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Sunday, December 3, 2017


“Time to get r done, and end the frustrating confusion!”

EURUSD & EURGBP Appendices to the “Scalper’s Algorithm” are now available in the “Download Links” section, over in the right-hand column. This finishes all 7 of “The Magnificent Seven”, and gives the raw data for each. More importantly, though, is the addition of “The Magnificent Seven Summary Volatility Table”, which takes the data for all 7 markets and breaks it down, giving us the information we need to make intelligent decisions. This table is what I have been working on since Hurricane Maria hit the Eastern Caribbean on September 19th & 20th 2017, and left me on “Gilligan’s Island” for almost 2 months. The raw data is there for anybody who wants to wade through it; however, all of you should spend some time analyzing and thinking about the Summary Volatility Table”, and what it means for your trading.

And while the EURUSD data is up, I want to focus attention today on EURGBP. After Friday’s blog post, on Friday night and into Saturday night, I got some emails from longtime professional trader pals I’ve known for decades [and by the way, I trained back-in-the-day]. They’re scattered everywhere, and most often I see them when they come to visit here in the Caribbean. But to a man, they all wrote [one way or another] to tell me, “It’s about time”!; and what they are referring to is the conclusion they all reached years ago, namely that the only market in FX to trade is EURGBP. They all are very large traders, and I would bet almost never do any trade under $1 million notional; most days sees them do anywhere from $5 million to $20 million notional per trade, and as I was reminded by all of them, “I told you so” and “why didn’t you listen to me years ago?” were liberally applied to the gentle needling they were so happy to dish out. And as I wrote back to them, “I F-ing here you now”!, I can only imagine the chuckles around the room when they open my email.

None of these other professional traders would touch with a ten-foot pole, any of the other pairs offered up on the MT4 [one said he “dabbles in AUDNZD cuz it’s in the Asian time zones and he lives in Singapore, and says it trades a lot like EURGBP; meaning, it trend nicely over the short-term without the huge gaps and stop blowouts seen in other FX pairs.], for the very simple reasons they are all fraught with 1) horrendous slippage, 2) LP dealer stop-hunts, 3) much higher spreads, and 4) exponentially higher risk on gap moves. The simple fact is, they’ve been telling me this since at least 2006, and in earnest since 2012; and of course, they are “right on” in their analysis. EXIT QUESTION: “are you gonna trade any Dollar pair or cross with 20 mil stuff, and subject yourself to the utter insanity of 30-50 PIP moves against you in seconds, only to see your market orders or stops get literally obliterated with slippage”? Of course not, unless you’re certifiably nuts and want to give money away; cuz the problem is you can’t make it back without risking the account. And I got news for you: nobody trading 10-20 million stuff, is ever going to put themselves in a position where they have to work again for a living or for their lifestyle … not gonna happen.

Cuz what they have known for years [me as well, but I thought the other pairs were viable and they never have] is that most of the “games” LP’s play with the retail spec trade is “ABSENT” from EURGBP; the market is very large, deep, with a very high rate of bank, dealer, hedge funds of all sizes, government entities, and very large individual traders as well, all participating in an institutional cross where the money flows are quite different than in other pairs. And while USDJPY is considered the “800 pound gorilla” of FX, it also happens to be the world’s premier “carry trade”; meaning, it’s the denominator against everything else that is traded in the world. Where are all the crosses with GBP or EUR in the denominator? Well, outside of EURGBP, there aren’t any … which of course leads to the observation and eventual conclusion they are non-correlated with other asset classes.

None of these guys would ever dream of trading GBPJPY or GBPCAD, or anything else; way to much risk and LP games. One second it’s dead as a bump on a log, the next it’s “bat guano” crazy “off the charts” 5-10 PIP bid/offer spreads with 50+ PIPS moves that come out of nowhere and then just as quickly recede. How you gonna trade this with size? Hell, how you gonna trade it period, no matter your volume. Last week, I got clipped for 6 PIPS on a buy order for a 1 lot in GBPCAD, when there wasn’t a whole helluva lot going on in the market; imagine what 200 lots would have looked like in Friday’s “nutjob” market? … am I just not supposed to give a crap about this? Cuz what makes this “allowable” in most of FX, namely not enough institutional presence to matter, isn’t the case at all in EURGBP.

