What is “normal” in FX? … depends on your decade AND the paradigm in which
these markets operate … FX has been around in its modern incarnation since
the mid ‘70’s, and what was “true” about these markets from trading action to
who the players are over the years & decades sure as hell doesn’t apply today
… today’s FX paradigm came into being in January 2015 with the EURCHF
debacle, and don’t look for it to ever change cuz central banks are firmly in
control now and won’t ever give up power over FX unless it comes at the end of
a gun & heads get separated from shoulders.
I’ve had some very recent conversations with other trusted trading pros, guys
I’ve known for years and trade for a living, who still prefer to trade FX [although
not gold] over anything else … and they all say the same thing [paraphrasing]
… “yes vegas, you are right about the things you’ve been writing about
concerning FX pairs, and the loss of “spec monkeys” to other markets, but with
all due respect YOUR CONCLUSIONS ARE IN ERROR”! … OK, I say, please
enlighten me cuz I’m missing something here evidently … “the loss of the
“spec monkeys” has seen VIX go lower, but that only means running stops of
the “clueless specs” is less of an event than in the past … that actually IS GOOD
FOR US, cuz it means its INSTITUTIONAL FLOWS that run more of the market
than ever before … and while overall VIX is lower, as seen in the 20 Day Range
MA’s, the intraday moves are “purer” than they’ve ever been cuz of the loss of
the specs … you are right that it means less “pump & dump”, but that’s not a
negative in our view, it’s a VERY BIG POSITIVE, unless you focus simply on
“quick hits” for trading … it means our trades are longer and take more time
than in years past, but the flip side to that is spreads are as low as they are ever
going to get, along with RT commissions, and slippage is minimal … for sure,
you can’t trade EURUSD or USDJPY like you do Bitcoin, cuz they are totally
different, but that doesn’t mean they are less profitable either”.
And given that perspective, what clouds the issue is having trading pairs that run
the gamut in terms of VIX … and that means a “solution” for FX has got to be for
FX ONLY, and can’t be translated or superimposed on other markets … ratcheting
down VIX, and then creating algorithm parameters that spot things happening in
the market the naked eye can’t distinguish is of prime importance … cuz here’s
the deal folks … we have to be FASTER to the trade THAN OTHERS, cuz 1) you
don’t want collective spec company on your trade, AND 2) we have to EXIT
EARLY BEFORE THE TURN … and what my colleagues are saying is that the
institutional flows are good enough to do that, and that’s why they love FX in
this low VIX environment!
So before I take up crude oil, I’ll give FX another shot, although I’ll be focusing
more on EURUSD than other pairs cuz 1) total cost to trade is the LOWEST, and
2) it has the highest liquidity and volumes [on a par with USDJPY] … USDJPY is
the other trading pair worth noting, and I’ll be looking at that as well, along with
GBPJPY … given the slight modifications I have made in the trading algorithm
for the FX space, there should be ample opportunity in at least one of these 3
pairs … to that end, below is a 20 Day Range MA table for selected FX pairs that
have decent spreads [right around 1 PIP or LOWER] … this will replace the
indices table, cuz I’m not interested in trading indices any longer.
I’ll keep my eye on crude oil, but the costs to trade here are much higher relative
to the 3 FX pairs mentioned above … as it is, a 3 cent spread is acceptable, but it
sure as hell isn’t ideal either, whereas the costs in FX are the best around … gold
for its part I’m avoiding for now cuz it just isn’t “trading” relative to the costs and
risks [horrible stop hunts] … you pay a very high cost to trade gold, and then it
meanders around with “mystery ticks” galore until it decides to explode … if I
want explosions I’ll go over to Bitcoin, I don’t want them in FX cuz more often
than not it simply leads to the Loser Formation.
Onto the week … outta here … “the future looks so bright, I need sunglasses”! 😎
… Onward & Upward!!
-vegas
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