A DAY LATE AND A DOLLAR SHORT: By Scott Pickering

1. THE FIRST SHOT:

1.1. INTRODUCTION:

This will sound a little crazy but over the past couple of weeks I have had worries about what to write about. I feel that the FX market is being dominated by TRUMP. Last week I even eluded to my early morning daily routine being altered because like most traders I was waiting on the 7AM EST daily TRUMP tweet to see which way we are heading on the day and would it be RISK ON or a RISK OFF.

Economic data seemed to be secondary to the TRUMP media circus that has ring fenced not just equities but also the FX market.

Let me be straight. It’s a bloody hard thing trading at the moment. We are range bound, pretty much directionless and sentiment shifts by what seems like the content of the latest tweet.

I will expand on these thoughts and take matters a couple of stages forward in the “SOAPBOX” section of the blog a little later.

Apart from trading being a pain in the arse, what else is bugging me?

Well it’s not the snow….

The weather has thankfully improved and our new BIG GREEN EGG BBQ is due very soon. This will affect my trading as I will be more outdoors during the day and not tied to my multi screens for hours on end. Better weather = MacBook Air and iPAD Pro days in the near future after the London fix.

I am maybe a little tired of the current trading ranges. The EUR/USD has been operating inside a range within a larger range for a much longer than expected period of time than I thought, given all the news flows.

 

From the chart above you can clearly see the two ranges.
Large range (Maroon Trend lines) 1.2085 to 1.2560
Inside range (Black Trend lines) 1.2235 to 1.2475

When the EUR/USD is held captive as the most liquid pair in the FX market it adds to my frustration as it limits other moves with other currency pairs and encourages ranges to be developed all over.

I am NOT saying that there are NOT opportunities to trade, but, it is like walking across a minefield at times. There is always a market within which to trade, however, not every market contains opportunities that fit with your personal style of trading and the temptation to force trades therefore increases each day and if you do not have control of your MINDSET it becomes a challenge.

I have subscribers to provide for, so the pressure mounts to find opportunities beneath the obvious and that is not always possible. Therefore, they get nothing if I see nothing and we all look at screens….

This is what is causing I think my main frustration with the market at the moment. It will change, it always does but looking at the EUR/USD (above) chart once again, it has been inside a 140-pip trading range for just over a month. In a nutshell there is the root cause of my frustration.

I have often communicated that PATIENCE is vital when trading. Sometimes your best trades are the ones you miss, when price does not align with your TRADING PLAN.

Moving on…

Patience and the ability to adapt to this at times, bizarre marketplace with its corresponding price action, are critical success factors at the moment.

My FX PREMIUM subscribers that have been with me for a few years now know that I have embraced change in the way I approach and adapt my trading style to suit the current market. I do NOT have a TRUMP trade in FX and I doubt many traders do. I have read a lot of column inches and I think most of it is tantamount to gambling.

I have read some frightening stories recently via social media regarding traders failing in this current market through over trading, wrongly sizing trades, starting FX to try and make back cash lost through crypto currency gambling.

I have said for the past three years and it has been my closing comment on every blog for over a year, that to be successful and to achieve longevity with your trading you need to trade smaller positions with wider stops to basically MANAGE YOUR RISK. This approach keeps you out of the chop fest. This approach works… the FX PREMIUM success proves that point.

Newbie traders believe probably via Brokers or Social Media that trading FX is straightforward. They jump in with NO idea of leverage and believe that trading with large position sizes generate larger profits. If you are the luckiest bugger alive that approach will work, but in reality, it’s a sure-fire way to blow up your account and be margin called.

Trading is lonely. You are on your own. No one is going to cuddle up and say never mind, it’s hard, better luck next time. It is you versus the market. You need real disciplines to achieve trading longevity. It is NOT a get rich quick play. It is hard graft and a particular set of skills are required with the correct MINDSET to be successful.

1.2. THE SOAPBOX:

A DAY LATE and A DOLLAR SHORT

FOMO has become a very common abbreviation meaning “FEAR OF MISSING OUT”. Right now, I can see this in the stock market and with reading about FX traders blowing up accounts it is obviously apparent in the FX environment as well.

The markets are nervous…

We have a President in place who judges the economy by how well Wall Street trades.

I think I am getting punch drunk on the TRUMP approach. It’s predictable, boring, childish, repetitive and frankly if this is what it takes to resonate with his voter base GOD HELP these United States, and NOT GOD BLESS them!

I want to be balanced in this piece and not just bash TRUMP, however….

