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Thursday, February 2, 2017


“If markets were a person.”

Careful what you wish for, cuz if you get it you may not like what it looks like up close and personal; and that dear amigos is what we got on our hands in the “ever so friendly” gold & USDJPY markets. If emotions were scaled on a grid from 1 – 10, both markets would be somewhere in the 40’s right now.

We’ve gone from watching paint dry to “speed of light” moves once again; seemingly out of nowhere, and with very little if any warning, gold spiked $5 in about 3 seconds in the wee hours of Europe and before New York is even thinking about trading; anybody with a buy stop and you have my condolences on your fill at the top. And for the record, this is simply “one” scenario the version 2 volatility algorithm [scalper & regular or combination of the 2] was updated to fix and deal with when trading these filthy animals; you hit that buy button when gold, Yen, or Cable are rallying, or hit the sell button when they are dropping, and you my friend are in a world of hurt and pain. By utilizing minor contra trends within a stronger short term trend for entry … by definition … you are entering your position [long or short makes no difference] at the most optimal point for profit [read highest probability]… the only thing that will cause a short term loss is if the short term trend changes at this inflection point, and while this happens occasionally, it doesn’t happen all day long. The point is this: our entry into a long position is buying the break at the turn of red into green after at least 3 M1 red candlesticks with all 3 algorithm slope lines pointing higher [positive], and our entry into a short position is selling the break at the turn of green into red after at least 3 M1 green candlesticks with all 3 algorithm slope lines pointing lower [negative]; and after a long move either in time or price, I’ll make a judgment as to whether or not to make additional trades before some kind of retracement in price.  By doing this, I am buying the breaks and selling the rallies inside a short term trend, no matter what that trend is or where it is going.

Turning to today’s trading, BOE [Bank of England] interest rate decision and presser early in the New York session; even though they did everything expected with no surprises, the early move up to the 1.27 area got smacked down hard, resulting in new lows. We’ll see what the U.S. brings … remember when it comes to gold, there isn’t anything Asia & Europe can do on the upside that the manipulators in New York can’t undo and reverse, and most likely will. Another day of frantic buying overseas, and with buy stops run, what’s left on the upside for New York? USDJPY? This market is all over the place; up… down … back up … back down … 40 – 80 PIP runs commonplace before entirely reversing and trapping orders on the other side.

Given the “nuttiness” of gold & USDJPY, I’ve moved over to GBPUSD, where make no mistake this market can hurt you like any other, but the moves are better suited to the algorithm without the hysteria and panic seen every 10 minutes in gold & USDJPY. “I like nuts, just not insane nuts, Ok”? Directly below the trades today in Cable.

Total of 7 trades; 4 clear winners, 2 losers and 1 scratch; it adds up to about 25 PIPS, with some more if you “free traded” one or more of the positions; I’m assuming maybe you didn’t, which is OK … hindsight has no business in trading. 

By 9 A.M. – 9:30 A.M. New York time today, GBPUSD has already put in a 160 PIP+ range for the day, with an HVALUE = approximately 120 PIPS; what does recent trading history suggest is left for New York the rest of the day? Easy Peezee: “nothing but chop and heartburn”. Sure, we could get some moves later in the day, but the horse is out of the barn, and it isn’t likely this market is going to run anywhere ± 30 PIPS from where it is now. Best time to trade this market is from about 4 A.M. – 11 A.M Caribbean Paradise Time [1 hour ahead of New York]; this time slot gives you the best opportunity for algorithm signals that go somewhere, and also gives you the best probability of seeing HVALUES and daily ranges increase from Asia. There are always stops being run above and below support and resistance, and your best chance of capturing a really good move is in this time slot. That’s not to say the New York session can’t produce some good moves; they do and will, just not as probable.

From my PAMM discussion from yesterday, I want to highlight the importance [which I have done before] of getting somewhat close to institutional spreads and the lowest round turn [RT] commissions possible; I think we can all agree, nobody is handing out free money here, and nobody is in business to lose money just so you can trade. I want the LP bank and the brokerage house to prosper from my trading; I want them to make a good return on their investment, from the janitor sweeping the floor at night to the guy or guys owning the place. What I object to is getting “mugged”, and being the one paying for their daughter’s pony; “be frickin’ reasonable for Christ’s sake, instead of pointing a gun at my head on every trade”!

With the scalper algo combined with the regular volatility algorithm [the “free trade” concept], I’ll most likely do 10 trades a day; so, let’s round that down some and that equals about 2,000 trades a year. If I’m paying just 1 PIP extra in “net” costs, it’s going to impact my PAMM clients to the tune of approximately 200% of their account balance!
Yes, read the last sentence of the last paragraph again; so if you had $10,000 in the PAMM, and I agree to the cost structure that allows the LP & brokerage house to take an extra PIP, you and I have just signed up to hand over 200% of our account balance this year to them; “and I’m gonna go out on a limb here and assume you don’t really want to do that”. 

I can state “flat out”, you will not see a better trading cost structure anyplace else; there are a whole host of other surprises in store as well, but until everything is finalized, I’ll hold off on details for today. In fact, and I’m not exaggerating this one bit, the cost of trading the PAMM is cheaper than if I was standing in the old pits of Chicago; that’s something I never, ever thought would be possible. “Ain’t technology wonderful”?

Beach beckons … until tomorrow.

Have a great day everybody!



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