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Thursday, December 14, 2017


“You’re welcome baby!”

Another day, another FX “shit show-a-rama”, as the ‘smartest people in the room” wax eloquent about interest rate “dot plot” paths over the next few years; never mind, they can’t even figure out car sales for the week, but somehow they got their “smarts on” about the course of their respective economy. Even before the central bank oracles spilled the beans, there was the “same old same old” dealer LP “bat guano” in EURGBP price, wiping out stops with abandon; directly below, it didn’t take long to get both sides of the equation in EURGBP. “Hey, we got needs … and you’re the one who gets to fill ‘em”!

I’m sitting here last night and the phone rings … “OMG, it’s from Greece … Hello, I said”. “-vegas baby, it’s Mr. Panos … I had feeling in my toes you needed me, your old friend from pit trading days, to give you a call and cheer you up … how you been, my longtime friend”? [He needs me to send him 50 Euros, I just know it.] “Markets are bat guano Teddy, it’s tough sledding at the moment”, I said. “-vegas baby, listen to me and follow this advice: 1) stay Greek baby!, 2) buy EURGBP from one bank, and sell at another … whichever way it moves, call the bank with the loss and cancel the order, and 3) can you send me 50 Euros, cuz oozo & hooker prices have skyrocketed since those F-ing Germans forced us all with austerity”?

“So, you need 50 euros huh? Ok, I’ll MoneyGram it here in a second … you never change, you know that? … same old Teddy, dead broke by Friday”!

And so, after reliving the old pit trading days for a while, he hangs up, and I get on the laptop and send him 50 Euros via MoneyGram… only, when I’m looking at the screen, it says, “your request to send Theodopolous Teddy Panos in Greece 5,000 Euros is processing; please wait a moment”. And now, I’m freakin’ out!

Then, I wake up, and the dog is lookin’ at me; “hey good, you’re awake; I think it’s time I need some bacon … let’s go to the “impenetrable bacon box” in the kitchen right now, Ok”? And it takes me a few seconds to realize why it was more “nightmare” than dream; Teddy Panos with 5,000 euros in his pocket with a weekend in front of him … “time to party -vegas, let’s go baby”! … OMG, I hurt thinking about those days.

But, this morning after the interest rate decisions were out, and EURGBP was wiping people out left and right, with sharp moves up and then immediately down, or vice versa, I went back to thinking of “Teddy” and the days in the old Swiss Franc pit … and while many might think it was all “champagne & caviar”, there were time periods [like this one in EURGBP], where making a buck was tough to impossible … and then there were guys like Teddy. And what I remember most, is his belief he could impose his “will” upon the Swiss Franc and make it go wherever he wanted … idiotic, but true … he would threaten brokers, scream at clerks, scream at the ceiling, and once I saw him punch himself in the face … I almost soiled myself I was laughing so hard, right along with the other 20 or so people standing there … as one broker said to him as he’s standing there staggering to stand up, “hey, if you want somebody to beat the shit out of you, I’d be more than happy to oblige”!

And while for years, it worked remarkably well, one day it didn’t, and he got carried out … time to go back to Greece and do whatever … there was a time, when I didn’t do a trade for 21 days in a row, cuz the market was like a coil winding up to explode; which it eventually did big time, but during that 21 days, it was pure hell sitting on my hands and doing nothing … déjà vu baby, feels kinda like the bullshit going on today in EURGBP.

Quite frankly, I don’t know how deep the mud is in EURGBP; my gut feeling is that for the foreseeable future, GBP is pretty much capped at 1.35 to 1.36 max, and unless May’s government collapses or the Brexit deal goes down the toilet, it’s gonna be hard to get Cable under 1.32 and stay there … I simply can’t see the upside with the uncertainty facing the U.K., along with the political necessity of a deal should support around 1.32 on the downside … at the same time, the Eurozone is improving economically, and it’s gonna be tough to get EUR under 1.16, while at the same time, the ECB will do whatever “jawboning” is necessary to keep it under 1.20. All of this puts EURGBP between 0.86 and about 0.8925 … and even these might be a tad “wide”, and it looks to me like the best choice is buying the spikes lower for trades, especially if there is no news. If the break warrants it via news, then I’d reevaluate, but since Cable is the more volatile of the pairs in the cross, the least likely scenario is for Cable to rally sharply and hold the gains; and that means buy the breaks via spikes lower. And, as we all know, when intraday volatility slows down, the algorithm isn’t fast enough … by the time you buy the 5 & 9 crossover, that’s the rebound high from the spike lower.

