MUSICAL CHAIRS & MONEY

 

“When the Cable music stops, it turns ugly quickly!”

OK, got the “Google Sheets” spreadsheet working again last night … need some 

time to get it all loaded into the document, so what I’m gonna do, is do it this 

weekend, and post it along with the GBPUSD algorithm on Sunday night ...this 

gives me time to get it done so I don’t screw it up, and also gives me more time 

to get the GBPUSD algorithm finished before Sunday night as well. 

More than any other group of markets, the FX pairs turn faster and more 

vicious “when the music stops”, and momentum turns to the other direction 

… and while not all the time vicious and quick, most of the time you aren’t 

gonna get a second or third chance ...and leading that cabal of volatile markets 

is Cable, which most of the time makes other Dollar pairs look tame by relative

comparison. Don’t misunderstand, I said “relative” … none of these pairs are 

“oat spreads”, and every one of them has their “moments” of insanity where 

“stupid shit” can get you carried out the door “toes up” at room temperature.

And while I may sometimes [not always to be sure], early in the trading day, 

look for a scalp from either side on straight up/down action, latter in the day 

when the range for the day is better established, I won’t go near trying to buy 

near the low or sell near the high … why not? Simple; “you have no idea the 

amount or scope of the stops that are ready to be taken out in the next 

nanosecond, and therefore cannot put any kind of risk evaluation into your trade 

… in other words, you're flying at night, with no instruments, in the mountains 

with zero visibility … what could possibly go wrong”?

Which incidentally, brings us to 15:30 server time today in GBPUSD, where 

price is hugging 1.39250 … and then BOOM! … and just like that, the spike 

down to 1.39024 [the days low at 1.38949], where if you were thinking of 

maybe being long with a stop at 19 or 20, you got filled at 1.39024 absolutely 

guaranteed. Directly below, the M1, with the 15:30 minute under the aqua 

arrow.

 

Ditto on the way up, before the Super Mario ECB presser, when the market 

was making new highs … if you continued to “get short” the 5 times it made 

new highs for the day up here, using reversal patterns to establish short 

positions, all 5 times within a minute or two you were covering for losses.  

“How many times are you willing to do this and get it stuffed up your nose”? 

Finally, as the market approaches and looks certain to bust through 1.40000 

and set off a new wave of buy stops to bury you, you cover and admit defeat, 

and then go long. Directly below, here’s the action I’m referring to, where the 

aqua arrows are the short positions, and the white arrow is the capitulation 

and then getting long at the high of the day, where it promptly goes  

“Thelma & Louise” a lot faster than you thought possible.

 

My point here is simple: “can you tell me, in either situation, what your risk is 

beforehand”? … SHORT ANSWER: “No, not a clue, cuz nobody knows … not 

you nor anybody else has any idea the level of panic on the other side … is it large 

or small? … will the stops gap this stuff or will it be orderly”? And so, it’s not a 

question of “IF”, it’s only a question of “WHEN”, where at some point it’s 

gonna be large like the Pacific Ocean and tsunami your donkey … “you can’t 

play Russian Roulette an infinite number of times with a loaded six-shooter and 

expect to live”!

I bring this up today, cuz I got a few emails from people, who ask “don’t you 

just sell the rally, and when it drops cover for profit, or BTFD and liquidate on 

top”? [OMG! If only I had thought of that … what’s wrong with me?] MY 

RESPONSE: “Are you Bill Gates or Jeff Bezos? Do you have unlimited capital? 

Can you just blow through an account and shrug it off, like lint on your pants, 

and then go raid the seat cushions in the den sofa for an extra $100 K and try it 

again? The devil is always in the details, and without a rigid risk parameter 

mechanism, your career as a trader will be very short lived. How many of the 2 

examples, just from today’s action, do you need to see to realize that in FX, 

especially something like Cable, this is the dictionary definition of “stupid shit” 

… so don’t do it”.

Turning to today’s GBPUSD market … I’m beginning to believe that ECB 

interest rate decision days, especially when Super Mario has a presser, are on a 

par with NFP Friday’s, as my least favorite trading days of all time. It’s no 

secret in the biz, that Super Mario is a “loose cannon” … his history of  

“foot & mouth” disease with financial markets is legendary, and goes back 

years, as time after time he ends up “sandbagging” markets with torrential 

volatility. And while he represents The ECB and not the BOE, make no 

mistake GBPUSD will also be profoundly affected through the EURGBP cross 

… why should today be any different from this assclown? “And viola! … he 

doesn’t disappoint, now does he”? To say I’m not fond of Super Mario days is a 

gross understatement!

Coming into today’s market action, I’m very leery of selling GBPUSD right out 

of the 06:00 server time gate … selling a market “in the hole” [meaning as it’s 

going down with no rally] does you no favors, even though sometimes it works 

… I would remind people, everything has to work eventually, so what does that 

prove? In any event, looking at the daily candlestick here at 18:00, it looks like 

a nondescript “doji” day with a slight negative [red] bias … a little up, a little 

down, ho hum another day. “Oh, did I forget to mention the 50 PIP break, 

immediately followed by the 100 PIP rally, immediately followed by the 95 PIP 

break, immediately followed by the 30 PIP rally to the middle? Oh yes, a trend 

followers dream NOT”! 

And all this simply a “prelude” to tomorrow’s “release the Kraken!” moment 

with U.K. GDP numbers at 08:30 server time, followed 5 ½ hours later with the 

BOE’s Carney giving a speech at 10:00 A.M. EST. The fear index of what could 

go wrong here is off the charts mi amigos.