I expected more; he is, despite my increasing lack of tolerance towards the TRUMP style with his awkward stance and approach on the cusp of something big that no other U.S. President could ever have achieved with both a China reciprocal trade deal and North Korean denuclearization. They are not yet signed, sealed or delivered, but my goodness he is closer than anyone from the Oval office has ever been. I think Washington is so fucked up it wouldn’t recognize the enormity of these deals if they were concluded positively. I have said it before and I will say it again, these are HISTORY BOOK ITEMS.

All this aside, back in the day, when I managed by sales teams across Europe, I would always consider myself a change manager. Right now, I am not that willing to accept the TRUMP influences and impact as freely as I may have done a few years back.

The markets are nervous, they are skittish. They have risen so far so fast on the back of TRUMP, should he for whatever reason lose the Presidency there will be blood on Wall Street.

The markets are dealing with: –

• TRUMP on SYRIA MISSILE ATTACK
• TRUMP on TARIFFS
• TRUMP on CHINA TRADE DEALS
• TRUMP on RUSSIA
• TRUMP on THE IRAN NUCLEAR DEAL
• TRUMP on NORTH KOREA
• TRUMP on TPP
• TRUMP on NAFTA
• TRUMP on THE MUELLER INVESTIGATION
• I nearly wrote TRUMP on STORMY DANIELS!
• The USPS (last Friday) stating that TRUMP’S attack on AMAZON was without substance as the USPS makes money out of the AMAZON postal deal.
• Also last Friday: James Comey, the sacked by TRUMP ex. FBI Director, who is about to have his book “A Higher Loyalty” released soon, likens TRUMP to a Mafia boss, a congenital liar, an unethical leader devoid of human emotion and a person driven by personal ego. The last part seems pretty accurate. In true TRUMP Presidency style Comey was called by the President of the United States a “slime ball”.
• In addition; we are now entering earnings season once again.

 

• OIL is on the March higher because of middle east uncertainty over supply. This will have a knock-on effect into production and distribution costs.PLUS:
• The FED are raising interest rates maybe 3 more times in 2018
  and
  The Dot Plot from the FED suggests 4 more rate hikes in 2019.
• Central Bank divergence talk has gone quiet of late. Let me just say “THIS IS REAL”. Can you imagine USD strength coming back through the markets? Since TRUMP was inaugurated the USD (DXY) has been in a down trend and any bounces so far have been shallow(see DXY chart below).

What comes first…. USD strength or a “FULL-ON” BEAR MARKET?

Since the GFC we have until very recently just seen a one-way market. RISK-OFF has NOT been heard much at all until very recently.

Dead right…

These markets are nervous. FEAR and GREED are still dominant but who wants to be “A DAY LATE and A DOLLAR SHORT?”

In my opinion, TRUMP is on a thinner line than ever at the moment between glory and utter failure.

The graphic below shows in RED those senior in his administration who are no longer in his team…the sacked list! I’d say if you are on this page listed in BLACK your days could be numbered!

 

The markets have an awful lot to consider. I would say that prayers are held most days before trading and that contingency plans are in place for the inevitable.

The existing formula cannot possibly have longevity for the U.S. Something has got to give.

 

From an FX viewpoint using the DXY chart above, with regards to USD strength it could be a really sharp RIP higher. The TRUMP inauguration trend line resistance comes in around 91.75 (RED LINE) in the DXY

The 61.8% Fibonacci retracement is above the trend line at 92.54 (GREEN LINE). This could be a trend line break target. At this level it becomes my line in the sand play. 95.19 (SKY BLUE LINE) is a point of interest on any move higher in the next few months.

For now, however price action is contained by the 38% Fibonacci retracement.

If you DO NOT have this chart on your radar for your decision making at the moment you will do moving forward.

I do not want to sound alarmist but so much is bubbling under, in my opinion, it’s now becoming just a matter of when NOT if.

2. THIS WEEKS IMPORTANT TRADE INFORMATION:

2.1. ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.

 

 

2.2. GEOPOLITICAL EVENTS:

 2.3. BIAS CHART – USD MAJORS SUPPORT and RESISTANCE:

 

 

2.4. USD OVERVIEW – MY THOUGHTS:

Nothing much has changed from last week. We remain in the TRUMP downtrend and remain range bound as seen on the attached chart.

Longer timed charts show “BEAR FLAG” formations with measured moves as low as 82.00.

