powered by Coinlib

Saturday, November 25, 2017


“Steadfastly following the data … wherever it takes us!”

Over in the right-hand column under “Download Links”, I have posted the respective Appendices for GBPCAD & GBPCHF to the “Scalper’s Algorithm” (8HR data [08:00 – 16:00 Turnkey server time] & weekly data from 12/31/2011 thru 9/10/2017). However, before I talk a little about each of these FX crosses, first a few words about the data & GBPJPY.

Quite frankly, until I spent a considerable amount of time going over the data, I have had an “uneasy” feeling about GBPJPY; yes, it’s called “The Dragon Trade”, and it can destroy accounts with ease if you get stupid; turns out, my assumptions about this market have been entirely wrong relative to other pairs in the non-correlated FX crosses. Sure, GBPJPY is great when it moves, and part of the problem is that it moves “bigly & yuge” when it moves and leaves traders in “total awe” of the “yuge” moves; now comes the other part of the problem, namely, just when you think the doldrums are over, it goes into a complete shell for weeks on end … in other words, it’s not consistent; one week an 800 PIP range, and the next 4 weeks it’s 170 PIPS per week, and everything comes on spikes out of nowhere, and leading to nowhere … It’s “hurry up & wait”, as week-in, week-out the trade looks to the “Peter Pan” BOJ, or the totally clueless FED for direction, and when it doesn’t get anything, the market “dies” … and then somebody says something “out-of-the-blue” and all hell breaks loose & SHTF … rinse & repeat endlessly … all that is achieved is stops [buy & sell] get butchered by the scumbag LP’s, there is no follow through, and consequently you get burned. And if you think you can pick the week(s) that it’s “active & volatile”, good luck in your new “guru” role, cuz nobody can.

I have stated repeatedly over the weeks & months, that what I want is CONSISTENTCY … I want something that has above average volatility “day-in, day-out”, rain or shine, March or October [or any other month for that matter], and isn’t a “one hit wonder”. “Well, it pains me, but GBPJPY isn’t gonna cut it … not to say there aren’t those who love it, wouldn’t trade anything else, and will trade it to the end, but for me it simply isn’t consistent enough, nor treats traders well via the algorithm when things slow down … it doesn’t; with spikes all over the place it can take your stop out in a heartbeat”. Simply put, I want a market that emulates [in many ways] the “old” Swiss Franc futures from back-in-the-day, from my floor trading days … “now THAT WAS A MARKET”!

Here’s specifically what we have learned in 2017; 1) spot gold [XAUUSD] is a cruel, manipulative joke, no matter the spread or RT commissions; trade it and the stop hunts & consistent outrageous slippage on fills will kill you, 2) the 3 major stock indices [SP500, DOW30, & DAX30] are “dead”; killed by central bank manipulators, they are untradeable without taking huge risks [for very little gain I might add], and 3) most of FX is a correlated, tangled mess, with absolutely no room to maneuver and profit unless you trade the very lightly correlated or non-correlated FX pairs.

I’ve identified seven FX Pairs that I call “The Magnificent Seven”; to be sure, they each have their “moments” of nuttiness, especially on major news that affects each, but in this list of 7 markets, you can find the ones that are right for you. After analyzing all 7 [EURUSD & EURGBP data are partially completed; enough for me to draw some conclusions], it is clear to me there is “one” that has everything I want … on the surface, not the obvious pair, but when you dig into the data and spend some time analyzing the market … then actually trade it [I have in my own account] to see how I’m treated by LP’s … well, the obvious winner in the list of 7 markets is GBPCAD … “nothing else comes close to its consistency for large PIP ranges, and I didn’t even analyze the North American afternoon … if I had, the ranges would be larger by approximately 10% - 20% [educated guess] … most importantly, as far back as I could go on the M1, the “Scalper’s Algorithm” works very well with this pair [in fact it’s excellent], for the most part due to the fact there aren’t nearly as many large spikes on M1 signal changes, and the SAR on long running trades does a great job of liquidating near the top/bottom of a move”.

