Today is such a “teachable moment” day in situational awareness I don’t even know where to start … 1) BOJ does extra QE last night, letting the world know it doesn’t want the Yen to go higher [USDJPY lower], 2) gold has been brutally monkey hammered 3 days in a row, and now on day 4 [a Friday no less, meaning plenty of traders will be evening up positions ahead of the weekend], with a relatively tight range of about $8 and we are hovering near the lows, and 3) at 09:30 New York time we get a shipload of worthless ‘before Trump” economic reports which will shake things up. What could possibly go wrong?
Coming into this clusterfark, I check the news and see what “Peter Pan” Kuroda [“I can fly, I really can!”] did, and I’m looking at the hourly on gold directly below.
I got a red trend line on this HR1, along with the Ichimoku cloud [support & resistance levels]; market is about $2 - $3 lower than the trend line prior to 9:30, but from looking at this, I know that if that trend line is broken on the upside, added to the fact that its “position squaring” Friday, we could get a nice burst up in price with buy stops.
Since USDJPY has been inverse correlating pretty well lately with gold, on a move up in gold spells a move down in USDJPY, and with the price destruction in gold lately it’s going to take a Herculean effort to get it above 1190 and keep it there; meaning, buying USDJPY near the bottom for a trade.
Here’s how I played it; 1) let the numbers come out at 9:30, 2) if we get no reaction from the numbers, I’ll look for algo signals to sell USDJPY on gold rallying at some point on short covering, 3) if USDJPY market goes bananas on the upside, it will mean gold busts 1180 decisively, and takes price into exhaustion line territory where I will buy, 4) if gold pops higher, meaning USDJPY goes lower, I’ll buy USDJPY if gold hits the upper exhaustion line at RM=1. In any event, option #4 is what happened. Directly below, first the gold chart and then the USDJPY chart.
As you can see from both charts, we got a double confirmation of a short term top in gold with an RM=1 upper exhaustion hit, and a short term bottom in USDJPY with an RM=1 lower exhaustion hit. When I bought USDJPY, I got the worst fill imaginable; a full 3 PIPS off the offer on my screen, which despite what any/all brokerage houses tell you when they swear to you nobody is trading off of you [which I know is bullshit cuz they all do it despite ECN, STP, and every other alphabet soup networking BS … they might not know “who you are”, but they see the order and want protection … a rotten fill is exactly what you want to see because it means a rally is imminent!]; don’t be naïve enough to believe they are handing out great fills in a fast moving market.
Don’t get me wrong, I’m not blaming LMFX here, I’m just stating FX trading “facts” as I know them from being in this biz for so many years; every brokerage house on earth “talks” a good game. They ALL got the best LP’s [oxymoronic statement if I ever heard one], deepest liquidity [except when it ain’t], and lowest spreads [except if you look]. Fact is, every LP allowing you to have an account is looking to rip you off; every trade, every day.
Now, I have a good long USDJPY trade going here from an exhaustion line hit, so what do I do now? Easy Peezee; I’m looking for a spike up to liquidate [sell]. Well, within seconds on a spike up I liquidated and actually got a much better fill than I had anticipated; do you think that would have happened if I had waited until price had stalled or started to roll over and go down? [Hint: “Hell No!”] And do you think I CARE it rallied further a few minutes later where I could have made even more money? [Hint: “Hell No! (part deux)]
In essence, the day’s trading was a “backdoor” algorithm signal; I didn’t want to sell gold at the upper exhaustion line, but felt given the circumstances of the day’s news events [especially “Peter Pan”], buying USDJPY on a break was the play especially if the correlation with gold held up [and it did]. It’s called “situational awareness” and I had the scenarios pegged in my trader brain [“please be careful when entering”] for how I wanted to play this Friday before it occurred.
I also want to add something to what I wrote yesterday; namely the “1%” theme. Three things of importance here; 1) your weekly total of 50 PIPS [10 PIPS a day] is more important than each single day. In other words, don’t sweat the small stuff if you finish a day with 8 or 9 PIPS or even lower, cuz there’s gonna be days where you will be above 10, 2) don’t dwell on the PIPS, concentrate on the trade; some trades are quick scalps because they don’t look or feel right, others you can “free trade” it for more given the right circumstances in the market, and 3) nothing in life is absolutely perfect; if you fall short a week or two it simply means you get to add a week or two to get what you want at the end. It’s no big deal; don’t put so much pressure on yourself that you end up doing “stupid shit” [and you know what that is without me even having to tell you].
Every single trading day there is opportunity within these above average volatile markets; right now USDJPY is pure “gold”. Right behind Yen is GBPUSD, which has been trading with good ranges and HVALUES. EURUSD has been very good for those of you that want “pure scalping”. Gold, for its part, is “iffy” due to 2 criteria; 1) the spread is high versus Cable or Yen, and 2) ranges and HVALUES have not been consistently high enough. The stock indices are a disaster, and I recommend for the moment you stay away from them. Crude oil is always a viable “last resort” if things die down; from where I’m sitting, I don’t think either Cable or USDJPY are going to “die down”, so crude [at the moment] isn’t an option for me.
One other subject I want to brooch before I head out for the weekend; the “life” of a trader. I’m not any different than any of you reading this; nobody shoved a “silver spoon” into my mouth nor ponied up “free money” for me when I started. I wasn’t born knowing any of this; I struggled, got knocked down, got back up and took more shots than a bowling pin. However, I scratched, clawed, and took “no” for an answer when those in the Pudding Business told me I was crazy. In other words, I learned the biz. And the one thing, and I know I speak for all those who have traded professionally, that is always in my mind is I never want to have to be in the Pudding Business.
Having said that, I know because it is how I “did it” when I started in my trading career; all you have to do is follow the volatility algorithm [scalper, regular, or combine them like I do] and make some PIPS for your dreams to come true. Too often, I here people who want to take $1,000 today and have $25,000 within 2 weeks, not knowing that you might as well go to Las Vegas and play Keno cuz your chances are better there. Trading is a “process”; and when you finally “get it right” [which I show you how to do], you can name your income.
What you need to understand is that it isn’t “guesswork” or “analysis” that gets you your goal; what gets you to your goals is “intraday volatility”. If you have it, there’s almost no way at the end of the trading day [6 – 12 hours] you can be down money if you trade the market via the rules & procedures in the scalper’s algorithm; you’ll get a shipload of signals. Give me any very low cost, tight spread, liquid market and if that market has consistently high HVALUES, it’s like walking up to an ATM and walking away with money.
Remember Butch [above, best photo we got of him, but really he’s a marshmallow], head security honcho for the –vegas team? Hell, he’s in 7th grade now … startin’ to think about the ladies … you think a paper route is gonna pay those bills? … Butch loved crude oil, but I got him trading USDJPY now, and some of his 6 girlfriends even got him eatin’ sushi… “Even Winthorp here [err, sorry Butch, don’t hit me] KNOWS VOLATILITY IS THE ANSWER! … between Netflix, pizza, Mickey D’s, texting, surfing, & more pizza, ya think butch pours over charts and brokerage house research reports? … Bwahahahaha … AND IF BUTCH CAN DO IT, WHY CAN’T YOU?
Uh oh … I’m picking up very intense telepathic signals now … “go to the impenetrable bacon box in the kitchen and get me some sliced roast beef … and … LET’S GO TO THE BEACH!” I’m sooooooo outta here … beach beckons … until Monday.
Have a great weekend everybody!
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