EURUSD had a “double reversal” today with sizeable range … the last time this 

happened, was I believe back in December 2015, when Super Mario reversed 

himself mid-presser and “sandbagged” both the DAX30 and EURUSD. Cable, 

for its part almost had a “double reversal”, and somebody sure as hell tried to  

“get ‘r done” @15:30 from the chart above. And while I would love to release 

the volume hounds and let millions fly with the eagles, I’m not crazy about 

double digit percentage losses a real possibility when Apparatchik Pie Holes 

start talking and change the direction of markets in a nanosecond. 

A bunch of trades today … PAMM up slightly, but nothing significant. 

I tried being short on the leg up, and had to cover as Cable came back and 

rallied from very short breaks … I tried to be long as it was going down, but 

had to liquidate as it fell back from higher levels. In short, for an almost  

“double reversal” day, I never got really caught, just liquidated when I had to 

cuz it simply wouldn’t move in the desired profit direction during this crazy 

ass day … it was only about a 104 PIP range day, but felt triple that, given the 

roller coaster ride courtesy of the ECB. Overall, happy with the fills and 

execution today, although one long trade filled me almost a PIP higher which I 

promptly liquidated at a slight profit … granted only 1 PIP, and I’m not 

complaining, simply saying I expected a better fill and didn’t get it … and when 

it didn’t move much more in my profit direction, I liquidated it.

I had planned on writing today more about the GBPUSD “ONLY” algorithm 

… I decided to save that for tomorrow, so people can see it over the weekend as 

the most recent blog post. Just as a short summary, it’s structurally very simple 

to understand and implement … there are portions of it, that I know for a total 

fact, scumbag LP bank trading prop desks [that would be their proprietary 

accounts traders trade for the bank] use religiously [outside the U.S., they can 

do this] … I have always added a “filter” which takes away some profit, but 

almost eliminates daily risk of loss [I said “almost”]. I’ve “modified” the 

original algorithm cuz we now trade electronically 24/5, versus pit trading 

days when the U.S. ruled the world and controlled 99% of the daily action. It 

worked to perfection back-in-the-day, when minimum ticks in the Pound 

futures was 2 ½ PIPS, 1 lot = 62,500 British Pounds, the daily ranges were on 

the order of 200 - 350+ PIPS. and they called it on the floor “The Widow Maker” 

 for a reason.

Many readers are probably wondering why I haven’t brought this algorithm 

up before, and why now? The reason is simple: up until very recently, like last 

year when Turnkey went live around January 2017, Cable spreads have always 

been notoriously high; 5 PIPS for most of the time between 2000 - 2014, and as 

recently as 2015, when I was trading through ASSETS FX [Finland], their 

Cable spread was down to approximately 2 ½ - 3 PIPS, with another half PIP 

added for round turn [RT] commissions … sorry, that ain’t gonna get me to 

trade it, cuz it’s still too high versus other FX pairs, and when the market slows 

down, you can’t get the damn thing to get out of the spread! Now, of course, 

our “net” cost to trade Cable is approximately 0.6 - 0.8 PIPS, which makes a 

helluva difference.

It most definitely isn’t cuz I forgot about it, or wasn’t interested in it. Since a 

couple of months before “Brexit”, up until the end of 2016, not only was the 

spread still too high, but the market was full of daily “Brexit” rumors that 

buffeted this stuff around like a ping pong ball … add to that the nightmare of 

October 6, 2016, where minutes before the Asian session open, in one M1, the 

scumbag LP banks took Cable from the 1.26000 level, down to the 1.16000 level, 

and then right back up like nothing had happened. A move of 1,000 PIPS lower 

and then immediately 1,000 PIPS right back up, and in the process destroyed a 

shipload of accounts. That brings us to 2017, and the daily rumor mill didn’t 

stop, culminating in December 2017 with some days that were truly “off the 

charts” in terms of “stupid shit” trading action. Thankfully, we seem to be over 

it now here in 2018, and Cable can go back to being its normal crazy self … as 

today demonstrates, it sure doesn’t need any help!

Tomorrow should see some heavy action, and it remains to be seen what 

Carney will say come 10 A.M., and how that affects GBPUSD. The “bar” is set 

pretty low for U.K. Q1 2018 GDP, as the consensus for YOY growth of 

1.4% - 1.5%, and for QOQ of 0.3% - 0.4%. Anything deviating substantially 

from this, and we could see some very sharp moves. If the numbers are “hot”, 

does that mean an interest rate increase in on the table for May 10th? If the 

numbers “disappoint”, how can you raise rates with such anemic growth and 

not expect to kill the economy? Anybody but me see the problem here for the 

BOE? And more importantly, if you raise rates, is this the only bullet in your 

gun for a long while down the road, and we end up seeing “buy the rumor, sell 

the fact”?

In any event, it won’t make any difference to me cuz I’m trading based on the 

algorithm and nothing else. All told, I didn’t expect much from “Super Mario 

Day”, cuz either it’s bat shit crazy and you can’t get in to your advantage, or 

people yawn and say, “see, I told you he was an idiot” and nothing happens 

waiting for tomorrow’s GDP & Carney speech … either way, not an optimum 

situation, but something we just deal with and move on to tomorrow. I’m outta 

here … until tomorrow mi amigos … Onward & Upward!!

Have a great day everybody!

-vegas

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