I don’t want people to think EURGBP is for “widows & orphans” accounts; barely moving and doing nothing. This stuff moves, although mostly absent is the “out of nowhere” insane moves that infect and plague other markets, that end up “skewing” the data. For example, that 400 PIP drubbing GBPCAD put in last week for a weekly range, a good 80% of it were in a handful of M1’s, that you couldn’t have captured for profit no matter what you did. Sure, the market moved, but what good was it for you if you can’t capture it? And therein lies the “rub” with GBPJPY as well … large weekly ranges from time to time that skew the averages, with almost 100% certainty that 20%-40% of that range was a BS spike out of nowhere, that accomplished only stops getting taken to the slaughterhouse. More than likely, spreads were widened considerably to make any trade unwise, and slippage you could count on to be horrendous … “there just isn’t any way, any of these LP’s [“liquidity provider”; an oxymoron if I ever saw one] are going to give you a fair price on what you want to do … instead, it’s feeding time for the sharks … do you know where your account is Nemo”?

Now, that doesn’t mean that EURGBP doesn’t have its moments; it most assuredly does. Economic reports, and Government Pie Holes keep things most interesting, but for the most part, you can see this stuff coming and side-step it until the news is out. And even if you get caught in some “Brexit” news and/or political intrigue from Germany or the U.K., it isn’t the end of the world for your account … certainly nothing like the BS that accompanies other markets. AND THAT’S THE PRIMARY REASON THEY ALL ONLY TRADE EURGBP … RISK! To one extent or another, they all use my algorithm ideas, having been originally trained on the floor, and most if not all have “tweaked” it to their unique style of trading; I don’t have a problem with this cuz I know they know what they’re doing.

For you Newbie traders out there reading this, understand that 1) lower risk doesn’t mean “no risk”, 2) the spread in EURGBP [cost of doing biz] is the lowest of any cross [usually 2/10th’s to 3/10th’s of a PIP] on any trading platform and has the lowest slippage of any pair traded, and 3) this cross can be traded at any time 24/5, but I would still avoid the late afternoon New York [3 – 4 P.M. EST] into the first hour or two of the Asian session [8 - 10 P.M. EST], simply cuz 99% of the bullshit shenanigans of the LP dealer community takes place during this time period, with very little cross activity for your efforts. Things do pick up, though, in the cross starting around 11 P.M. – Midnight EST., so if your inclination is to trade during this time, there’s no reason not to … just remember, know what’s on the economic docket for the day in the E.U. and the U.K., so you don’t get blindsided with a 4:30 A.M. EST report that sees you on the wrong side of the cross … you want to gamble, go to Las Vegas.

We all know markets move, and we all know that EURUSD & GBPUSD move as well. If EURUSD = 1.18000 offered and GBPUSD = 1.34000 bid, EURGBP will be offered [for you to buy] at 1.18 / 1.34 = 0.88060; if the Euro goes up a PIP to 1.18010 and Cable stays the same, EURGBP = 1.1801 / 1.34 = 0.88067; if the Euro stays the same but Cable goes up a PIP, EURGBP = 1.18 / 1.3401 = 0.88053; if they both go up a PIP, EURGBP = 1.1801 / 1.3401= 0.88061; if they both go down a PIP, EURGBP = 1.1799 / 1.3399 = 0.88060. So, as you can see, no matter what happens the cross will move; yes, more slowly than other crosses, but that can be made up in higher trading volumes plus the fact the cross is in “GBP”, so your PIP payout is much higher than in CAD or JPY. In order to get a 1 PIP move in EURGBP, all it takes is an approximate 1.4 PIPS ± difference between Cable versus Euro, and with the spread and RT commissions, you’re up ½ of a PIP.

Studying the “Summary Volatility Table”, it should quickly dawn on you that 1) if you raise your volumes modestly in EURGBP, 2) understand that a PIP has much different Dollar values depending on what cross you trade, then 3) the weekly and 8-hour range advantage that GBPJPY, GBPCAD, and GBPCHF have over EURGBP EVAPORATES rather quickly into only a few PIPS difference. Now, what these friends of mine have know for years, I’ve quantified into data that shows “they speak NOT with forked tongues”!