It’s still Thursday, and things can still happen; however, taking a “snapshot” now of things as they stand, directly below the weekly candlestick in EURGBP, where it looks as though we may be in for 2 small “doji” weeks in a row. As you look at prior weeks, you have to look awfully hard to find 2 worse weeks, back to back, than the ones we’re in right now, in terms of price action. 

And if you’ve been watching during the day, or trading it, you are now looking at how dangerous and treacherous these “doji” weeks can be; they get you to buy the tops and sell the bottoms, looking for the volatility breakout that’s there about 99% of the time in all weeks traded … only, it ain’t here now is it? … and that kills an account, which is why I always have told people that your primary objective in trading is to not do “stupid shit”; and doing stupid shit is defined as continuing [over and over] to do the things that lose money, looking for a different outcome … sure, eventually the market will break out; when, who the hell knows … but your objective is to be there and not in the “Pudding Business”.

Always evaluate your risk; and right now in EURGBP, the risk is spiking UP as the market blows through 0.88300 – 0.88500, on its way upwards of 0.89000. What that means, is simply Cable goes down faster than EUR, cuz the risk in Cable from the 1.34 level is lower, not higher … right now, things in the U.K. are on “eggshells” … May’s government is hanging by a thread, and she just got a Brexit vote shoved up her you know what … the BOE is signaling no rate hikes for a long while; at least a year into 2019 … and this Brexit BS is stagnating the economy, while the Apparatchiks in government take their sweet ass time dragging the whole process out … and what that means is “uncertainty”, and if you don’t know it, know it now; markets, any market, hates uncertainty. And that’s why I think the upside in Cable is limited barring some news event that changes the calculus. And since Cable is in the denominator, and the risks are for lower prices, those gaps lower will spike the cross up, and that’s why I don’t want to attempt to sell the upward spike … simply put, it can go plenty further very quickly. On the other hand, spikes up in Cable aren’t lasting very long … they’re mostly stop hunts, and when the stops are cleaned out, there’s no new buying at all, and price quickly goes down … again, that means EURGBP spikes lower, and until I’m proven wrong, that to me is the optimal entry buy signal with a stop a little lower. On the bounce you liquidate. I’m talking large “spikes” here, not normal trading; this is akin to the “special conditions” trades in the Scalper’s Algorithm” manual.

We’re getting close to the European close, and once again, EURGBP price is slowly slipping away … like watching a popsicle melt in the sun; nothing dramatic, just liquidations lower from the morning in stair step fashion; traders in the pair simply giving up and liquidating long positions, that for the umpteen time the last 2 weeks have rallied up only to see no follow through at all once the stops have been cleaned out. From my vantage point, though, the problem is one of logistics; moves higher don’t stay higher and then after a correction continue higher, and moves lower don’t stay lower and after a correction higher don’t then go lower; instead, it’s pretty much straight up to some kind of high, and then rolling over and straight down to some kind of low, with no algorithm signals in the middle of any of this. And that kind of action perfectly describes a “doji” and/or the “Flying Wedge of Death” [FWD], which is no traders friend whatsoever. Today, another in succession, and what moves and algorithm signals that come, they come right before news releases of importance which will move the market, and there’s no way I step in front of any report of importance.

I said the other day, “how many times does this have to happen to you before you realize, that the spike up and subsequent drop in price isn’t to be bought cuz the 5 & 9 don’t crossover … only if a signal is given and price then bounces and more new highs occur do you go in and be a buyer … until then, you’re simply being set up to lose. Same way on the downside only reversed”. And today, the move down came from the approximate 50% retracement line straight down with no 5 & 9 signal crossover to get me short … it simply rolls over and the market gets crushed lower with zero rallies to get us in … and if anybody out there thinks selling a market in the hole or buying a market on a rally is the road to riches, I got news for them … it ain’t. It simply is what it is, and is our “tail risk” when trading action is condensed into large spikes and then nothing, until it happens again … and boy, have we seen a lot of that lately, which isn’t normal by any means, although I’m starting to wonder if there is a “normal” anymore.

It’s very frustrating to be sure, but it has happened in the past … as I said earlier, there was a time when I made no trades for 21 straight days …  people were wondering if I had died … no, the market I was trading simply stopped trading for 3 weeks+, with every day having a very small range and then doing nothing but moving slightly higher almost every day … I saw this, evaluated the risk, and took the position of not trading until the bullshit ended … and when it ended, it ended with a bang … this will be no different, but the important point is to survive it and then flourish. Going forward into the Holidays, I expect both weeks to be Ok trading wise, cuz both Christmas & New Years Day are on Monday; year end capital flows should keep things interesting and more volatile than you might think.

