A GIGANTIC BOWL OF STUPID

 

“FX traders, did you get your heap big serving of ChiCom stupid today?”

Today is the 10^th of the month; so far this new year, every damn move in EURUSD has either come from 1) the Asian session, or 2) “the big bowl of stupid” news events, specifically the idiotic NFP report and today, the ChiComs telling the world they don’t want U.S. treasury debt anymore. Other than that, where you’re either asleep or watching bat excrement crazy price moves, the action is more like the Opera booth ticket window at a NASCAR event … in other words, its slim pickings for the scraps of everybody who just got taken to the woodshed.

EXIT QUESTION: “If you owned over a trillion dollars of U.S. debt, why on earth would you announce to the world you aren’t interested in it anymore? What sense does it make to hurt your own investments in treasuries [yields go up, prices go down]”? Ok, I get maybe it’s cuz the Chicoms want to send a “message” to President Trump on trade, the Norks, or whatever else has them bugged, but there are other ways to do that without hurting yourself financially … all of which leads me to believe it’s “bat guano”. So, you got a EURUSD market that can’t move 25 PIPS in 2 frickin’ days, and BOOM! … up 70 PIPS before you can say, “WTF was that”? And of course, hours later we’re still sitting right about where the panic took the market initially … “enjoy the scraps peons”. All-in-all, an exceedingly frustrating sequence of events to start the first 10 days of the year … if the rest of the year is like this, I might be clinically insane by next Christmas. “No Fido, you and the Mrs. cannot vote now”.

I got an email the other day from a Newbie reader, and I think his question is worth discussing on the blog post today. His question is, “I'm having trouble with the F (P) = ∆{Price)  - ∑ (t) formula. I understand that it's to find the 50% line of the day and anything above it is a long signal and anything below the 50% line is a short signal. I'm hoping you can elaborate the F (P) = ∆{Price)  - ∑ (t) formula more and show a picture chart example of it being implemented so dummy people like me can understand and implement it myself”.

Ok, here’s my response: “The 50% retracement line has nothing to do with the formula … it is a “guideline” to keep your donkey out of trouble, specifically stops on the wrong side of market momentum; get short near the top to soon, or long near the bottom to soon, and your stop gets filled at the extreme. Now, if you want to pick tops and bottoms after an above average range for the day has been put in, that’s the prevue of the “special situations” section of the trading manual.

The formula you cite above in your question is a “philosophical pillar” in my approach to trading; it simply says, that the probability of you making money on any trading day = intraday volatility of your market – the time that’s already gone by until the close … simply put, in an 8 – 10 hour trading day, time really isn’t a factor until you get to about 17:00 – 18:00 server time. At that point, any trade you make carries a bigger risk than trades earlier simply cuz, if you’re wrong, how are you gonna make the money back, with no volume or range in the market as it dies down for the day? View the formula as simply a trading philosophy, one that says make money as early as you can consistent with the algorithm, and then leave it alone, come back tomorrow”. I hope this clears things up for you.

Turning to today’s news filled psychotic drama from the Chicoms … “well, that escalated quickly on the upside didn’t it? … My, that escalated quickly on the downside didn’t it”? I’m sitting here all day still trying to figure out how EURUSD catapults 80 PIPS over 1.20 to a high of 1.20181 … and even more puzzling, how it stays up there near the high on 6 attempts to go higher over an approximate 45 minutes, where it hovers only a few PIPS from the high for approximately 10 minutes. Again, “bizarro world” in action today. Then comes the slow trip with “Thelma & Louise”, culminating [so far] in your standard slow-motion train wreck with a convenient approximate 70 PIP drop … “see how easy this all is”?

Ok, so the ChiComs are threatening to not buy U.S. paper … big whoop … interest rates go higher, and somebody tell me how this is negative for the dollar? Bloomberg gave a convoluted answer, but I won’t torment your brain with convoluted “analyst group think” after the fact to fit the move … suffice it to say, though, the news caught plenty of retail & institutional players short, and once they got mauled from that, they turned their attention to being long, where when the market refused to go higher, they all hit the exit gates at the same time … “and please excuse my floor trader “French”, but this is what was known on the floor as “properly double fucked” … thank you, come again, have a nice day”. What did I say yesterday … “Oy is an element best avoided”!

And as I said earlier, once again we see either Asia or the news totally ruin a trading day … first algorithm buy signal wasn’t until the market was up at the 1.20 area, and you would have had to “pay up” over 10 PIPS to get long from 100 seconds earlier … thanks no, I’ll pass …Ok, now we got a problem, cuz subsequent buy signals all come after the high for the day, and the range, at this point is about 93 PIPS … “Ok, where’s it gonna go? Are we going up through 1.20300 or 1.20400, or even higher? I still can’t believe this ChiCom second-hand BS report took the market over 1.20, let alone 1.20300 or 1.20400, but what this forces me to do is shorten my holding horizon for long positions off buy signals … cuz the dirty little secret is, they have a high probability of not lasting very long, and if you get a spike up after getting long, you better have your finger on the button when it backs off, cuz you may not get a second chance”. Well, there were signals, and sure enough, the majority didn’t last but a minute or two.

Now, after climbing in the back seat of the Cadillac for another trip off the cliff, the question becomes why not get short below the 50% retracement line? Simply put, large reversals in FX dollar pairs that continue, are very few and far between; you’ll get one or two every 3 – 5 years, and that’s it … most of the time they simply die on the vine. What you want to see are early in the day reversals off SMALL ranges; these are the most powerful and give great profits … but of course, first 10 days of the year, they are nowhere to be found. Trust me, this too will pass.

Two trades today, both profitable; one before the ChiCom report hit, and the second after. It would have been nice to see better trading action without the hysterics … oh, won’t tomorrow be interesting … I’m outta here … until tomorrow mi amigos. Onward & Upward!!

PAMM spreadsheet directly below.

   

 

Have a great day everybody!

-vegas

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