It is not often that I write opening comments like these but for me last week was a wasted week as far as trading was concerned.
We had U.S. CPi data last Thursday. It was eagerly awaited data. Ahead of the news release, all analysts were very consistent with regards to the expected number. It was clear that the expectations were for a “7” print. The only question that remained was what the decimal point would read. The range was 7.1% thru 7.5%. We came in at the top of the expectation range at 7.5%.
Usually ahead of big news events such as that one, I would advise my subscribers if I had a specific plan to trade. I had a plan; I always have a plan but, on this occasion, I had decided that I would close a profitable AUD/USD (CORE) POSITION trade ahead of the data and that my existing LIVE and LIMIT ORDERS were sufficient to see me through the news event. Mentally, my mindset was such that I was NOT going to trade or act on the news, just observe.
What did we get?
Following the 7.5% print, we saw a sell-off in equities and a strengthening USD, predictable. Then we saw a USD squeeze off lows by c.+100 pips in EUR/USD. I used the squeeze as an opportunity to exit a couple more trades. Then FOMC voter St. Louis FED President, James Bullard, hit the markets with he saw a FED Funds rate of 1.00% by July 2022. The squeeze was unwound completely. The 60-minute chart below shows the reactions and breath of the moves in EUR/USD.
Now, I am NOT a scalper, this type of market move whilst it brings volatility the knee-jerks and snap back moves can be Forex Broker account breaking moves especially for the gamblers out there that simply over-trade and do NOT look at RISK until its too late.
30 -40 pips here and there through scalping do NOT interest me. I will take 50 pips or so on a move that I feel is consistent with my plan but crazy / mad moves that are out of the blue are not for me.
My point here is:
- I had my plan ahead of the data
- I took the opportunity that the “Squeeze” presented
- I did NOT chase trades in the volatility
- Basically, I stuck to my overall plan
This is TRADING DISCIPLE and HEAD MANAGEMENT (TRADING PSYCHOLOGY) added together to ensure no spur of the moment reactive move on my behalf. I controlled my FEAR and GREED ensuring I did NOT get into a trade that I would regret later. More of this in Section 4 later in this blog.
At the end of last week, THE WEEKLY FX PREMIUM 2022 current position was as follows: -
FEBRUARY 2022 to date:
Total net pips = +165 pips
YEAR TO DATE 2022:
Total net pips = +2,021 pips
2022 pip objective = +14,920 pips
(13.55% of 2022 objective achieved)
If you would like to see more information on how I trade etc., check out the link below that will connect you to my video presentation, which is on my YouTube channel: -
THE WEEKLY FX PREMIUM REVIEW OF 2021 & LOOK FORWARD INTO 2022
1: THE SOAPBOX
BIDEN’S FINEST HOUR.... TALK IS CHEAP
Over the recent week, I have noted Geopolitical news but it has until now been not at the top of my list for fundamentals that the market is facing.
I want to correct that view today and raise the RED FLAGS on geopolitical issues that are now growing as issues to bear in mind.
I wrote recently to FX PREMIUM subscribers highlighting an issue that all recent U.S. Presidents have faced since partisan politics entered Washington and polarised views, just simply created a dysfunctional government with very little domestic output.
Let me elaborate....
What power domestically does a sitting U.S. President actually have?
In my opinion, of late it’s been a catalogue of failed initiatives. Executive orders are seen as a way to implement changes that cannot be carried out via the legislature.
Look, here is a great example. Joe Biden cannot get a guy in Dallas, Texas to wear a mask by law... but at the same time if he ranted about RUSSIA, CHINA or NORTH KOREA he could pretty much do what he wanted as almost 100% from the U.S. population would support aggression against these adversaries.
Domestically, the President’s power is limited by devolved power to state governors, yet internationally he can interfere and play RISK as much as he wants.