Now, I grant you, the spread in GBPCAD is a little higher than I would want, coming in around 1.1 – 1.2 PIPS during most of the day [very acceptable given the ranges]; however, when you add it all up, that’s a very small price to pay for 1) 8 HR [remember, not counting afternoons in New York] ranges that have averaged almost 120 PIPS in 2017 so far, 2) approximately 87% of days in 2017 so far have seen 8HR ranges ABOVE 75 PIPS … GBPJPY is at approximately 75%, and GBPCHF is at a whopping approximate 54%, just so you can realize the comparison, and 3) a “relative” absence of the “nutty” spikes that plague GBPJPY, which we see practically every hour of every day non-stop.

Having said all of this, though, there will be “slow days” in GBPCAD, just like every other market … point is, I want to eliminate as many as possible, while at the same time, having a consistently high profit potential with relatively high 8HR ranges; “I get that in GBPCAD, and don’t get it in other markets … the data is clear, and I am more than happy to abide by the data and go there”. Don’t get me wrong, I have no problems with anybody trading any of the 7 markets I’ve identified … for the PAMM, though, this is clearly the best, and has been for a very long time. No reason anything should change going forward!

I do realize however, “different strokes for different folks”; that’s the reason for the other 6 markets, and why I have the data for each. Next weekend, I’ll have all markets finished, as well as a “Summary Volatility Table”, that will show all the comparisons of the data without having to wade hip deep into each Appendix.

GBPCHF is above EURGBP, but below GBPCAD in terms of volatility; however, for those wanting a pure European non-correlated cross, this is an option. Be warned, though, that the history of USDCHF is filled with actions and dates that live in “infamy”; just ask those who were long any cross with CHF in the denominator when January 14, 2015 came along and the SNB [Swiss National Bank] “unexpectedly” ended support for EURCHF @ 1.20. An approximate $36,000 gain or loss within 60 seconds per each 1 lot in volume … just beware of what you are getting into with the Swiss Franc in any denominator of any cross … I don’t think you have to be afraid of it, simply respect it and be situationally aware of what is going on in FX.

Starting this week, I’ll be trading GBPCAD; look for higher volumes as well. In the future, I’ll be monitoring closely these 7 markets, and commenting at various times on each. Quite frankly, if we can’t get the movement [8HR ranges] we want and need out of any of these 7, we can’t get any movement out of anything else either.

What originally started out as the algorithm to trade the GBPUSD non-correlated market, has happily morphed into GBPCAD; for an approximate 6/10th’s of a PIP per trade higher spread, we get an average range that is approximately 60% greater than GBPUSD [approximate 119 PIPS versus 76]. If an extra 43 PIPS per day can’t make up for 6/10th’s of a PIP, and translate into greater daily profits, then something is seriously wrong …and there ain’t nothing wrong here. Throughout my trading career, I’ve never, ever been one to stick around a market and either watch it die, or slow down to the point it’s an exercise in futility … my job has always been to find the “greenest pasture” to graze in, and then enjoy eating all the grass; I’m not about to sit around and wait for any market to “get its act together” and play by my rules … that could take a very long time. As I have stated on many occasions, I’d trade “dirt futures” if the trading conditions were right … I don’t “marry” a market. And, if I see either I was wrong about a market or it changes its fundamental paradigm, I’ll be the first one out the door, cuz the name of this game is to make money … what in doesn’t matter. I’ll be the first to admit, right along with many of my professional peers who sadly won’t, that 2017 has been [so far] a very frustrating year in many, many respects; issues I never dreamed possible I’d have to confront and solve from as little as 5 years ago. But the changes came regardless; I saw, I solved, and here we are.

If the past is any guide in terms of price, for the future, then I feel very comfortable trading GBPPCAD [and secondarily the other 6 pairs]. Through crude oil’s ups and downs, and economic conditions in both Canada & the U.K. pointing to more uncertainty and problems ahead, I can’t foresee ranges significantly growing smaller over time; if anything, they could easily get larger. But hey, who knows … certainly not me, cuz I’m no “analyst”, simply a trader; but this trader knows that if “The Magnificent Seven” can’t outperform, nothing else will either, and that’s why the focus is now on these 7 markets, and now specifically GBPCAD going forward; statistically, and probability wise, it’s our very best market to trade … the data says so, and I have always “abided” by the data, no matter where it has led me … this time is no different. Onward & Upward!!

Have a great rest of your weekend everybody!



No comments:

Post a Comment