UNDERSTANDING THE “EBB & FLOW” OF FX

 

“The only thing missing are the puppet strings!”

I knew it before I even turned my screen on this morning; had that “feeling”  

in my trader gut that said, “yup, they’ll FUBAR this on a Friday no doubt 

… would be just too damn easy otherwise”. And sure enough, I turn my screen 

on a few minutes before European open, and what do I see? … I see every 

market on it’s high; stock indices, precious metals, and both GBPUSD & 

EURUSD … and of course, we all know what that means, which is once again 

for like the umpteenth million time, the Chuckleheads in Asia have got the 

 “buying bug”, and bid everything including dirt futures up. Well, Europe 

opens, and while it’s a slow tortuous slow ride down in EURUSD, Cable gets 

 “Thelma & Louise-ed” right off the edge of a mountain cliff. 

For the second day in a row, we almost had a “double reversal” in EURUSD 

… OK, “almost” doesn’t count except in horseshoes & hand grenades, but 
nonetheless, that feeling I got that George Costanza is sitting somewhere and 
trading EURUSD makes me uneasy … “bizarro world” and flip-flopping tail 
risk on the probability bell curve very much in play yet again. And it all leads 
me to the “compass” that makes everything in FX understandable; which is,  
“trading is all about big money [A] getting small money [B] to do stupid shit, 
thus transferring money from “B” to “A” like water flowing down a river 
… you keep this in mind and don’t ever forget it, and you’ll do alright … ignore 
it, and the scumbag LP banks will send a limo to your house to take you anyplace 
you want to trade”.

So, the question becomes, how is “big money” positioned day-by-day, and what 

is their collective attempted “exit strategy” to give unwary retail & 

institutional specs the most heartburn & loss? Viewed in this context, it all 

starts to make sense, cuz they do is sell your buying spikes up, and buy your 

selling spikes down. “That’s why I teach everyone to use large spikes up to sell if 

long; not only do you get the best fills from the scumbag LP’s, more importantly, 

you’re playing “the game” the way big money plays it. And here’s the kicker … it 

doesn’t matter what happens next … OK, you sell the large spike up and 

liquidate; even if it goes further, it doesn’t matter cuz your cost is simply 

opportunity … and as you should know, opportunity is infinite, capital is finite”! 

 This is how FX “ebbs & flows” … news, and all the other bullshit fed to us 

day-in, day-out, is nothing more than food for the “talking heads” to chew on 

and spit out to the masses.

Turning to today’s trade … I’m beginning to believe, that this EURUSD 

 “correction”, may last longer than most people think; certainly after 7 

consecutive up weeks it’s “due” for some kind of pullback … yet, the action 

this week has been remarkably one sided … and that side ain’t the buy side 

[unless you’re a Chucklehead]. For the most part, the daily “setup” this week 

has been all wrong for buying and staying long for longer than a few minutes 

… it just hasn’t been there. Even down well over 100+ PIPS on the week, and 

all anything [especially stock indices] wants to do is open steady and go higher 

at the start of the day … given the declines we’ve seen, this isn’t a scenario for 

gains to the upside later in the day, that can maintain and sustain further gains 

in the trade.

One of the big problems this week in EURUSD has been the “mechanics” of the 

trade; specifically, down spikes have been much more vicious than anything on 

the upside. Also dragging on EURUSD, is profound weakness in GBPUSD, and 

its effect on the EURGBP cross, notwithstanding the “hawkish” BOE meeting 

on Thursday … that “BOE rally” got “monkey hammered” quickly, and from 

those highs, Cable is down more than 250+ PIPS. 

Almost Noon in New York, and EURUSd still maintains a measly 60 PIP range 

… granted, we’ve been to both sides of that range twice today, so officially, 

you’re looking at another classic “Flying Wedge of Death” [FWD] scenario 

… and while Cable and stock indices are extraordinarily volatile, the only thing 

that’s moved EURUSD is basically some of the buy/sell action via the numerous 

crosses … EURUSD doesn’t act and feel today like it wants to play. In the 

meantime, banks keep chipping away at support like water over a rock, wearing 

it down over time. 

Only one trade today, simply cuz the trading action is terrible and extremely 

choppy in EURUSD… PAMM up between 0.1% - 0.2% on the day.

It looks to me, unless somebody gets this thing in rally mode, we are headed 

lower into next week, and quite possibly looking at 2 - 4 weeks of corrective 

action at a minimum … to be sure, there will be nice rallies, but the “backing 

& filling” in price, I think, will continue and lead to choppy conditions. In any 

event, I’ll deal with it day-by-day, trade-by-trade, concentrating on important 

setups for our trades, looking for the lowest risk, highest profit, scenario the 

market offers … I’m outta here; got no desire to get chopped up in New York 

afternoon trading on a Friday, if a trade doesn’t pan out … until Monday mi 

amigos … I'm outta here! ... Onward & Upward!!

PAMM spreadsheet directly below.

 Have a great weekend everybody! 

-vegas 

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