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FX short to mid-range frequency discretionary trading
- Thread starter amazingIndustry
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I find it very hard to read the market at the moment, we have BOE and ECB coming out with their policy statements later this week (most likely more QE and rate cut, respectively) but I highly doubt it will make much of a difference other than a very short term move. I see more upside in the markets at the moment because EMU has bought itself some time after the summit (which they will of course not purposefully use) and what else could go wrong at this point (famous last words...;-)
If equity markets would not trade this rich I would look to buy dips in risk trades. This is the time I look back to when I was trading cash equity and index and single stock options, so much more choices in terms of underlying and options strategies. In fx markets I simply do not see much going on unless unexpected headlines hit the tape.
One such headline may be a tougher stance towards bank bailouts and where the funding shall come from by Holland, Finland and Co. But even both countries together are unable to push the remaining votes below the mandatory 85% majority in order to activate ESM funding of banks. Thus, the market may discount what anyone out of the non-German North European camp has to say...dull Asian session...to say the least...
Taking equity markets into account (as pointed out above) and watching AUD retreat from its high despite the strong retail numbers I may look to sell eur and cable on short term highs, given such highs mark lower highs relative to previous levels...
If equity markets would not trade this rich I would look to buy dips in risk trades. This is the time I look back to when I was trading cash equity and index and single stock options, so much more choices in terms of underlying and options strategies. In fx markets I simply do not see much going on unless unexpected headlines hit the tape.
One such headline may be a tougher stance towards bank bailouts and where the funding shall come from by Holland, Finland and Co. But even both countries together are unable to push the remaining votes below the mandatory 85% majority in order to activate ESM funding of banks. Thus, the market may discount what anyone out of the non-German North European camp has to say...dull Asian session...to say the least...
Taking equity markets into account (as pointed out above) and watching AUD retreat from its high despite the strong retail numbers I may look to sell eur and cable on short term highs, given such highs mark lower highs relative to previous levels...
looks like an opportunity to sell some eur (which I did). Cable also looking vulnerable here. Could it be that bad news out of France are gonna entertain us in the next couple weeks? Hollande gets what he deserves, socialist overpromising is poison to any economy. 75% taxes on income beyond 1,000,000 Euros? I am looking forward to see how all those laid off blue collar workers are gonna manage to service France's debt load, let alone reduce it.
Quote from amazingIndustry:
I find it very hard to read the market at the moment, we have BOE and ECB coming out with their policy statements later this week (most likely more QE and rate cut, respectively) but I highly doubt it will make much of a difference other than a very short term move. I see more upside in the markets at the moment because EMU has bought itself some time after the summit (which they will of course not purposefully use) and what else could go wrong at this point (famous last words...;-)
If equity markets would not trade this rich I would look to buy dips in risk trades. This is the time I look back to when I was trading cash equity and index and single stock options, so much more choices in terms of underlying and options strategies. In fx markets I simply do not see much going on unless unexpected headlines hit the tape.
One such headline may be a tougher stance towards bank bailouts and where the funding shall come from by Holland, Finland and Co. But even both countries together are unable to push the remaining votes below the mandatory 85% majority in order to activate ESM funding of banks. Thus, the market may discount what anyone out of the non-German North European camp has to say...dull Asian session...to say the least...
Taking equity markets into account (as pointed out above) and watching AUD retreat from its high despite the strong retail numbers I may look to sell eur and cable on short term highs, given such highs mark lower highs relative to previous levels...
took profits in my short position in eur. My reading of the market seems to have been right in that I am not the only one who is indecisive at the moment. Volatility has dropped down quite a bit so far this week which does not surprise me given past week's short covering frenzy and the upcoming CB meetings plus US employment numbers this week. In light of that one takes what he is given and taking 30pips home does not hurt given I lack conviction.
But I like to come back to how I have missed the rally last week. Problem was that I had a strong short bias and was more looking at the right levels to short instead of retreating and hopping onto the long train. Opportunity costs sometimes hurt equally like a loss. I am not a big friend of days when my traded assets move several standard deviations (unless I share into the move) simply because subsequent price action is very unpredictable and volatility often times drops off even below pre-spike or pre-crash levels. Once the move is missed its not only the associated opportunity cost that hurt but the drop in volatility robbing even astute traders of good opportunities.
But I like to come back to how I have missed the rally last week. Problem was that I had a strong short bias and was more looking at the right levels to short instead of retreating and hopping onto the long train. Opportunity costs sometimes hurt equally like a loss. I am not a big friend of days when my traded assets move several standard deviations (unless I share into the move) simply because subsequent price action is very unpredictable and volatility often times drops off even below pre-spike or pre-crash levels. Once the move is missed its not only the associated opportunity cost that hurt but the drop in volatility robbing even astute traders of good opportunities.
Quote from amazingIndustry:
looks like an opportunity to sell some eur (which I did). Cable also looking vulnerable here. Could it be that bad news out of France are gonna entertain us in the next couple weeks? Hollande gets what he deserves, socialist overpromising is poison to any economy. 75% taxes on income beyond 1,000,000 Euros? I am looking forward to see how all those laid off blue collar workers are gonna manage to service France's debt load, let alone reduce it.