Most recent U.S. Presidents suffer on domestic approval ratings if they attempt change, thus, they look overseas to create news to show effect to counter low domestic approval ratings. Biden is no different. If I can see this, so does RUSSIA, CHINA, IRAN, and NORTH KOREA, who are the countries that cause the major concerns for U.S. Foreign policy.
Leaders like Putin, Xi, Kim Jong Un and Raisi are NOT as stupid as the west likes to portray in simplistic terms. Far from it, their histories are based on exploiting weaknesses. The have absolute power and they do not have to worry about voters or approval ratings. Moves are being made... this is heading towards BIDEN’S FINEST HOUR... faster than we think.
- RUSSIA: Allegedly there are now 130,000 Russian troops on the border of Ukraine. They are NOT there to party.
Do we need a Jim Hacker move from the UK BBC sitcom Yes, Prime Minister (well worth watching by the way)? What he did was send in thousands of troops to a trouble zone as a goodwill / peace-keeping gesture.
What if the U.S. / UK and EU sent in 150,000 paratroopers to Ukraine on a goodwill visit? All jokes aside Biden will be pushed to the brink.
The question is what does Putin actually want?
Sanctions mean feck all... they have never worked effectively on Russia in the past, so what makes this current batch on the table different?
Does Biden or Putin want war?
Will Biden actually fight and commit U.S. troops?
I am just NOT sure, and I suspect Putin’s end game is money. If Biden was serious and wanted to end the issue quickly, all he has to do is remove the banking SWIFT CODES and isolate the Russian Financial system.
Does this move raise the stakes too high?
130,000 troops on the border is NOT a peace-keeping deployment.
Placing NATO troops in Ukraine, whilst it may send a message it also brings opposing sides closer that are within range with loaded weapons. It just needs one trigger happy individual or individuals and off we go...
Biden needs to manage this....
- CHINA: As expected during the TRUMP administration CHINA agreed to buy U.S. goods. They never stuck to the deal or tried to bring the deal up to date during Covid-19.
From a Democrat perspective, human rights abuses continue, no progress on this subject at all.
Given CHINA’s position this is a major foreign policy headache for the Biden administration. Plus, CHINA’s influence and support of the NORTH KOREAN regime and friendship with RUSSIA must cause a few sleepless nights for some at the Pentagon.
- NORTH KOREA: If I lived in Hawaii, I would NOT be a happy puppy, given the recent North Korean tests. Since TRUMP Kim Jong Un has started testing more and the tested missiles are more long-range than before.
For GUAM and JAPAN missile tests are concerning and raise stress levels. GUAM is about 2,000 miles away from NORTH KOREA, well inside range. JAPAN is much closer as a target and, in addition, one should never rule out an assault on SOUTH KOREA.
- IRAN: Since TRUMP walked away from the Iranian Nuclear Deal, IRAN has allegedly moved forward at a rapid place with its nuclear program.
Sanctions have worked to some extent especially on dropping oil into the world market BUT it is widely reported OIL tankers still went to CHINA with heavy priced discounts to beat the sanctions, albeit at RISK... but the west never really got its act together to stop this properly.
Now we have an alleged revised NUCLEAR DEAL on the cards. The west is welcoming this. Timing is everything. Potentially, there could be another million barrels of OIL back into the world markets each day at a time when OIL prices are rising and look like breaking USD$100.00 a barrel for WTi.
Biden is a politician, an IRAN deal no matter how bad, gives OIL and approval ratings!
The question that I cannot find the answer to is how stable is the Middle East now given the IRAN nuclear program development progress?
So, if you thought that a global pandemic was scary put the above in a mixing bowl!
TALK IS CHEAP...
Right now, there is nothing to do vis-à-vis your trading BUT from my perspective any developments from the above in a bad way is a flight to safety move. The USD, JPY and CHF are the beneficiaries.
As a POSITION TRADER, there are fundamentals within the market to consider but hanging over all of these like THE SWORD OF DAMOCLES are the geopolitical issues.
