I know, I should probably start with the effect of the RUSSIA invasion of UKRAINE on the markets but, that comes later.
The 80/20 rule.
I think that most of us have heard about this, and it is applied to almost everything in life. You know what I mean – of 100% of people in an office 20% work really hard and pride themselves in their work ethic and authenticity whilst the other 80% are on “turn up” money.
I do not know about you (my reader), but as a retail trader, the 80/20 rule can be applied in almost every aspect of our trading routines.
Here is one example of the 80/20 that has me concerned. Look at the ad placed below regarding trading with FXCM.
73.42% of traders who open account lose money.... FFS (It would also be realistic to believe that the numbers of traders making money with other brokers would be similar)
Now, it’s not 80/20, it’s 75/25 BUT let’s NOT split hairs.
Given all the webinars, all the presentations and analysis provided just from brokers alone, what a fecking sad industry we trade in. Based on the 80/20 rule, please tell me I am wrong, but are 80% of current traders nothing more than gamblers?
Here we are right in the middle of a war in Europe, the first since WWII back in 1945, the markets are absolutely 100% volatile, moving on headlines and there are gamblers loose trading the FX markets.
Is it any wonder, white label brokers pop up frequently in jurisdictions with laissez-faire attitudes to registration? I always find it astonishing with FX brokers, it must be the most rewarded industry on the planet as almost every broker is award winning. I have been around for 10 years, one’s I have never heard of are award winning... yeah right!
I was too premature with my thoughts that gamblers had moved to crypto currency trading, or maybe they use FX and Crypto to hedge!!
Seriously, we should all in my opinion, unless you have wizard like skills as a scalper trader be sitting back at the moment. The RISKS are just too great. If you have to trade, take your trade size down by 66%-75%. Capital preservation is paramount. All that FXCM advert tells me is that brokers are getting money based on zero TRADE, HEAD, and ACCOUNT MANAGEMENT principles being in place.
Being in a headline driven market allows for very little to no planning and executing trades for more than an hour at most, sometimes maybe just a few minutes. No-one can tell when a headline will interrupt.
Last week, my blog title was called “SOMETIMES DOING NOTHING IS THE RIGHT APPROACH”. Now, I am a POSITION trader, I trade wide stops small position sizes, multiple positions for each trade at times. This allows greater flexibility. Even with the breaking news of RUSSIA invading UKRAINE, many of my open positions turned negative and some limit orders were triggered BUT all of my trades are RISK assessed prior to my set ups being added to my broker account.
Look, I do NOT like seeing negative numbers in my accounts but it is a fact of trading, if you cannot handle negative numbers, in my opinion you should NOT be trading in the FX market.
You draw your own conclusions...
At the end of last week, THE WEEKLY FX PREMIUM 2022 current position was as follows: -
FEBRUARY 2022 to date:
Total net pips = +605 pips
YEAR TO DATE 2022:
Total net pips = +2,461 pips
2022 pip objective = +14,920 pips
(16.49% 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:
MONEY before PEOPLE... $$$ before LIFE
Look, there will be plenty of lines written about this and plenty of minutes in Financial TV devoted to this subject over the weekend, and probably all done by individuals better qualified than I.
I am perplexed, with the West’s response to the invasion of a democracy-based country by a dictator.
We eagerly awaited the heavily publicized sanctions from the west that were planned to be hard hitting and were based on two/three weeks of planning. FFS... These are NOT hard-hitting sanctions; these are reactions based on FEAR by popularity driven politicians.
With regards to Putin himself, I do not know the man. All I can judge him on are translations of speeches (are they 100% accurate?). I can see and read his body language, his non-verbal communication.
This is how I see Putin: -
- PUTIN is a dictator
- He is not interested in public opinion or popularity polls
- If you dissent you get whacked
- Sanctions do NOT work against a dictator
- He does NOT have any concerns about anything or anyone but himself
- He is only interested in absolute POWER
- He is a narcissist
- His 60 minutes rant last week re-writing history are actions of a madman
- He’s said repeatedly that he wants the old Soviet Union back
- It’s basically a LAND GRAB
- He has always been 2 steps ahead of the Western Alliance from day one
- He knows the West’s weakness with its “unified approach” and exploits it
As long as OIL sells and GAS moves through pipes out of RUSSIA, the west is funding Putin’s invasion of UKRAINE. This is an undisputable fact that cannot be hidden.
