“What volatility dying looks & feels like.”
The first 4 hours in GBPCAD a complete joke today; market held hostage by data, no doubt. Directly below, our friend the “Flying Wedge of Death” on the M5.
No range, back & forth, USDCAD not doing much; GBPUSD looking weak after multiple days going higher. Even though the chart is an M5, clearly nothing to do on the M1, as the 121 & 183 EMA’s are flat … maybe a little up/down, but no real slope in either direction. That leads to the 5 & 9 signal generators jumping over each other every few minutes, which is NOT something we want to see.
Inflation data came in a little “hot” for Canada, and I thought that might get things moving in CAD, but no dice … stuck in a tight range, the data didn’t give rise to much reaction in the market. Ok, maybe the interest rate decision at 10:30 EST, followed by the BOC presser at 11:30 EST will get things moving.
We were on tap, after 7 hour and 50 minutes, of having one of the top 10 worst volatility days of 2017, for our 8 HR period 08:00 – 16:00 server time; at approximately 63 PIPS at 10 minutes to 11:00 EST, and the BOC having released their policy initiatives [no change], Cable took a massive dive and that plunged GBPCAD about 50 PIPS in 3 – 4 minutes … and we haven’t even started the BOC presser yet. Well, that was unimpressive, and the focus on CAD provided nothing in terms of price movement of any significance … 100% of the action in the cross belonged to the numerator, namely GBPUSD.
Once the BOC shenanigans ended, a couple of sell signals that really went nowhere; why? With CAD doing nothing, and Cable already having a 135PIP+ range, where is the cross gonna go? It’s got nowhere to go, unless either CAD starts moving, or Cable goes further in the “rabbit hole” and makes further lows? Regardless of the fact the cross only has about a 100 PIP range, I simply look at the numerator & denominator and ask, “what’s the probability Cable goes past a 137 PIP range, and even if it did, how far”? I have often talked about situational awareness in trading, especially the non-dollar crosses … “you can never take anything for granted, cuz they are like chained, dangerous predators; ignore them, and they hurt you”.
Once the 50 PIP plunge out of nowhere happened; nothing much happened after that of any significance; a couple of new marginal lows by a PIP or two, but the “market message” here is, “hey Skippy, there ain’t nothing left … sell at your peril”!
“Well, that escalated quickly didn’t it”? … a massive reversal day in 7 minutes on “Brexit” news, from the lows to new highs, here in the New York afternoon … talk about “cleaning out” the order books … nothing says lovin’ like an approximate 120 PIP move in 6 minutes [and climbing]. Again, I remind readers, don’t worry about profit; learn to evaluate “risk” and how to avoid it. Know where the danger lies, know where the stops are, and understand the importance of not doing “stupid shit”. And in my book, looking for more downside in GBPCAD this afternoon, what with GBPUSD having the largest range since 11/2, and CAD doing zero is “stupid shit” … you simply got nowhere to go on the short side, and plenty of risk “if” it moves higher … and boy did it move higher.
Today brings up in “spades” the need for tight stops, and not letting the market get away from you … if you don’t pay attention, days like today sneak up and whap you up side the head and leave a mark you aren’t gonna like. I’m not saying I saw this coming; all I’m saying is I viewed it from the other side once the BOC meeting was over, and with zero movement from CAD, it was all the “Cable show”, and 2 things stood out like red flags in the breeze; 1) it’s not moving lower, and 2) without CAD movement, where’s this thing gonna go on the short side? I don’t want to be long cuz the 121 & 183 EMA’s are negatively sloping, so the only choice I got is to sit.
Ok, bullish “Brexit” news takes Cable up and cleans out the buy stops and “kills” shorts; and now in one M1, GBPCAD plummets 130 PIPS+, cuz “sources” in the U.K. government say “The Daily Telegraph” is wrong and there is no deal … if you got hurt being short, only to get long at the top and not pay attention to the signals in the algorithm, you get “double bagged” in about 35 minutes with multiple hundred PIP losses … “and if that happened to you, you’re probably sitting somewhere and asking yourself how this can happen … problem is, it happens a whole lot more than people realize … today points out why the algorithm’s primary focus is to “stay out of trouble”; then and only then, can you look to profits. Do it the other way around, and it’s eventually back to the “Pudding Business” after the trader funeral”.
Here’s the bottom line: “you can take all the little short positions, from all day long, and thumb your nose at the algorithm cuz you were making a little profit on the positions; fine, but as I said before, you’re gonna need all of ‘em to cover the ones that “get away from you” and hurt you … and today points this out as best as I can point it out”.
Professional traders used to all have one thing in common; nobody ever wanted to go back to the real word and work for a living. If you want trading as a career, your focus MUST BE ON RISK CONTROL, no matter how much it pains you to either take a small loss OR sit on your hands doing nothing. I’m betting there are a whole lot of people wishing they stayed in bed this morning, after what has transpired here in the New York afternoon … it’s not about how many trades you make, or how smart you think you are … you aren’t … what matters is controlling risk.
80 PIPS off the low, before the first “Brexit news” afternoon buy signal kicks in … no way am I giving the market 80 PIPS to get long … it’s getting late in New York afternoon, and the trade is winding down … time to leave it alone and come back tomorrow. No trades today, simply cuz 1) it was worthless up to 15:50, and 2) no good signals after that. Hell, everything came on news, and when that happens the signal generators can’t change quick enough to matter. If you take a position, you are simply “flying blind” without the proper setup … and this is something I refuse to do. The market will be here tomorrow; you lose 30%+ of your account today, and if you survive the emotional baggage, it could take months to get it back … and for what?
I don’t see anything of significance tomorrow on the news front for either Cable or CAD, but with “Brexit”, who knows … for you Newbie traders out there, let today be a lesson in market mechanics you should never forget. We’ll see what tomorrow brings, and I’m hopeful for good signals, after 2 days of total crap. Onward & Upward!!
Time for the beach … I’m outta here … until tomorrow. PAMM spreadsheet directly below.
Have a great day everybody!
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