2: THE EDGE
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers. It is combination of Charts, News, Central Bank oddities, Clarification points and general issues we face as FX Traders).
2.1: WEEKLY FX PREMIUM – EXCLUSIVE TWITTER FEED UPDATE:
2.2: THE RIKSBANK REMAINS CAUTIOUS:
2.3: HOW CAN THE ECB BE SURPRISED BY INFLATION?
2.4: U.S.10YR IS NOW AT 2% WHAT NEXT?
2.5: HOW MANY FED HIKES IN 2022 THIS WEEK?
2.6: AS EXPECTED THE ECB IS WALKING BACK THE HAWKISHNESS:
3: THE MACRO / FUNDAMENTAL VIEW:
(This short section of the blog looks forward. I share my macro / fundamental thoughts and views for the coming 3-6 months on factors to consider from my Macro, Fundamental and Geo-Political perspective)
We are in a huge period of uncertainty once again as both the Markets and Central Banks come to terms with what’s next.
INFLATION, which almost every country wanted and fought to try and achieve is now here in what appears a stubborn level egged on by wage inflation, which is permanent.
The lesson here is: BE CAREFUL WHAT YOU WISH FOR...
We now have the ludicrous situation where Major Bank analysts, Hedge Fund managers, Pension Fund managers and other large Institutional analysts are caught in a frenzy of what is basically a lottery without a ticket, trying to second guess what Central Bank Governors, Presidents and similar should do to counter INFLATION.
We recently saw the opinions from the Reserve Bank of Australia (RBA), The Bank of England (BOE) and the European Central Bank (ECB), confuse rather than provide clarity. The result is... more uncertainty and increasing speculation, which frankly is NOT what we want.
In my opinion, we will have to deal with this nonsense throughout Q1 2022.
Do NOT lose sight of the bigger picture.
- We STILL have a Global Health Pandemic. It has NOT yet disappeared into the distance when looking through the rearview mirror.
There will be more mutations, as we enter what the politicians maybe naively call the home straight.
- There are STILL SUPPLY CHAIN issues and despite what Central Bank officials think they are, they have ZERO influence in connection with supply chains.
In fact, their actions can create more INFLATION (The Assassin of Hope).
- The world DEBT burden is huge. We face RECCESSION conditions ahead as we are taxed to high heaven to steady a very rocky ship.
There are other pieces in the BIG PICTURE jigsaw moving forward to slot into position. There will be plenty of trading opportunities this year as Politician’s dither and fumble their way forward aided by Central Bank leaders who frankly are trying to navigate unchartered waters, that most if not all would say, they did NOT sign up for.
Do NOT forget what is going on near to and at the border of Ukraine and Russia.
I think at this point, it would make sense to post here what I consider to be the KEY DRIVERS in 2022.
My KEY DRIVERS for 2022 are: -
- CENTRAL BANK POLICIES:
Divergence (The Central Bank Divergence Trade)
- INFLATION / DEBT ISSUES / CREDIT DEFAULTS:
Inflation is a game changer versus the past
Emergence of new Variants
Market Reaction re RISK ON / RISK OFF
Learning how to live with the Pandemic.
- SUPPLY CHAIN ISSUES:
If you resonate with my long-term MACRO THOUGHTS and want to get into the trades with me as I develop positions, you will need to subscribe to the WEEKLY FX PREMIUM at https://www.weeklyfxdrivethru.com
4: HEAD and RISK MANAGEMENT:
Over the past few months (September thru December 2021), I looked solely at HEAD MANAGEMENT (TRADING PSYCHOLOGY) as an area of trading that is often left behind by many traders.
From my experience and perspective this is an area of trading that needs constant work and understanding in the ways to improve you as a trader and improve your trading consistency.
Over the coming weeks, I want to add, not just my thoughts, but also those from traders I respect as to why HEAD and RISK MANAGEMENT go hand in glove for serious FX Traders.
