question....what is your edge?.....getting in front of a freight train
edit: and please don't say that shorting parabolic moves is your edge
Fading Yen - It has gone parabolic
- Thread starter gmst
- Start date
question....what is your edge?.....getting in front of a freight train
edit: and please don't say that shorting parabolic moves is your edge
Any TA based or quant strategy (other than delta hedging in which case you are trading a model) be it pairs, arbitrage etc. is trading some kind of observed market tendency. You might have a good explanation for such an observed market tendency or might only incompletely understand it. It can be argued that stat arb models are typical example of trading market tendencies when you don't completely understand all the moving pieces but you have been successful in modeling them.
The market tendency/reasoning here is that parabolic moves happen because market participants were not ready for such a move and they got caught in fast moving markets in a low liquidity situation. Even though one can trade 100 million in usdjpy without moving the markets more than 10 under normal circumstances. But with policy change news coming out etc. the pair can move 50 pips for every 100 million. So, wrong positioning of players or huge gamma hedging by market participants lead to such parabolic moves.
The edge here is once the dust settles, things come back to their more appropriate value. Shorting parabolic moves in small size, with a detailed scale-in, scale-out plan is the way to benefit from such market tendency.
Not sure if my answer impressed you, but I firmly believe in it.
Also, downward usdjpy volatility is significantly different from upward usdjpy volatility, due to various reasons. So, we won't see a 4-6 big figure move in 1 day in upward direction, but we have seen historically 4-6 figure move in downward direction for yen.
good luck with that
To the OP, or others,
Do you have a chart that details the price action of USDJPY dating back as far as possible? If OP is right and the very long term trend is in fact down (and is to continue down), maybe we could benefit from seeing if there is any long term resistance up ahead.
I do recall plotting this out with what data I could find via google and it seemed like the 90 range was a possible longer term resistance area, but my analysis was quick and possibly inaccurate. And, I think my data only went back about 30 years.
Do you have a chart that details the price action of USDJPY dating back as far as possible? If OP is right and the very long term trend is in fact down (and is to continue down), maybe we could benefit from seeing if there is any long term resistance up ahead.
I do recall plotting this out with what data I could find via google and it seemed like the 90 range was a possible longer term resistance area, but my analysis was quick and possibly inaccurate. And, I think my data only went back about 30 years.
How do you like these apples?
http://fxtop.com/en/historical-exch...M1=01&DD1=01&YYYY2=2013&MM2=01&DD2=18&LANG=en
That break from 250 to 125 was practically in a straight line. The money that was lost trying to fade that in the late 80s' was spectacular.
Quote from murrica:
Looks like 90 is in fact touching *some* type of resistance... lol, kind of a broad stroke so maybe OP IS ON TO SOMETHING!!
Notice how small that blip is on the bottom. What he is calling parabolic barely shows up as an uptick. That was the point I was trying to make. The move to the upside hasn't even started yet. What if the Yen retraced half of that move. That would put the yen at 250!!!!!!!!! It's not even at par yet!
look at that chart! We ain't seen nothing yet perhaps.... just wait for that trendline break!
As stated, it is better to go with something like this then trying to be the guy calling parabolic fades. It is not like this is an intraday jobber pushing it through stops lol... this is a power force.
Maybe what can make this better is the FED later in the year.
Another thing to watch is when this the US debt talk picks back up into Feb/March. Just be looking for dips...
As stated, it is better to go with something like this then trying to be the guy calling parabolic fades. It is not like this is an intraday jobber pushing it through stops lol... this is a power force.
Maybe what can make this better is the FED later in the year.
Another thing to watch is when this the US debt talk picks back up into Feb/March. Just be looking for dips...
I believe yen is sensitive to risk and carry trades.Notice that yen began its drop when europe risk seemed to go away (one month before S&P raising Greece rating by 6 degrees,ECB accepting southern bonds again as collateral).
What if risk appears again?
As to carry trades, yen has been for decades the only large currency with low interest rates,so very good to short against other currencies.But now,both USD and EUR have low interest rates,so there is no reason to keep these carry trades.
I think that both Switzerland and Japan are "riding the wave" to weaken their currencies now that risk seemed to disappear,but I think neither is able to do that if the world feels that there are big troubles.
So, what do you think? We have really overcome debt problems and yen drop will continue,or problems will come up again and yen rise will follow?
What if risk appears again?
As to carry trades, yen has been for decades the only large currency with low interest rates,so very good to short against other currencies.But now,both USD and EUR have low interest rates,so there is no reason to keep these carry trades.
I think that both Switzerland and Japan are "riding the wave" to weaken their currencies now that risk seemed to disappear,but I think neither is able to do that if the world feels that there are big troubles.
So, what do you think? We have really overcome debt problems and yen drop will continue,or problems will come up again and yen rise will follow?