue touch paper and appears NOT to give a rat’s ass about the outcome and the under currents in the markets.
- Equity markets continue to grind higher. I predicted a “Blow Off” top last year and still the S&P kept breaking higher.
Where do we stop?
4,000 the 161.8% Fib extension of the January 26th, 2021 highs to the February 1st, 2021 lows?
Who knows do we blast 1,000 S&P points to 5,000 and then come off with the mother of all pullbacks... THE BLACK SWAN?
- Institutional investors are protecting equity investments and diversifying into “Junk” and “Crypto”.
- Should we have another GFC on the way except this will be worse than the last. It will NOT just be institutionally biased. In my opinion, we will have homeowner bankruptcies the like never seen before and a housing market virtually demolished.
- There are soooo many retail investors in the market for one reason or another, mainly FOMO as they see TINA (There is NO alternative) to make big $$$.
It is so well documented the Retail investors “BUY at the HIGHS and SELL at the LOWS”. All of the dominoes are lined up ready in my opinion it is just a matter of time and what will be the trigger event.
Now, I know this is “DOOM and GLOOM”, and ONE SLIP and the domino effect is in play and let’s face facts, trading FX is not all Super Models / Chippendale’s and Unicorns, it’s a bloody hard existence to try and survive in a heavily rigged market regardless of what asset class you trade inside.
What do we do if the above plays out?
Many would say put on your tin hat, retire to the basement and stuff yourself stupid with Pizza, Chips (Crisps) and alcohol.... whatever floats your boat!
If we do see “a crash” is that ALL guests on CNBC or BLOOMBERG will tell the world they lost nothing. They will state they exited everything into cash just before the crash, as, they saw it coming.... this was the case following the GFC.
Back on point...
If we do have a market crash and a domino effect plays out: -
- FX will be volatile to say the least
- Central Banks will resemble Las Vegas casinos
- Rate Spreads will be wide especially into the end of the trading day.
- RISK OFF pairs should benefit
- I expect the USD to strengthen on flight to safety moves
- GOLD will rocket higher towards $2k per ounce
Not sure about the following: -
- Will the JPY strengthen? A lot depends on its inter-market bond relationship.
- Cryptocurrencies are not a stable store of value. Possibly a major sell-off?
- How long will the FED and other Central Banks achieve market stabilization?
Do I have a timescale on the above?
All I can do is express my thoughts vis-à-vis what I can see today based upon what I saw last week and based upon where this could lead, and it leads me to an increasing risk of a “BLOW OFF TOP” / “A BLACK SWAN EVENT”. The dominoes are in place, the ducks are lined up in a row.
At the moment things have slowed down following the euphoria early last week regarding the BIDEN Stimulus Package.
- Are we in the calm before the storm?
- Are we stuttering at “the tops” and will we be in a SELL THE NEWS trade?
- It is often something quite benign that triggers the move.
- It just needs one Institution to press “SELL” and off we go.
As an FX trader what can you do?
If you see what I see and agree: -
- Get positioned for RISK OFF
- Position Size, accordingly, small size with wider stops
- Brokers will adjust their margin requirements very quickly; be ready
The overriding factor about this type of market move is that it just happens very suddenly.
2. THE WEEKLY FX PREMIUM: SUBSCRIBERS SECTION:
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Firstly, before finally...
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Why not get positioned at the front of the line!
Always remember longevity in Forex trading can only be achieved through trading with good RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.
Mental toughness is key, and this is all about emotional control. Your mind can do amazing things, but only when it wants to, threat and alert will get your mind’s attention.
“Everyone has ability. It always comes down to mind games. Whoever is more mentally strong, wins” – Mohammed Ali.
Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
Stay safe and wear a mask.
The Pip Accumulator
BLOG VERSION: #401 FREE NEWSLETTER
DATE: 14th February 2021