And now that Europe has closed [basically 16:00 server time], it’s basically a different day as New York becomes one big slop bucket for price action. Sure, if I’m in a position and New York simply continues the move, I’ll stay with it, but more times than not, that isn’t going to happen … not even close … look forward to stop hunts and spikes, cuz that’s all there is barring some news that is propelling prices up/down. Since 16:00, today’s price action in EURGBP is not very good, or indicative of the earlier day, and is not worth trading most days. It’s why, for analysis purposes and trading purposes, I limit my trading time to this 8-hour period of 8:00 – 16:00 server time; if it isn’t happening during this time, it isn’t happening. Unfortunately, this week has been data loaded with economic reports & the G3 central bank meetings on interest rates … that’s limited the available trading time, unless you want to skate through something that can spike against you in a millisecond and obliterate your stop, leaving you with 30+ PIP losses in a heartbeat, which is gonna take a lot more heartbeats to get back. In that respect, this week has been a disaster, while the week before was dominated by the “Brexit divorce drama”, and nobody knew when news was coming, until it was there and price spiked somewhere.

Tomorrow sees no reports … all the news is out … Friday will be the first day of this week not under the influence of “shit coming in large quantities” either down the road or now. Hopefully, we can get a decent day out of this week, get some algorithm signals without having to worry about some report or event that is gonna happen in 3 minutes, and have a nice profitable day … we’ll see.

Considering past price history [outside of Brexit, which can be considered a “one-off”], it really is remarkable that GBPUSD has all of a sudden decided these past few weeks to a month to start with the “stop-a-rama” price spikes that skew everything in its path. Yes, Cable has always been volatile, but there has been an “orderliness” to it where usually large gap spikes were absent … not so recently. To that end, I’m hoping that the erratic nature of EURGBP these last 2 “doji” weeks is behind us, and more normal trading is again ready to return … that remains to be seen, but EURGBP is a good market to trade under normal circumstances. Historically, the algorithm works very well in this market, and some of my peers who trade it exclusively, and have for the last 10+ years, while experiencing the same frustrations as us these last 2 weeks including today, no doubt would tell you what I have been saying, but nonetheless just wait it out and everything is fine. No market is 100% fantastic 100% of the time … it doesn’t exist.

Here in the New York afternoon, EURGBP is rallying back into its “comfort zone” [above 0.87700; who knows if it will hold, but for now it is] … granted, on the low end of it; nonetheless, back it comes, and once again shorts are frustrated they can’t get this pair lower … just like longs are frustrated they can’t see price stay above 0.88300 for longer than about 3 minutes, before it aggressively backs off, shorts can’t get it below 0.87500 before it rallies quickly off the lows, and this is what has plagued this market for 2 straight weeks [since November 30, 2017]. Now, I know what a lot of Newbies are thinkin’; “hey, buy it when it gets near 0.87600 and sell it when it approaches 0.88300”. But the problem is one of risk … all of your trades for 3 or 4 PIPS gets wiped out, when the market goes through one of these areas and gaps 40 – 60+ PIPS and leaves your stop at the extreme. So, which trade is it that gaps? Answer that and your fine, but you can’t, and all it means is you get wiped out when it happens … trade for a long enough time frame [that would be your career], and it’s not a question of “IF”, it’s only question of “WHEN”. So, if you like the “Pudding Business”, you’ll love this strategy.

No trades today, but like I said before, 1) no signals [except ones right before reports], and 2) money we don’t lose is money you make and keep. Trust me, I don’t like sitting here twiddling my thumbs in the wee hours of the A.M., but I really hate losing money; we can’t deposit into our bank account number of trades, so that only leaves profit. And profit doesn’t mean much, if before you get it, you get whacked every day with losses.

Wrapping up today’s big G3 interest rate decisions, and “solving the unsolvable”, it doesn’t mean every single scenario of trade conditions can be solved, it simply means I know which ones “CAN” be solved when I [we] see them … that’s all. Thinking of Teddy Panos every now and then, should remind you of the necessity of patience & discipline, something he lacked more than money for a weekend party. I’m hopeful tomorrow sees better trading action … Onward & Upward!!

PAMM spreadsheet directly below … until tomorrow mi amigos.

Have a great day everybody!






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