The TRUMP inauguration trend line resistance comes in around 91.75 (RED LINE) in the DXY

The 61.8% Fibonacci retracement is above the trend line at 92.54 (GREEN LINE). This could be a trend line break target. At this level it becomes my line in the sand play. 95.19 (SKY BLUE LINE) is a point of interest on any move higher in the next few months.

 

2.5. USD TRADING CHARTS:

EUR/USD:

No change from last week…

The Daily chart below highlights the trading range that I believe we are sitting in.

We have two ranges: MAROON Lines 1.2090 to 1.2550 and the BLACK Lines signify a range within a range at 1.2240 to 1.2480.  The latter range has been tested twice, but we are just range bound.

This pair is waiting for a bolt, a catalyst to move it one way or the other.

 

GBP/USD:

This pair tested 1.4300, more than likely on the EUR/GBP breakdown with lots of selling coming through the markets rather than a flurry of GBP buyers entering the market. We end the week with a nasty looking “shooting star” candle having formed.

Looks to me that the GBP could be moving lower in the early sessions this week. This would be consistent with the USD Strength that we saw into the latter trading sessions last week.

 

AUD/USD:

This pair had strengthened last week off the 0.7650 level, which now looks like quite a formidable level for bulls to start building stops.

On Friday last week however, we posted quite a nasty looking “shooting star” candle which I have highlighted on the chart below.

The range to play now is 0.7650 to 0.7820.

 

NZD/USD:

A lot of NZD strength last week. This currency pair was very resilient to geopolitical news over the past two or three weeks which, has continued to surprise me. However, last Friday’s candle was a dent for the NZD bulls touting a move to test the range highs at 0.7435. The bull move stopped at 0.7400.

I believe that we are in a range, which is clearly defined on the chart of 0.7176 to 0.7435.

 

USD/CAD:

The Head and Shoulders pattern is in play. The measured move is to 1.2510. It is only invalidated should we see a break back above 1.2930.

 

USD/CHF: 

No change from last week.

As you can see on the Monthly chart below, the triangle pattern is “RIPE” for a breakout. My thought process is a long side breakout towards parity once again.

There is a range in play, which I have been following of late which is from 0.9190 to 0.9850. I am a little reluctant to aggressively trade the CHF given its flight to safety and neutrality attraction.

We are tightening in the triangle…. something is going to give soon.

 

USD/JPY:

We are still in the throws, in my opinion of breaking down towards 102.00.

We have broken above 107.00 and I think a short from a little higher would offer greater value, circa. 108.00 would be great. Basically, a re-test of the underside of the 2012 trend line.

The JPY is a very targeted currency at the moment as Bond Yields, RISK and TRADE WARS all play directly into how the JPY is traded.

I am surprised by recent price action with the USD/JPY given all the geopolitical news hanging over the markets. This in itself makes me more cautious in what trades I am considering. This divergence is quite strange.

 

3. THE WEEKLY FX PREMIUM TRADING SUMMARY:

3.1. WEEKLY FX PREMIUM PERFORMANCE YEAR TO DATE:

(Incorporating the last 5 WEEKLY FX PREMIUM TRADES)

You can get on board and join from as little as CAD$10 for 10 days and then CAD$150.00 per month, currency conversions for CAD$150 is roughly as follows: –

• GBP £90 per month
• EUR €100 per month
• USD $120 per month
• JPY 12,700 per month
• AUD $150 per month

This represents a great value way to subscribe…

Go to my website www.weeklyfxdrivethru.comfor more details under the TAB – “SUBSCRIBE HERE”.

4. TRADER EDUCATION:

Most weeks, I will add an article in this section based on an area of importance in trading that I feel should be documented. It may not resonate with all traders but for some I hope they find it useful.

THE 5 MOST COMMON MISTAKES NEWBIE TRADERS MAKE

It isn’t always easy being a newbie. Whether it’s in taking on a new job, starting your own business, or trying out a different sport, the degree of uncertainty in a new and unfamiliar undertaking can sometimes be overwhelming and push you to make mistakes. Trading is no different. Here are five of the most common mistakes that newbie traders can make:

1. TRADING WITHOUT A PLAN OR JOURNAL:

Even newbies fresh out of school and in their first week of trading know that the market is as unpredictable as the next “American Idol” or “The Voice” sensation. More often than not, in the attempt to make the most out of the opportunities the market presents, you get so lost in the emotions that you forget what you are supposed to do.

With your own money on the line, planning and researching trades and not being impulsive are they key goals. To help you achieve this key goal, which is to become a consistently profitable trader, you need a TRADING PLAN and maybe a TRADING JOURNAL.

