THE WEEKLY FX PREMIUM: REVIEW OF THE FEBRUARY 2022 PERFORMANCE... INCLUDING IN SEARCH OF THE TIPPING POINT

THE WEEKLY FX PREMIUM:
REVIEW OF THE FEBRUARY 2022 PERFORMANCE
including
IN SEARCH OF... THE TIPPING POINT

For those traders who wanted volatility, is the type of volatility you wanted?

Being primarily a fundamental trader, I have been asked quite a lot over the past two weeks about how does the current trading environment sit with my trading approach and disciples etc. My answer has been consistent. Headline driven markets do NOT sit well with me as moves can reverse very quickly, initially without rhyme or reason and being on one’s toes is simply not the answer. I have said on a couple of occasions the current trading environment is basically TRUMP x 2 trading conditions.

Going back to my starting question; many traders say they want volatility, I get that but, there are different kinds of volatility and this type I do not like, it just does not align with my trading style. It’s very choppy and at times illiquid and for as much of the time that it’s “Headline Driven” it’s also “Flow Driven” and whilst we can follow news, for flows as retail traders we are f*cked.

For those who are technical traders. This type of volatility probably does NOT suit you either. Technical levels are for the most part ignored; round psychological numbers carry greater importance. Most of the time chart levels mean nothing and as investors flee the markets, capitulation moves and the resulting flows dominate.

So, apart from the Gamblers, the potentially insane and the uneducated FX traders, who likes this type of market?

I know one person.

One of my peer group trades 5,15 and 30 minute charts only. She is like an EA on speed. She looks at charts I could NOT bother my ass over and she’s damn good, really good, and very effective. If it can be termed this way short-term scalpers like this market, especially when they sniff out momentum.

That’s NOT me and as such my activity is therefore down 50%. I am still adding a few pips here and there, but I am no way close to my usual. My daily routine is largely unalerted, but my trade execution is low and if anything, getting lower.

Two weeks ago (20^th February 2022) this was the title of the DRIVE THRU blog.

SOMETIMES DOING NOTHING IS THE RIGHT APPROACH

Look, let me give balance and perspective here. I am here for the long haul. I have been around for 10 years. I enjoy what I do, and I understand that there will be periods when its best to step away. This is one of those times.

Do not be afraid to sit it out. There is absolutely nothing wrong in doing this. Capital Preservation is a key factor in trading longevity. Why RISK your account?

Below, just after the chop fest that followed the NFP data last Friday, I posted the following tweet to my market commentary feed for FX PREMIUM subscribers.

Moving on...

Looking at the February performance of the WEEKLY FX PREMIUM.

February 2022:
Total net pips = +725 pips.

YEAR TO DATE 2022:
Total net pips = +2,581 pips
(17.30% of my 2022 objective of +14,920 net pips)

1: THE WEEKLY FX PREMIUM – FEBRUARY 2022 PERFORMANCE:

1.1: MONTHLY TRADE STYLE PERFORMANCE:

Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Mini lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.

Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.

Therefore, on the spreadsheet using the highlighted reference points: -:

A: - This represents at USD$1.00 (Mini Lots) per trade a USD$ income of $725.00 which, correlates to my reporting of net pips for the month of +725 pips.

B: - Costs trade reflects the fact that 42 Mini lot trades in total were undertaken at a cost of 29 x USD1.00 = USD$29.00.

C: - When subtracting B from A this gives a net income total based on trading just single Mini lot trades of USD$696.00.

I am of course grateful to have produced a positive “pip” result for the month. Over and above this statement what else is there to add.

Well, I did bank 730 pips of losses from short EUR/CAD trades, which is made even worse when you look at the sell-off with this pair... painful to say the least.

With lower trade activity and being in a market when it’s safer to basically “smash and grab” pips, I was eager, maybe too eager on occasion to cover trades. As soon as I write this sort of sentence, I am reminded of a phrase used by many traders... “You will NOT go broke, banking $$$”, never a truer word spoken. Anyway, as a result of being over eager or whatever my pips per completed trade dived to 25.00 pips per trade well below my 2022 objective of 40.00 pips per completed trade.

My Profit / Loss ratio on completed trades stood at 86% / 14% against an 80% / 20% objective, so happy days there!

The question I am of course asking myself is how long will these trading conditions persist? If you know, please let me know...

1.2: MONTHLY TRADE BY TRADE REVIEW:

2: THE WEEKLY FX PREMIUM – YEAR TO DATE 2022 PERFORMANCE:

2.1: YEAR TO DATE TRADE STYLE PERFORMANCE

Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Micro lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.

Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.

Referring to the year-to-date spreadsheet above and using the highlighted reference points: -

D: - The gross year to date income from all three trade styles is USD$2,581.00. This is based upon single Mini lot trades valued at USD$1.00 which, correlates with my reporting of net pips year to date of +2,581 pips.

E: - Costs to trade reflects the fact that 71 Mini lot trades in total have completed so far this year at a cost of 71 x USD1.00 = USD$71.00.

F: - When subtracting B from A this gives a net income total based on single Mini lot trades of USD$2,510.00.

G: - An annual WEEKLY FX PREMIUM subscription costs CAD$1,500.00, which is approximately USD$1,200.00.

H: - After the annual subscription cost is deducted, the net income after all costs is USD$1,310.00 based off trading just single Mini lot trades.

There is a huge amount of additional monthly and year to date trading information and reports available on my website https://www.weeklyfxdrivethru.com This can be found on my home / landing page under the tab at the top of the page titled HISTORY / PERFORMANCE, scroll down to “This year’s Performance”.