Putin must be laughing his socks off. The responses from the west are so predictable MONEY before PEOPLE... $$$$ before LIFE.
This is a PIG of a political situation. It's a full-on invasion, a war for God’s sake, the first in Europe since 1939. Biden, Johnson, Schultz, Macron, Von Der Leyen etc., can put lipstick over all the features of the sanctions being applied but we still have a PIG.
NO PAIN NO GAIN is a phrase often used when one wants to improve something in your life. If the west wants rid of Putin, or whatever, and to show democracy wins there is only one route.
- Remove the SWIFT CODES.This action immediately stuns RUSSIAN economic activity.
It’s instant NOT gradual.
- Make UKRAINE a neutral country similar to FINLAND / SWITZERLAND.Neutrality is surely an option that was worth discussing. That would keep a status quo and alleviate RUSSIAN fears of NATO growth on the doorstep.
He knows the west’s last resort are the SWIFT CODES. He also knows by the time the west has a united front on this matter that the invasion will be complete. It’s even possible that removing swift codes right now is too late to prevent the falling of KYIV.
For all the U.S. bravado based upon RUSSIAN intentions. Isn’t it pointless to gloat, “We knew PUTIN was going to do what he’s done, and our timelines were 100% correct” ... and what has the U.S. actually done in response ... nothing more than the usual “payers and thoughts”? Despite all the rhetoric, nothing BUT hot air.
FFS... OK; all this means is that the west failed (If the U.S. state department is bloody good at predicting events, please send me the next six numbers that will be drawn in the Canadian Lotto Max!).
Hot air is no match for a 48-ton T-90MS Russian Tank.
Moving off my SOAPBOX...
I want to remain authentic.
I trade to make $$$ and that's fine when it’s to do with economic data and the like, making $$$ resulting from market moves based upon people dying in a war leaves a sour taste in my mouth; it doesn’t feel the same.
I have talked about this ‘til the cows come home, the flight to safety trade involving the USD on the back of an invasion. The EUR/USD tested 1.1100 on Thursday last week, which I missed!
After a sleepless night Wednesday/Thursday I was in front of my screens NASDAQ futures were lower by over 3%, yet into the close Thursday NASDAQ was up over 3.0%. Massive volatility, a huge swing.
Why did that happen – How could this happen?
Possibly weak sanctions or the view that the FED will hold off on Interest rate increases.
However, initial FED speakers remained resolved in their determination to tackle inflation – right a wrong that they believed to be TRANSITORY.
Without doubt we are looking at lower global growth as a result of the RUSSIAN invasion. The fall out will show this via commodity prices. The possible outcome is we will have what is often called “Cost-Pull” inflation.
The G10 could be looking at STAGFLATION rather than increasing INFLATIONARY pressures from the fall out.
What about Forex?
Look it’s all gloom and doom, I get that, but this is a war in Europe, the first since 1939. It means something and the reaction is tepid. I know in our 2022 “App-driven, Zoom-driven, take a selfie world”, unless its right in front of our noses we wipe it away like snot.
The EUR will in my opinion be under increasing pressure. The Fed will hike and the ECB, well you know... the flying pink pigs will be flying once again.
The EUROZONE / THE EUROPEAN UNION is potentially heading for STAGFLATION and increasing accommodative policies.
The penny will drop in a week or two, probably around the next round of Central Bank meetings.
March 10th, 2022: ECB
March 16th, 2022: FED
Between now and then, I will be trading light. I do NOT chase markets. I will add to my existing (CORE) POSITIONS and that will account for c.80% of my trades.
Please note this type of market is what I call “ACCOUNT BREAKING”. If you are over-sized in a trade the wrong way you are screwed.
You DON’T have to trade, but if you are weak and cannot exercise self-control trade small with wider stops.
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: RBNZ - THE MOST AGGRESSIVE CENTRAL BANK RE RATE INCREASES?