Just went long eur, the extension granted to Spain to get its deficit target in order should support euro to gets it butt off the lows. I set a pretty tight stop because so many times the market shrugged off such news only to make new lows. This is a short-term view but given we made new lows in Asian morning hours it could be an interesting entry into something longer term should momentum get behind my trade.
I currently resort to pure headline trading on the discretionary side of things for lack of strong conviction to either side.
I currently resort to pure headline trading on the discretionary side of things for lack of strong conviction to either side.
Price action in fx markets is currently a pure pain to watch. No follow through on either side, the participants benefiting the most in this environment are brokers, no question. There are just so many contradicting news headlines crossing the tape that anyone looking for momentum shall get thoroughly disappointed... I tightened my stop to 1.2280 and will sit again on the sidelines should we trade below such levels. The point is that I currently lack conviction on the downside. I still err on the long side but the lack of any sort of momentum so far does not give me much hope. Those are one of those days where its very hard to find an edge and so I just keep the long trade on and focus my energy on more productive means...
...clearly shows sometimes luck is part of the equation (albeit a small portion). Eur traded down to 1.2280/1.2281 and in Interactive Brokers sell stops are triggered when the offer (not the bid or mid, least how I am set up) trades at or below the stop price. Usually the spread at IB in Eur is tighter (generally half a pip) but IB quotes wider spreads when being set up to trade orders >5 million USD equivalent notional)
I decided to keep the trade open with unchanged stop at 1.2280.
As can be seen in attached chart, its risk-on baby. AUD, NZD, CAD heavily bid up, dollar and yen sold...euro and the pound almost unchanged. Should have probably bid aud or kiwi when European equity indexes started to fly. But one is always smarter after the fact.
I decided to keep the trade open with unchanged stop at 1.2280.
As can be seen in attached chart, its risk-on baby. AUD, NZD, CAD heavily bid up, dollar and yen sold...euro and the pound almost unchanged. Should have probably bid aud or kiwi when European equity indexes started to fly. But one is always smarter after the fact.
Quote from amazingIndustry:
Price action in fx markets is currently a pure pain to watch. No follow through on either side, the participants benefiting the most in this environment are brokers, no question. There are just so many contradicting news headlines crossing the tape that anyone looking for momentum shall get thoroughly disappointed... I tightened my stop to 1.2280 and will sit again on the sidelines should we trade below such levels. The point is that I currently lack conviction on the downside. I still err on the long side but the lack of any sort of momentum so far does not give me much hope. Those are one of those days where its very hard to find an edge and so I just keep the long trade on and focus my energy on more productive means...
Attachments
there you go, stopped out at 1.2280. The perfect summary for what went on for the last two days. Completely erratic price action, driven by the slightest comments of central bankers and politicians. As expected and illustrated in my previous attached chart the commodity currencies are holding up a lot better, euro is now being sold off heavily alongside dollar and yen buying which may actually push eur to re-test if not break the low of this week at 1.2050 levels. Nothing else to add, I lack conviction for any more aggressive moves and will remain on the sidelines. It only shows that in such tight range (eur traded in a 80 pip range since the start of the week) taking home 30-50 pips is not the worst idea. However, I am in the business of looking for larger moves and am taking fully into account that I will be frequently stopped out before generating 100+ pip trades.
Quote from amazingIndustry:
...clearly shows sometimes luck is part of the equation (albeit a small portion). Eur traded down to 1.2280/1.2281 and in Interactive Brokers sell stops are triggered when the offer (not the bid or mid, least how I am set up) trades at or below the stop price. Usually the spread at IB in Eur is tighter (generally half a pip) but IB quotes wider spreads when being set up to trade orders >5 million USD equivalent notional)
I decided to keep the trade open with unchanged stop at 1.2280.
As can be seen in attached chart, its risk-on baby. AUD, NZD, CAD heavily bid up, dollar and yen sold...euro and the pound almost unchanged. Should have probably bid aud or kiwi when European equity indexes started to fly. But one is always smarter after the fact.
Current currency basket levels, note how euro is on the short list of most larger players since having posted the previous levels. AUD and NZD held up remarkably well pointing to the fact that the current risk-off move originated from comments out of the EU EcoFin meeting.
Attachments
eur extended its range this week so far by 20 pips to about 100-110 pips, which is extremely narrow. It looks increasingly like all the big players who wanted to be short are already, while yields in Spain and Italy remain stubbornly at "unsustainable" levels.
I honestly do not have a bias in either direction right now but should momentum build then I will want to trade on the same side, I find it impossible to imagine that we will not see any large moves this week in this particular pair anymore. Something has to give...
I honestly do not have a bias in either direction right now but should momentum build then I will want to trade on the same side, I find it impossible to imagine that we will not see any large moves this week in this particular pair anymore. Something has to give...
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