WHICH WAY THE CURRENT?

 

“Do you think they’re paddling upstream? … Why not?”

I got an email yesterday from a reader, and he pointed out that “I like to trade 

EURUSD from the buy side, and that I get long even when the price is below the 

50% retracement line”, and was wondering about the short side of the equation. 

Instead of sharing my thoughts simply with him, I thought it would be more 

beneficial to share it with readers as well. It’s a complicated process that 

involve a number of issues I will address now.

No matter how deep you go into the trading process, from the simplest to the 

most complex trading method or algorithm, you’re still going down the “rabbit 

hole” and meeting the “Queen of Hearts” … here, there is no such thing as 

common sense, or  sense of justice, but simply the “whims & fancies” of the 

Queen … in many respects, exactly the behavior of financial markets.

The question always rises when trading, “which direction [long or short] is the 

easiest to make money”? The non-computable problem that must be attempted 

to be solved, is “how willing are you to put up with “false positives” and what is 

“Plan B” if you get one”? … this isn’t just some academic exercise, and whether 

traders realize it or not, they face this dilemma constantly in their trading. 

Using the “KISS” method [Keep It Simple Stupid], I choose to use the trend 

indicator mentioned in “The Teacup Handle Turn” … of course it’s not perfect, 

but literally nothing is, cuz if it was within 2 years I’d have all the money in the 

world. 

Since November 2017, this indicator has been giving a “bullish” reading, 

meaning it should be easier to make money on the long side of EURUSD 

rather than the short side … when you look at my trades, the entire year of 

2018 so far has been entry on the long side; simply cuz that’s what the 

indicator is telling me. Point is, it’s a simple “probability indicator” of 

market sentiment … can it be wrong? … of course, and on down days, my  

“Plan B” is utilizing the “special situation” section of “The Scalper’s 

Algorithm: The Final Solution” to judge entry from the long side. Cuz 

remember, medium term sentiment is not easy to change, and in a bull 

market down days are very tough to make money … as I’ve stated before, 

you have to be “perfect” in both entry & liquidation, and can’t be a second off; 

if you didn’t bring your A+ game to the table, you’ll lose money, and believe 

me this is almost impossible to do consistently over time.

When you combine the valuable information in the “Summary Volatility Table” 

[updated quarterly] for “The Magnificent Seven”, along with the signal 

generators from the M1, you now have a very high probability of success on 

each trade. And when any FX pair goes into a bear market, what you’ll notice 

are my trades will consistently be from the short side … what “I think” is 

irrelevant to the process, I’ll be selling the market first.

What is extremely hard for novice [Newbies] traders, or those with more 

experience that simply lose money all the time, is fighting the emotional 

 “long/short battle”, and never really have a firm grip on liquidations. Trust 

me, every trader at some point “stares into the abyss”; nobody is immune. 

The solution is twofold; 1) give up thinking and follow directions, and 2) 

realize that successful trading is learning “how to consistently fail 

successfully” … and while at first blush it might seem moronic to consider  

“failing successfully”, it really is one of the keys to success. 

When I first started my floor trading career, I had a real problem with letting 

winners become losers … always thinking there was more to a move than there 

really was. It wasn’t until I started to do serious research into “exhaustion” 

moves that I finally figured it out … and what that “figuring out” was, is what I 

want tattooed on the inside of your eyelids so you can still read it when you 

sleep … “you must learn to liquidate longs on spikes up or liquidate shorts on 

spikes down; and most importantly, not give a damn what happens next”. Cuz 

what you learn is something I have preached here in the blog forever: 

“opportunity is infinite, capital is finite”. You simply can’t give a bag of bat 

guano if you liquidate a long position and it keeps going … so what? … was 

this the last up move forever? And this is part of the learning process of  

“failing successfully”.

Another important consideration, is reading the market and determining what 

it is giving you today … of course, some days much better than others, but the 

point is, you’re never gonna be able to figure this out cuz it’s non-computable 

and unsolvable … so why fight it? … give it up!! This is why we all have 

trading methods or algorithms, cuz “flying” without instruments at night in the 

fog will get you killed. It does you no good to be up 30% one day and down 50% 

the next, cuz sooner or later your account goes “dry”, and then what? “Well, it’s 

back to the “Pudding Business”, and who wants that”?

