This week, from my perspective the FX market is in a very strange position, it is CAUGHT IN BETWEEN a battle between equities and bonds. Inter-market correlations are off, mis-aligned in my opinion and FX is right in the middle. More about this later in the soapbox section.
It is not very often that I write in my blog stating what a poor week I have had trading, but, last week was one of those weeks. All my pip gains for the month were wiped being caught the wrong way in trades following the U.S. CPi data and the Coinbase IPO excitement.
Like all traders I had, for a few minutes, the woulda, coulda, shoulda moment followed by the “if only” segment as a dessert! Look, it was what it was, I move on, BUT... I did NOT revenge trade. I am way beyond that sort of nonsense. I believe FX is a long haul, a marathon race not a 100 metre sprint.
Below, I have added the communication via TwitLonger that I initiated to FX PREMIUM subscribers on Thursday morning last week following the U.S. Retail Sales data release. Hopefully, maybe or maybe not some of what I wrote may resonate with you.
It is not that often that I feel the need to course correct and I have not done so yet, but my intentions will be discussed in the subscriber only SUNDAY MORNING ZOOM of today’s date.
1. THE SOAPBOX:
(FX) - CAUGHT IN BETWEEN
I have often heard that trading FX is not all RAINBOWS and UNICORNS. This statement is very true and very accurate, and it is often pointed out when we have a crossroads in the FX market. It is I suppose all part of the FX “Circle of Life”.
With regards to what happens in the FX market next, in my opinion, the jury is out...
Last week I took a small hit on pips all in one session and all on the back a market move that did NOT sit well with my overview thinking at the time.
Therefore, there are lots of things rolling about in my head right now about the market even though I have had 48 hours or so to gather my thoughts, and make choices and decisions on moving forward. My higher inner self thinks it knows in what direction I should take but requires more conviction. On the other hand, my lower inner self is telling me to just leap in now and get what I call positional trades in place to measure.
Taking losses are a part of trading, I know that. It was the manner and the basic fundamentals that took me by surprise, then again, how can anyone not be surprised by how a rigged and manipulated market operates. Was this naivety on my part?
Look, these markets are very EMOTIONAL, prices are driven on emotion rather than solid or sound reasoning. EMOTIONAL MARKETS attract amateurs (very high number of Robinhood and the like, brand-new retail traders in play), who are basically gamblers who do not see trading as investment or RISK MANAGEMENT rather that of a gamble to become rich based upon what they perceive other people are doing. They have NO HISTORY of trading, NO understanding of TRADING PSYCHOLOGY, no HEAD MANGEMENT skills or thoughts.
It is similar to when someone says that the Real Estate market is hot, and you should invest now before you miss the appreciating market.
The market overheats and prices pullback and those who jumped in on hearsay have mortgages that they cannot fund as prices drop. They end up selling for a loss.
Look, the easy money in these markets especially the equity market has already been made. You need patience to wait for the pullback, the correction is due across many markets, they are CAUGHT IN BETWEEN. Now that they are not correlating only flashes more RED LIGHTS in my opinion and warning bells are ringing out in my head. With all this going on FX in trapped to a large extent, in my opinion.
Last Thursday, I could not resist a wry smile at the tweet below from Peter Schiff, which I agree 100% with.
I remember that morning on CNBC as the GFC stepped up a few gears and “TOO BIG TO FAIL” became a household phrase. If Jim Cramer, has it wrong again and the bubble, I have talking about for weeks is about to burst, at least, I am NOT alone with these thoughts. I believe in being 100% authentic with my thoughts, choices and beliefs in FX and until I see a change that I need to quantify, I must remain true to my macro thoughts.
I may have dropped c.400 pips or so last week but given the real directional opportunities that lie ahead if we have a correction that loss will disappear into complete insignificance.
Am I right, or, am I wrong?
Look, the S&P just keeps grinding higher BUT commodity currencies are not following to the same extremes. The AUD gave in last week and jumped but it has not been convincing.
Last Thursday at one point I noticed that the S&P was up 75bps, Gold up 100bps and US10YR yields down 5bps... it is not that often that you see this all happening on the same day. It does make you wonder if from now to God knows when, possibly Q3 or Q4 2021 that U.S. data will remain 100% irrelevant and totally meaningless
Moving to Forex...