2: THE SOAPBOX:

IN SEARCH OF... THE TIPPING POINT

It has been some time since I have been trading in markets like these.

When looking at charts we are in round number territory when trying to establish possible entry levels for trades. It’s hard, many say too hard a market as a retail trader to participate in, and I am inclined to agree... I am IN SEARCH OF THE TIPPING POINT.

What is the TIPPING POINT?

A Ukrainian Nuclear reactor breach?
Putin wakening up nukes?
Putin launching a nuke?
Europe putting boots on the ground in Ukraine?
NATO troops on the Ukraine border?
Biden sends a naval fleet into the Aegean Sea?
Sanctions against the purchase of Russian OIL are imposed & defined.
At the moment the market is self-sanctioning.
OIL (WTi) hits $150 - $200 a barrel?

I do not know what the precise TIPPING POINT will be, but I suspect that there will be one. More of this later...

From a Forex perspective its crazy to be long RISK going into a weekend. In a market driven by headline news, with the Russian Invasion gathering momentum being long RISK is crazy to me.

The RISK of large opening GAPS in the market are huge.

With this as a backdrop, we are entering a week when we have an ECB meeting and Press Conference.

There are so many questions here for Christine Lagarde...

Is the talk of interest hikes towards the end of 2022 off the table now?
Inflation in the EUROZONE hit 5.8% last week. It’s set to increase even more given the EUROZONE reliance on Russia’s energy. But it’s NOT just energy inflation we also see food inflation.
The increasing inflation situation cannot be softened by monetary policy is the dilemma. Can the ECB tighten risking STAGFLATION?
The strong economic rebound talked about only last month. Is that gone?
Can the ECB begin a policy of normalisation given such uncertainty?

There are many more, but answers to the above will set us up with direction moving forward.

I think from a trading perspective the ECB will provide a TIPPING POINT regarding trading FX.

Let me elaborate....

In a matter of two or three hours next week, we will know just how bad things are for the ECB.

We know that the FED is raising rates by at least 0.25%. Powell has stated so publicly. Powell has also stated that the U.S. economy is in good enough shape to take a series of rate hikes.

Here’s my scenario: -

March 10^th - The ECB does nothing on normalisation, in fact it rules out rate increases for 2022 completely.
March 16^th - The FED raises rates by 0.25%
May 4^th – The FED raises rates by 0.25%
June 15^th – The FED raises by 0.25%

At the end of Q1 2022 just looking at the two biggest Central Banks.

ECB: Overnight Rate = 0.00%
FED: Overnight Rate = 1.00%

We essentially have CENTRAL BANK DIVERGENCE on a grand scale. For FX PREMIUM subscribers, I have added projections, goals, possibilities vis-à-vis some EUR currency pairs in section 3.3.

Now it’s NOT plain sailing, although I do feel that the EUROZONE is deep in the shit based upon the fact it is so reliant on Russia for energy, Natural Gas and OIL.

There are RECESSION and STAGFLATION risks hanging over both the U.S. and EUROZONE economies. But I do believe as long as the uncertainty continues, and the markets remain headline driven on the back of the Russian invasion of Ukraine, there is NO good news for the single currency and its fate as far as I am concerned is much lower.
The great and often forgotten factor when trading Forex is, it’s like a game of chess trying to stay one or two moves ahead: -

Here I am talking about the EUR heading lower BUT in my mind I am IN SEARCH OF THE NEXT TIPPING POINT to go long the EUR.

If you resonate with my thoughts and approach 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

3: THE EDGE:
(SOME OF WHAT’S ON THE OTHER SIDE)
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers)

3.1: BANK OF CANADA (BOC)... on the road to find out

3.2: GERMAN and ITALIAN INFLATION... UP

3.3: WHAT NOW... THE CENTRAL BANK DIVERGENCE TRADE

3.4: THE RBA GOES CHILLY UNTIL JUNE 2022.

4: 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 Ukraine / Russia conflict now into its second week.

It is very difficult to predict moves as we are swinging one way then other based on a mixture of geopolitical news, war headline news, sanctions against Russia headlines and finally the favourite of Financial markets what is the current story vis-à-vis interest rate hikes.

In this environment, FX has reacted strongly in favour of the flight to safety currencies; USD, JPY and CHF are all beneficiaries.

Financially, despite still a lot of talk, sometimes to the contrary 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 important to the supply of commodities into Europe (there are miles upon miles of pipelines running underground through Ukraine).

There are an increasing number of factors to consider.

Despite the fact it appears that most countries have increasing health controls, 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).
The RUSSIA/ UKRAINE conflict has severe ramifications for European energy costs etc. This cannot be underestimated.
RUSSIAN sanctions have gone down a path that isolates Putin and his policies. They are now affecting day-to-day activities with the Russian population. Unfortunately, Putin is only interested in Putin. It will be interesting to see does the backlash against Putin’s policies grow as time moves forward.
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.

I am trading but at about 50% of my normal trading activity. The RISKS associated with trading in a headline news environment do NOT align with my trading principles.

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

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.

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.

5.2: THE LAST DROP

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.

Scott Pickering
The Pip Accumulator
Twitter: @weeklyfxpremium (Restricted feed - FX PREMIUM Trade Information)
Twitter: @theanalogtrader (Restricted feed - FX PREMIUM Market Commentaries & Views)
Twitter: @thepipaccumulator (Open feed)

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BLOG VERSION: #446 FREE NEWSLETTER
DATE: 6^th March 2022