It can be a simple outline of your entry and exit conditions and your RISK MANAGEMENT rules, and it needs to be written down so that you can refer to it, record and review your progress. I use my TRADING PLAN all the time to refer to my entry and exit strategies. Your TRADING PLAN helps to keep you focused.

2. NOT SETTING A STOP LOSS:

Trading without a STOP LOSS is like trying to train a Labrador puppy to walk beside you nicely without a lead (unless you are Caesar Milan). It is impossible and crazy.

Stop Losses are there to protect. They are not 100% guaranteed as the SNB day (when the EUR/CHF peg was removed) illustrated. They are the best insurance you have however, to stop your account being wiped out. Over the past three to four weeks in particular we have seen very volatile markets and short squeezes that could potentially wipe out accounts. Therefore, setting a STOP LOSS allows you to survive and fight another day even if you have a losing trade.

3. REVENGE TRADING:

You would not be a trader if you had not ventured into this area at one time or another. Pure and simple REVENGE TRADING is when you get emotional over a losing trade and then try over aggressively to recuperate the loss. I have revenge traded and like most traders my REVENGE TRADE was twice or three times the position of the original trade.

It is difficult, but you just have to try to accept the loss and not let your judgement in the future be clouded by your ego. The text books will tell you that instead of REVENGE TRADING you should focus your efforts and energy on analyzing what went wrong and figuring out what you can do to improve your subsequent trades.

4. LETTING LOSING TRADES RUN:

This is an interesting subject. The textbooks also say that newbie traders often let their losing trades run all the way to their stops instead of cutting losses early.

As a POSITION TRADER I am at odds with some of the textbooks. I fully understand that mentally if the trade is going the wrong way, maybe on the back of a significant news event, it may be the correct action to exit a trade early, I have no problem with this.

However, 90% of the Trade setups that I get involved with are based off Fibonacci levels and I usually allow an excess of 10 or 15 pips either way for stops or limits. It has been proved and well known that currencies will run to specific prices, test these levels and then stop and reverse. Therefore, sometimes if you believe that your stop is at a level where there is a lot of price interest I see absolutely no problem letting the trade run because history has taught me that sometimes taking a loss is wrong if there is a huge amount of interest at your Fibonacci level.

When you enter a trade, you assess risk. This risk is based on possibly several indicators and chart analysis techniques. You have to set realistic stop loss levels and sometimes the best policy is not to exit the trade but to wait and let it reverse. This route preserves capital in your broker account and CAPITAL PRESERVATION is key to Forex success.

Knowing when to let a losing trade runs comes with experience. If you have entered the trade with a clear objective and assessed the risk, you sometimes need to allow the trade to move around within the parameters you have set. Having said that a geopolitical event or poor headline economic data sometimes means that no matter what you have planned, it needs to be forgotten and the trade exited.

5. HAVING UNREALISTIC EXPECTATIONS:

Having goals in all aspects of life help you stay motivated and disciplined, the same can be said of Forex trading.

The goals you set have to be realistic and achievable without adding too much stress.

Hand in Hand with setting your goals whether you prefer, daily, weekly or monthly you also need to have a clear understanding of the steps that you need to take to achieve these goals. This is what your TRADING PLAN is for. You detail objectives and the critical success factors that you need to achieve the goals set.

5. WEEKLY FX PREMIUM SUBSCRIBERS:

5.1. TRADING REVIEW:

5.2. OPEN TRADES… HOW I WILL TRADE THIS WEEK:

5.3. CROSS-RATES & EMERGING MARKETS PAIRS:

5.3.1. CROSS RATES:

5.3.2. EMERGING MARKETS:

5.4. SENTIMENT,FUNDAMENTAL & MACRO THOUGHTS:

5.4.1. OVERVIEW THOUGHTS (MY MACRO PLAN & IDEAS):

5.4.2. THE MARKET SENTIMENT CHART:

5.5. CURRENT LIVE TRADES & LIMIT ORDERS:

5.5.1. CURRENT LIVE TRADES:

5.5.2. CURRENT LIMIT ORDER TRADES:

5.6. FX BROKER NEWS and MARKET FEEDBACK:

6. THE FINAL SHOT: 

Nothing more to add here, I have said enough except,

As usual…

Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.

Scott Pickering

The Pip Accumulator
Twitter: @weeklyfxpremium

https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #278 FREE NEWSLETTER
DATE: 14th April 2018