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Friday, March 10, 2017

NFP DAY: “WHAT DID WE LEARN TODAY?”



“We ALWAYS have a choice!”

We’ve been in March now 10 days; there hasn’t been a single day this month where Asia and/or Europe has reached the “40 PIP” rule during their trading sessions, leaving everything up to the crooks at the New York banks. Out of the 10 days, 3 sessions have seen 30 – 50 PIP spikes [up/down, what’s the difference] that blow past the 40 PIP HVALUE threshold and then come … yes, you know … crickets! … and after the mini explosion nothing but mindless chop of ± 20 PIPS or so for hours on end.


And then comes last night, where after the close and everybody has gone home, trading has gone "nighty night", trading desks got the “C” team with fresh MBA’s manning the phones, and what do I see upon returning from dinner? Why of course, somebody comes in and stampedes a large order through in gold and USDJPY and we find ourselves about 40-60 PIPS higher in minutes and from which we can sit the entire night and chop some more ± 10 PIPS or so until morning.

All the while remembering the total wall of selling all day right around 114.90 or so that capped every attempt at a rally … got me long twice to no avail… well, go away and come back in 60 minutes, and it’s 60 higher … seriously, even an experienced trader like me wants to hit something … anything … where’s an LP dealer at when you need him for something?

And so today, so far we got an HVALUE of about 39 PIPS and an LVALUE of about 38 PIPS and a market, as I write, that is “unched” around the Noon hour in New York; not that it would matter much anyway, cuz the bottoms in USDJPY off the NFP report produced no viable signals either in terms of bullish engulfing patterns or reversals. In essence, it’s basically the worst of all worlds, cuz just when you start to think the market has “legs” to do something … BAM! … “Ha! We ain’t doin’ squat … but thanks for playing, please come again”!

Ever since I moved my operations over to Turnkey, and believe me it’s a blessing I found these guys, because the spreads on crosses and subsequent RT commissions are the best ever on the MT4, I have had to seriously “rethink” many of the major cross pairs; no longer are we subject to 3 – 6 PIP spreads and the pleasure of paying about $8 per 1 lot round turn commission to boot. With these kinds of conditions, and as volatile as some of these pairs can be, it makes it very difficult at times to get even outside of the “net” cost of the trade, let alone make a decent profit on a short term move; add in some slippage, and it almost makes you feel like you won the lottery if you can make 5 PIPS on a trade, while losing 20 comes at the snap of your fingers.

Longtime readers/clients may remember years ago when I published one of my first documents detailing the 3 FX cross pairs you can always trade for profit, no matter how slow markets get or become; the SP500, DOW30, & DAX30 can go completely dormant, USDJPY can sleep for months, gold can slumber like a grizzly bear in winter for years on end, and everything on your platform looks and feels like it’s DEAD! But there are 3 pairs that are always active, and I have told people for years, and years, “don’t get emotionally attached to a market that you trade; go where the action is and make money, do not sit around telling yourself everything is fine and volatility will return, when in fact it may not. Hell, I’d trade dirt futures if it was available, and it was liquid, deep, and had good volatility. So many times in the past I have seen people refuse to “wake up & smell the coffee” when faced with their favorite market going “sleepy time”, and then they hang around for weeks/months/ and even in some cases for years waiting for “normal” to return. And when it doesn’t, where are you at”?

Don’t get me wrong, I’m not sittin’ here predictin’ the demise of Yen volatility; by the same token, it isn’t doing anything of substance either, and were it not but for a handful of spikes, this entire month so far would look like spoiled dog food. I’m not going to sit around and just wait for USDJPY to get its ass in gear. In the past 5 years, there have been stretches of 3 -6 months [MCH, APRIL, MAY 2015 (3 months); FEB. – JULY 2014 (6 months); MAY – OCT 2012 (6 months)] where the market has been absolutely dead, with very little activity, so it’s not like this kind of event can’t take place right now; it most certainly can and at some point in the future will most definitely will.

The 3 crosses I wrote about years ago are most definitely still valid and always have been; the big difference now is Turnkey. They are GBPNZD, GBPAUD, & EURAUD; at Turnkey the RT commission rate is $2 per 100,000 notional, same as in everything else, but the spreads are the very best you can expect to get. GBPNZD spread is about 2.0 PIPS, GBPAUD spread is about 1.3 – 1.5 PIPS, and saving the best for last EURAUD is about 0.2 – 0.6 PIPS.

It is EURAUD that is of interest to me because the “net” cost to trade it is most often equal to or less than 0.7 PIP; most other brokerage houses, net cost will be 3.0 – 5.0 PIPS per round turn. And folks, there is a “Grand Canyon” difference in trading something with instant fills on the market at a “net” cost of 0.6 or 0.7 PIPS compared to a place where there is slippage and we are paying a “net” cost of over 4 PIPS; “it’s Bigly & Yuuuuge”!