I’ve just scratched the surface here, but I’m hoping that in some sense I’ve 

helped Randy [the person who emailed me] and others put the pieces of this 

trading puzzle together … finally, I would encourage others to do what Randy 

did, which was email me with their thoughts and/or comments, and I will do 

what I can to help you.

Turning to today’s market … well, first let me comment on yesterday; another 

double reversal day with range. This is the second one this month, and another 

two times EURUSD came within fractions of a PIP of more double reversals, so 

in a sense we’ve had 4 of these within a month. Usually, you don’t see this kind 

of trading activity but 2 or 3 times every ten years or so … “WTF”! And to be 

clear, the only way to protect yourself is never let a winner turn into a loser 

… it doesn’t matter what happens next.

The first 4 hours today, nothing but “position squaring” in front of the ECB 

minutes @ 7:30 A.M. EST … traders not willing to do much of anything ahead 

of this … last release was a shocker and caught the market off guard. 

“Well, that escalated quickly, didn’t it”? … some days all you can do is shake 

your head and marvel at the scumbag LP bank’s ability to separate traders 

from their money … and as I have said before, always ask yourself if a trade 

is something you want to do, or is your chain being yanked and your emotions 

are making the trade. And off the near low set earlier today in Asia, it’s 

straight up the ladder 70+ PIPS on “I haven’t a clue”; “now, from what I said 

earlier about being short in a bull market, maybe you can see how damned fast 

sentiment can change back to the overall trend in place in the market … get 

caught in it, and you’re toast”.

Again today, we see market action in EURUSD severely constrained prior to 

important news [ECB minutes], and the effect it has on price when SHTF 

after it’s released; it literally skews the decision making process and creates 

panic … and once that happens, there’s no way to recover if you’re on the 

wrong side of things ...and when the scumbag LP’s smell “blood in the water”, 

they’re worse than sharks. And the “fun” today doesn’t end with the ECB, 

cuz @ 1 P.M. EST we get the results of the 7 YR. Treasury Note auction 

… and given the hysteria over interest rates lately, these usual “dull as 

dishwater” events take on added meaning for everything on the MT4, 

especially the SP500, which if you haven’t noticed, when it starts going down

hard, EURUSD follows it lower … it’s a “knee-jerk” reaction to potentially 

higher interest rates, and right now that’s the 800 lb. gorilla in the room.

One trade today … PAMM up slightly, nothing significant … the “setups” just 

not there to make a trade with any degree of high probability.

Today simply a disaster when it comes to “setups” … straight up off the 

bottom … straight down from the top approximately 40 PIPS … fart around 

and chop … that pretty much is the day, with prices extremely disjointed in 

terms of bid/offer continuity; speaking of which, the one trade I made today I 

got totally “ripped” on entry by 1.4PIPS from the offer I was expecting to buy 

… my rule on situations like this, is to exit the trade as fast as I can with any 

kind of profit … doesn’t matter the amount. Point here is simple: the trade 

started off bad, and it skews my expectations in terms of holding it for gain. I 

simply want to get rid of it and start over; amazingly, I ended up on the trade 

immediately, which surprised me some, but then it “sits” for 30 seconds not 

moving a tenth of a PIP either way … this I don’t like, and so I liquidate. And 

while it rallied further in the minutes after, I simply don’t care … I’m focused 

on risk, and I don’t want something that started bad to end bad. One thing 

I’m not doing, is “chase” the market … if I get what I’m looking for, fine 

… if not I pass, simple as that, and then look for the next opportunity.

I’m somewhat disappointed in the action today … I expected better than what 

we got, regardless all the data & news being released, especially in terms of 

“setups”, which we didn’t get. Ok, water under the bridge … tomorrow’s 

another day; the important thing is we captured some profit and grow equity

…  miniscule to be sure, but today was one of those days it was easy to lose 

money; we’ll take it and move forward … I’m outta here … until tomorrow 

mi amigos … Onward & Upward!!

PAMM spreadsheet directly below.

 

Have a great day everybody!

-vegas

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