There are lots of extremes in many currency pairs and many potential false moves have also set up, especially in the AUD pairs. Now, at the end of the day, they are moves that I expected but just not now. In my opinion, to coin a phrase, “more water needs to flow under the bridge first”. It’s just my opinion, but we all know what is said about opinions ... we all have them and we all have you know what’s as well.
The USD/MXN and EUR/MXN are pairs that I look at daily vis-à-vis RISK SENTIMENT, both are very sensitive to movement in RISK.
Below are the 240 minute and Weekly charts relating to the USD/MXN.
This is what I am looking at: -
- 240M CHART:
We have a descending wedge pattern. I really like these as 70%-80% of the time they produce really powerful reversal moves,We closed the week at 19.9177, which is basically on previous horizontal support of 19.8864 (In real terms this is about 15 pips in distance, MXN pips are to me valued at about 5% of a USD major).
Trend line wedge support is at 19.84300, which in real value terms is about 30 pips away.
In normal trading conditions I would placing a long trade with my STOP below trend line support, looking for the reversal move.
- WEEKLY CHART:
We have a triangle pattern with trend line support at 19.8040.From last weeks close this is about 50 real pips away.
With all this information, there is a trade set-up on the long side here, but do I have the confidence or the conviction to place the trade, this is the real question to answer?
There are always two ways to look at things: -
- I know my RISK. Place the stop a little away from the supporting trend line.What do I RISK, 70–80 pips to generate possibly a move back to c.21,0000
RISK: 80 pips
REWARD: 570 pips
It’s a no brainer to try.
- However, conversely given the market behaviour and the constant BUY, BUY, BUY of RISK.Would this trade be nothing more than a gamble?
One cannot place a tighter stop because of the spread with this pair therefore its down to conviction and belief; pure RISK MANAGEMENT based upon your RISK TOLERANCE.
Technically the trade is there to take. You will have to be a WEEKLY FX PREMIUM subscriber to find out what I decide to do.
In addition to the USD/MXN there are plenty of potential moves hanging around but at the moment currencies are just not behaving well in my opinion.
It’s all about your CHOICE and CONVICTION with the market. I remain with the belief FX is CAUGHT IN BETWEEN, and my fear is that we enter a period of dull, no volume, stagnant trading now, and we remain like this pending the FED making its move later this year, possibly into Q3 / Q4 on tapering, and interest rate policy.
Why would you want to RISK money in a market that is not clear and that you do not understand or trust?
I seek clarity before I add to what remaining live trades I already have in play, whether I am going to get what I want remains doubtful. In my years of experience when you see equities rallying and basically everything moves around both higher and lower for no reason, it is usually an indication that we have topped.
If you are involved trading in this market, be careful, NOT to overtrade and basically get suckered in.
2. THE WEEKLY FX PREMIUM: SUBSCRIBERS SECTION:
3. THE WEEKLY FX PREMIUM - PERFORMANCE:
3.1: THE WEEKLY FX PREMIUM: MONTHLY PERFORMANCE:
3.2: THE WEEKLY FX PREMIUM: SUBSCRIPTION INFORMATION:
The WEEKLY FX PREMIUM is my subscriber-based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
If you go to my website https://www.weeklyfxdrivethru.com you will see more information about the WEEKLY FX PREMIUM.
Lots of information about the way I do things, plus, previous reports about my trades, my trade styles and my trade projections for the year are located on my home page by selecting the appropriate tab located at the top of my home page.
There are 4 options for subscribing: -
- Monthly revolving subscription following a 10 day for $10 trial then a monthly CAD$250.00 per month.
- 10 weeks (c.3 months) = CAD$600.00
- 20 weeks (c.6 months) = CAD$1,000.00
- 40 weeks (c.12 months) = CAD$1,500.00
Further information about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.
4. CLOSING THOUGHTS:
Firstly, before finally...
My “YouTube” channel THE WEEKLY FX DRIVE THRU now has a library of the older DRIVE THRU ZOOM presentations. Check it out and maybe subscribe. My intention is to post other “ZOOMS” there from time to time related to FX Trading.
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: #409 FREE NEWSLETTER
DATE: 18th April 2021