On Sunday night I will be posting a “Special Update” on EURAUD; I’ve traded this puppy “on & off” since the MT4 was created for electronic trading back in 2001 – 2003, and I know how to trade it, when to trade it and when to leave it alone, what signal parameter values to use for SDEV in the volatility algorithm, and other key facts you need to know to trade it successfully. Make no mistake, this market can and does move … sure, there are some “slow” days here and there where HVALUES can be lower than average, but when you calculate how crosses are determined, it doesn’t take a “rocket scientist” to know small changes in either the numerator and/or denominator can produce very big swings in the cross.

For example, consider the EURUSD = 1.06000 & AUDUSD = 0.75000; EURAUD = 1.06 / 0.75 = 1.41333. Add 30 PIPS to each side, therefore EURAUD = 1.06300 / 0.75300 = 1.41169, a loss of about 17 PIPS. Even when they both move the same with respect the U.S. Dollar, the cross still moves. When they go opposite [which is often], things really pick up steam; EURUSD UP 30, AUDUSD DOWN 30, EURAUD = 1.0630 / 0.74700 = 1.42302, A GAIN OF 97 PIPS! Of course, there are 4 permutation events that can happen, so the price of the cross is active and moves up and down quite a bit during the day, and quite often has daily ranges and HVALUES in excess of 150 PIPS.

The other 2 crosses, right now, cost about double [or more] to trade without any discernible increase for the money when it comes to either daily ranges or HVALUES; so why pay more to trade something for nothing … for no reason other than you can say you traded it? EURAUD is also somewhat “smoother” to trade than the 2 GBP pairs; i.e. they trend better with smaller spikes [don’t be fooled though, this stuff can spike], and most importantly many of the turns are punctuated with engulfing patterns and reversals.

A very big “plus” in favor of the crosses is that they have no threshold for HVALUES, i.e. NO “40 PIP” rule; this is due to the fact they are crosses, and not U.S. Dollar pairs. HVALUES are not something to be concerned with in above average volatile FX crosses, because they are very much the norm in trading, and depending on the circumstances involving the 2 pairs, they can be anywhere and are for the most part moving. It is indeed an anomaly to see low HVALUES in any of these 3 crosses … it happens, but not anything like what can be expected in the U.S. Dollar pairs. On average over the years, low HVALUES are only seen less than 1% of all trading days, and most often are seen around key Holidays in Europe & the U.S. that involve either a Friday, Monday, or in the case of Thanksgiving, a Thursday. Other than that, in the past you can go for years and not see one during a normal business trading day.

In terms of volume and liquidity, nothing matches USDJPY, but that doesn’t mean EURAUD is small potatoes; it isn’t, and for a good long while I won’t have any problem whatsoever doing any size trade I want or desire. So, I’m not going to sit around and wait for USDJPY to do something; with Turnkey, we indeed are fortunate to have the cost structure we have [lowest in the world], and if USDJPY “wakes up”, then fine I’ll trade it via the algorithm signals and everything is “peaches & cream”. However, I’ve been in this biz long enough to know when the “red flags” are going up the flagpole giving warnings, and I’m not about to sit here and ignore them. So, look for the “Special Update” Sunday night sometime.

And through the whole day, it’s as if USDJPY is being run by “aliens” who can see us, but we can’t see them. It’s 2 P.M. in New York, and that’s my “official” cut off time for U.S. Dollar pairs that haven’t achieved their respective HVALUE … it can go to 0 now and I wouldn’t care [almost]. With only 2 hours until the close, any order flow that hits the market is apt to trap somebody, and moves can get downright strange and horrific, as people tend to panic when the clock is ticking down and do “stupid poo poo”; “I never have, and ain’t applying for membership now, into this club … thanks for asking me to join though. Considering it’s an NFP Friday, and you’re tellin’ me you can’t even get an HVALUE of 40 PIPS? If this isn’t an indication of something wrong with this market, then I don’t know what is; I’m not looking for things, but I’m not market blind either, and today spells it out rather clearly in my book”.

If the day ended right now, in USDJPY the HVALUE = 38.7 PIPS & the LVALUE = 35.8 PIPS, making the profit ratio [PR] = 38.7 / 35.8 = 1.08; about as bad you can get. And through it all, a 2 M1 “blitzkrieg” down = to about 50 PIPS so the sell stops can get filled at the bottom.

If the day ended right now, in EURAUD the HVALUE = 90.8 PIPS & the LVALUE = 24.8 PIPS, making the profit ratio [PR] = 90.8 / 24.8 = 3.66; a decent, respectable PR reflecting potential gain [Anything over 3.0 for the day is considered very good.] So, do the math Skippy.

If ever anybody needed a beach today it’s me … action wise, this week has been a total disaster, where if you combine all the minutes of the week I’m betting about 15 M1’s represented about 90% of the price move in USDJPY over approximately 7,200 minutes. That’s going to change next week I guarantee; cuz if USDJPY coming into Monday morning looks and feels like death warmed over, I’ll have EURAUD up and ready to go … “and just cuz I can, I gotta go throw some Shrimp on the Barbie”!

End of week PAMM/MAM spreadsheet directly below.




Beach beckons … dog is screamin’ … I’m outta here until Monday; “Special Update” Sunday night on EURAUD!


Have a great weekend everybody!
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OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!
 

 

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