website header 2

website header 2

Monday, November 28, 2016


“Paging June Cleaver … please call home immediately!”
Well, yesterday’s blog post sure produced a shipload of emails; it ran the gamut from “yip yip wahoo!” to “Yen? So what?” The “so what” is called “making money”, and I’m here after almost 40 years of professional trading [“I’m in my 20’s, but I use time travel to make things go faster.] to categorically state you can’t be a “one trick pony” and stay in this biz and make it a career. “You like the Pudding Business? Me neither, but it’s waiting for you if your plan B isn’t in place before your trading income starts dropping cuz your primary market has gone flat.” And the very last thing you want to be doing at crunch time is trying to figure out “on the fly” what you’re going to trade and how you’re going to trade it, and then putting it together very quickly; this is a recipe for disaster. The data is clear; sure, you can deny it all you want … that isn’t going to change anything in relation to what is actually happening, except you won’t be making money when you should be. “Hope & Delusion” are not trading strategies.

This business is about probabilities, not about finding the “Holy Grail”; if the “Holy Grail” of trading existed, some large firm would already have it and with it have all of the world’s money and there would be no market. In essence, throughout my trading career I have always wanted to be the “casino” and not the “customer”; you do that by placing historical probabilities on your side when making a trade. If you can follow directions, that makes you more money than you can dream.
And that dear friends brings me to USDJPY; I touched briefly yesterday on 3 points about this market that I want to expand upon today. The first is the sheer size of this market in relation to the world’s financial markets; every business day through direct US Dollar trades and the various crosses where JPY is the denominator currency [there are no pairs with JPY in the numerator] the world stares at about $3 trillion + Dollars worth of notional size, and the average size trade in the primary interbank institutional market is around $30 - $35 million notional size. Using the CME futures contract as a benchmark, that equates to about a 300 lot; when I was on the floor, nobody traded anything remotely close to 300 contracts at a whack like it was an “average” size trade. My point here, is that no matter who or what size account you trade, USDJPY can accommodate you with 1) speed, 2) liquidity, 3) very small slippage under normal trading, and 4) enough historical volatility to make it either a primary market to trade or a solid “Plan B”.
The second point I want to make is that unlike any other market, USDJPY trades actively in all 3 major world trading sessions; as long as you get past the 40 PIP threshold each day, it doesn’t matter where you live or what time zone you’re in, you’re likely to see adequate action to make money using the volatility algorithm. This is a huge advantage over other markets that are primarily based in their home market and gives traders flexibility in their trading other instruments don’t offer.
The third point is one of historical perspective; if I had taken data from 2008 to 2014, the PR’s from yesterday’s table would have been significantly higher due to much more volatile markets in that period; today’s markets are infected by central bank manipulation and the desire by financial elites the world over to one of “desired outcomes” rather than free markets. The result has been much lower volatility, especially in the stock indices, than in the past. For example, given the spread at ASSETS FX in the SP500 CFD, yesterday’s range in the SP500 equated to the spread being 5% of the day’s range; throw a round turn commission into the mix and you tell me how any client is supposed to beat this over time. You might as well be playing Keno in Las Vegas.
In FX, we have witnessed disaster after disaster in the majors the last few years; USDCHF, NZDUSD, and most recently GBPUSD; compared to USDJPY, these 3 are “chump change”. Please don’t misunderstand, that’s not to say USDJPY doesn’t have its moments of “stupid shit”; it most certainly does, but usually it pertains to things “Peter Pan” Kuroda says or does via the BOJ and monetary policy that takes the market by surprise. These events are usually known well in advance and can be avoided, but if you take a historical perspective into consideration with both gold and USDJPY, over a 10 year period the PR’s would both be easily 5.0+.
What you can do in gold, you can easily do in Yen; the same cannot be said the other way around. If you are a very large trader, you will suffer significant slippage in gold on a regular basis from either the futures market or with the LP trading spot; unless there is news, this doesn’t happen in USDJPY.
The problem with the stock indices today is one of intraday volatility; some days it’s so low you think you’re trading corn spreads, and then the next day the DOW30 has a 250 index point range. It’s been very difficult to get a handle on these markets without getting chopped to pieces in dull sessions. And just as a point of comparison, gold is operating along these lines as well; one day a $40 blowout range, and then the next day $9.
My whole point in bringing all this research to you via the website and downloads is to give you options and flexibility so you can make intelligent decisions for your trading. As I have said before on many occasions, I’d trade dirt futures if there was consistent money to be made; I have no agenda for any market. Ultimately, it’s about “escaping to success”, and nobody ever suggested it’s a four lane superhighway with no speed limits and no traffic to get you to your financial destination. Complex systems contain degrees of uncertainty and chaos, and what I’m providing you is a "road map" to not only defeat these features, but thrive in them like others can’t. This is what professional traders do.
Turning to gold today … higher in Asia … all of that gone now, and hitting new lows for the day 30 minutes to the New York open … seriously, what can I say I haven’t said before about these Chuckleheads?
Basically a few hours into this, and all gold has to show for itself is an RM=2 upper exhaustion move from below the white line that negated any buy signal; other than that it’s been … crickets.
Earlier I made a few USDJPY trades, so for me I’m not crying any tears missing the gold move; and overnight I decided the USDJPY manual and tutorial are far more important right now than the “chop-chop” action in the stock indices that is producing very little in terms of cumulative daily profits. In other words, intraday action in any of the stock indices since the election [where of course for 2 days the VIX went into another dimension but has since crashed] has been miserable right along with gold for the most part.
I’m going to have the USDJPY manual up by the end of the upcoming weekend, with the tutorial not far behind; yes, I think it’s that important. There are some radical changes in the volatility algorithm for USDJPY that 1) reduce “false positives” on the M1, and most importantly 2) give a much faster trend change for initiating buy/sell signals. The math is “rock solid”, and your probability of success in a 6 hour trading session is “off the charts” given algorithm rules. The biggest advantage USDJPY has over gold is far less slippage in market fills for bigger traders; in USDJPY, it’s almost impossible for retail spec traders, with an account less than $5 - $10 million in equity, to move this market or have any affect on pricing with market orders. Sure, if you go to sell 10 million in a down moving market maybe you get clipped for a few tenths of a PIP, but that’s a whole different ball game than what would happen to you in gold. In any event, I’ll get to the stock indices manual after I do the Yen this weekend.
It’s a “Chamber of Commerce” day here in Paradise; dog and I are outta here to the beach. Until tomorrow …
Have a great day everybody!

No comments:

Post a Comment