Why do these aspects of trading combined drive consistency?
Please forgive any repetition from what was written last year, at times it is impossible not to repeat gems that have stuck with me and today resonate as strongly as they did when I first came across these gold nuggets of success that have stuck with me throughout the past 10 years or so.
As in previous sections of this area of the blog, the pieces added each week will be quite short but over time they will build up into several pages of useful information that should add value to your trading.
A: FIGHT OR FLIGHT:
Using a term from Personal Development “FIGHT or FLIGHT”. This relates to FEAR, which as you know forms one part of what most markets operate from as a base. The partner of FEAR is GREED and together I still strongly believe that they form the basis of the way markets move and react. At the same time via FIGHT or FLIGHT it is the equivalent in the way we react to our day-to-day activities.
The response to FIGHT or FLIGHT can cause the downfall of you as a trader.
How do you manage RISK in trading?
Look, FEAR is something that humans have had to live with as we have evolved over millions of years, but we can manage and change our approach and how we deal with these feelings.
FEAR can have a significant limiting effect on our trading behaviour. We are built to be safe, mentally we look at basics to ensure our survival. Adapting this basic trait to FX Trading, it means that if we are LIVE in a trade that looks like its turning negative, or negative and getting worse our natural instinct is to pull out (cover) the trade so that further losses are NOT incurred.
To react on our base reactions, can affect our trading strategy, our TRADE PLAN and even worse it could cause you to made additional rash decisions, with the hope of turning a loss making trade around, causing maybe a greater loss of $$$. Instead of focusing on the TRADE PLAN, our mind wants us to focus on making the best out of the loss-making trade.
Once you grab the role of Forex Trading Psychology this will help you alleviate FEAR from your decision-making process and help you with RISK MANAGEMENT. Once you become aware of FEAR, immediately this will empower you, both as a trader and an individual. It will also allow you to re-establish control, logic and reason which should be your goal.
B: OVERVIEW - TYPES OF BIAS:
It is easy for traders to feel confident in their ability to remain calm and collected during trading sessions. However, once news breaks or the U.S. traders get behind their desks and volumes and liquidity picks up it can become a totally different story. What were to a large extent quiet dopey markets are suddenly alive and the shift in activity is usually very noticeable.... this usually triggers a whole new set of emotions.
Giving in to feelings of excitement, FEAR or GREED when trading can be costly and create irreversible mistakes.
What are called PSYCHOLOGICAL BIASES come into play. You can evaluate yourself to see if you identify with any of the following: -
OVERCONFIDENCE BIAS – “The market will go here...”
ANCHORING BIAS – “This probably means that...”
CONFIRMATION BIAS – “This also proves that I am right...”
LOSS BIAS - “I hope the price will come back...”
The four BIASES noted above all overlap, the reason being because no matter how you look at each of the biases individually, they all have one thing in common... FEAR.
So, how can such a Forex Trade PSYCHOLOGY be overcome?
Over the coming weeks, I will look at each of these points in detail, because the first step is to become aware of our emotions when trading.
Like most things in trading PERCEPTION versus REALITY is at the core.....
5: CLOSING THOUGHTS
5.1: THE WEEKLY FX PREMIUM – SUBSCRIPTION INFORMATION:
If you like my approach to the market and are wondering what my trades are like from, a live perspective and what is the WEEKLY FX PREMIUM all about, check out my website https://wwww.weeklyfxdrivethru.com
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 via Twitter, TwitLonger and ZOOM.
5.2: THE FINAL CUT:
Always remember longevity in Forex trading can only be achieved through trading with a good MINDSET, 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.
Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
Twitter: @weeklyfxpremium (FX PREMIUM Trade Information)
Twitter: @theanalogtrader (FX PREMIUM Market Commentaries and Views)
BLOG VERSION: #443 FREE NEWSLETTTER
DATE: 13th February 2022