2.2: (RUSSIA / UKRAINE) ADDITIONAL GLOBAL MACRO IMPLICATIONS:
2.3: BEYOND BREXIT:
2.4: THE RESERVE BANK OF AUSTRALIA (RBA) SAYS “NO TO RATE HIKES”
2.5: U.S. CONSUMER SPENDING & MANUFACTURING UPDATE
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)
The “Will they – Won’t they” scenario, regarding a Russian invasion of Ukraine is now answered.
Equity markets have been savaged and FX has reacted strongly in favour of the flight to safety currencies; USD, JPY and CHF are all beneficiaries.
I am now interested in finding out what happens with all the hype about multiple interest rate hikes from FED members and to some extent, but not as loud, from the hawkish ECB governing council members.
Financially, 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...
I am looking at potential STAGFLATION being the issue that Central Banks and governments are potentially going to have to deal with moving forward. Both Russia and Ukraine are both important to the supply of commodities into Europe (there are miles upon miles of pipelines running underground through Ukraine).
The ECB, which only has one single mandate... PRICE STABILITY, appears to have screwed up once again. The chart below in my opinion typifies what the ECB is now dealing with.
In my opinion the interest rate hike frenzy that has dominated social media and Financial TV for the past while, I think will be recalibrated and largely walked back.
So, we enter yet another period of uncertainty. For how long, who knows.
Do NOT lose sight of the bigger picture.
- We STILL have a Global Health Pandemic. It has NOT yet completely disappeared into the distance when looking through the rearview mirror, despite all political unwinding.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).
Also note a RUSSIA/ UKRAINE conflict has severe ramifications for European energy costs etc.
- The world DEBT burden is huge. We face RECCESSION conditions ahead as we are taxed to high heaven to steady a very rocky ship.
- Do not lose sight of CHINA / TAIWAN. The South China Sea issue and the continual military “cat and dog” maneuvers between Chinese and the U.S., I believe will only intensify.Timing is everything... do NOT rule out CHINA being another piece in the jigsaw.
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.
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.
Last week, I wrote about OVERCONFIDENCE BIAS and ANCHORING BIAS. This week, I want to conclude with my remaining two biases.
C: HOW TO CONTROL YOUR EMOTIONS:
The third bias in the psychology of Forex Trading is CONFIRMATION BIAS.
Possibly the most common BIAS amongst professional traders. I often challenge myself on this BIAS. This is when you look for information that will support a decision you have made, even if it wasn’t the best decision, it is simply a way of justifying your actions and strategies.
The problem is that by doing this, you’re not actually improving your methods, and you’re just going to keep making the same trading mistakes. Unfortunately, this can create an infinite loop in Forex trading psychology that can be difficult to break.
The best-case scenario in CONFIRMATION BIAS is that a trader will simply waste precious time researching what they already knew would be true. However, the worst-case scenario is that not only will they lose time, but also money and the motivation to trade.
In the psychology of Forex Trading, a trader must learn to trust themselves, be happy to use their intelligence to develop profitable strategies and then be able to follow them without fear or doubt.
LOSS AVERSION BIAS:
The final BIAS that I want to touch on is LOSS AVERSION BIAS. This BIAS derives from the prospect theory.
Humans have a funny way of evaluating their gains and losses, along with comparing their perceived meanings against each other.
For example, when considering our options before making a choice, we are more willing to give preference to a lower possible loss over a higher possible reward. FEAR is a much more powerful motivator than GREED. In practice, a trader with a LOSS AVERSION BIAS is more akin to cutting profits when they are still low, while allowing bigger drawdowns.
As a POSITION trader, I am often challenged on the size of my drawdowns. I am very disciplined in this regard. At the outset of all trades that I enter, I set my RISK for each position based upon the guidelines that are contained within my TRADE PLAN. My TRADE PLAN is very specific and trade style specific.
LOSS AVERSION BIAS is possibly the most controversial of all BIASES as it can imply a different perspective based upon your style of trading.
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 (Restricted feed - FX PREMIUM Trade Information)
Twitter: @theanalogtrader (Restricted feed - FX PREMIUM Market Commentaries & Views)
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BLOG VERSION: #445 FREE NEWSLETTER / “THE COFFEE SHOP”
DATE: 27th February 2022