In my lifetime, there have only been 2 markets that I would classify as “perfect 10’s”; 1) the “old” pit traded Swiss Franc futures, and 2) the “old” pit traded original SP500 futures contract [500* the index]; there is no such animal in the modern-day version of electronic trading, for the simple reason that back-in-the-day, the banks couldn’t pull “the wool over the eyes” of guys in the pits. In today’s electronic world of trading, the banks control everything and can pretty much do whatever the hell they want in most markets; look what the FED manipulators and the banks get away with in gold, for example. And then cast your eye on the outrageous slippage handed out like Halloween candy every day in dollar pairs and most of the crosses … it’s outrageous, and there’s only one market you can go to and escape it to any satisfactory degree … that would be EURGBP. Of course, I would love to see a very modest increase in the EURGBP 8-Hour and weekly data; that is this market’s biggest negative. However, that’s outweighed by other logistical factors in its favor over other pairs that keeps money in your pocket; and while it’s not perfect, it comes damn close, and in today’s trading environment, keeping money is every bit as important as making money, and this market allows us to do that.

Well, finally, I can’t ignore what they have been saying for years … in pretty much every other market on the MT4, the banks get you eventually, one way or the other; either they gouge you with slippage [in & out] that would make Vito Corleone blush, or they run your stop and then add slippage to that. The simple fact that the world’s biggest money regularly, and in most cases, only trades this pair, is testament to its power ranking and viability for making consistent money, day-in & day-out.

Most everybody who reads my blog on a regular basis, knows of my frustrations with the scumbag LP’s from day one; nowhere is this more apparent than in spot gold, which is a sick joke of its former self. Add to that list the stock indices, where everything I have been saying about this market manifested itself this past Friday, with the “fake news” from ABC about President Trump, which caused the stock indices to plummet hard from the 2660’s in the SP500, down to 2606 in minutes … “so Skippy, how do you know where to BTFD, when the market is dropping 5 handles per 10 seconds on certain Trump impeachment news? … oh wait … never mind … he was “President-elect”, not a candidate … so sorry for the error … and it’s “elevator up” in the SP500, back into the high 2640’s … sure, piece of cake to capture this move [NOT], and now that market can sit and die for the rest of the day and into this week”. That brings us to FX, where pretty much everything you see on your screen is a “mirage” when it comes to the crosses … there just isn’t any way to escape the LP’s and the slippage they hand out, or the stop runs they start and finish … sure, it’s criminal, but there isn’t anybody on earth that can/will stop it, cuz they are all in the food chain to get money from it … the only losers are retail spec accounts, and nobody but nobody gives a crap about us … nobody.

Except, that is, in EURGBP, where I most certainly should have gravitated towards after the hurricane hiatus in November … yes, I had the numbers … yes, I’ve known most of my peers WILL ONLY TRADE THIS PAIR AND NONE OTTHERS, cuz what retail specs get most often with LP’s in other pairs, is absent here, except when major news hits, but even then, it’s not nearly as “messy” as elsewhere. Over the weekend, I’ve shared the data with all of my close peers, and after emailing each other and/or talking via phone, it’s not even a close call; from here going forward, it’s EURGBP [with higher volumes] via the algorithm.

There is a major modification to the “Scalper’s Algorithm” that I am making just for EURGBP; delete the 121 & 183 EMA’s, and simply replace with a 31 EMA LOW [any color you want, but hey, I like “Aqua”]. The reasons for this are as follows: 1) it’s a relatively slower moving market that shifts subtlety but quickly, and my peers who have traded this pair for years, simply tell me that the 1HR [Ok, technically 62 minutes] block between 121 and 183 is too slow, and it lets good trades “slip away” for no reason, while at the same time the amount of “false positives” has not increased significantly. All of them agree, that by going past the approximate M30 threshold, you’re limiting profitably for no good reason.

I would add also, that your best trades in EURGBP will come when this 31 EMA LOW has a clearly defined up [for longs] or down [for shorts] slope; when it’s relatively flat, most often the trade signals are of very short duration, and there is a high probability of “chop” … something we don’t want to see but is inevitable. I’m hoping by the end of the next weekend, I’ll have an update to the “Scalper’s Algorithm” for EURGBP via another special chapter at the end of the document, where I will outline in detail these changes along with examples.

PAMM spreadsheet has been fixed; figured out the idiotic problem that only a computer would see as a problem, and it will be up tomorrow in my blog post. Until then mi amigos …

Have a great rest of your weekend everybody!



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