In theory at least, in today’s clusterfark casino environment of financial
derivatives trading, FX should be … I say “should be” … the default “no brainer”
arena for making money … of course, brokerage house “liquidity providers”
[LP’s] have different ideas on how to foil your trading plans, but they can be
overcome if you’re at the right house trading the right instruments … some
houses cater to CFD’s [stock indices, oil, gold, copper … SIMPLE FX], and
others cater to FX [Coinexx] … today’s focus is on FX, where trading conditions
across the spectrum have never ever been better than they are now … at least
on the VPS, Coinexx spreads are about as good as it gets for retail spec, and
round turn [RT] commissions are utterly meaningless they are so small [$1 per
side per 100,000 notional size of the trade prorated].
Because we’re in 24/5 electronic spot trading, all of the FX pairs, no matter where
you trade, are going to be hosted by LP’s that are large multinational banks … yes,
the cream of the crop of scumbag banks and their trading desks … it’s always the
same group of scum floating to the top no matter where you trade … some
houses make deals with banks to shove order flow … we don’t know for sure
which ones they do this with, cuz offshore brokerage houses share ZERO
information on trading specifics … “here’s your fill … you get what you get, and
if you don’t like it, then leave … end of story.”
There are 2 parts to the trading paradigm for FX … 1) the macro [POLS, central
bank Apparatchiks, and news flow … specifically economic reports that influence
any given narrative currency in the marketplace], and 2) the micro [your trading
model, or algorithm for trades] … never in my entire career, have I been a
position trader attempting to analyze “the big picture macro meme’ … it’s
impossible and it changes frequently enough to kill your account … the POLS &
Apparatchiks make sure of that!
My entire focus as a trader is on the micro … the v2.1 trading algorithm takes care
of the rest … however, there are factors outside of our control that we need to see
before we successfully trade … 1) “the lowest” or very close to it our cost to trade
any pair … 2) very tight razor thin bid/offer spreads that aren’t bogus bullshit,
along with minimal to ZERO slippage … and that depends on your house and what
they specialize in for traders … and 3) decent enough intra day VIX and ranges to
make scalping worth your while … we need ALL OF THESE, and if you take away
any of ‘em you disadvantage yourself immensely … the focus of the v2.1 algorithm
is VOLUME, and its function as a lever for either “buy fuel” or “sell fuel” … nothing
can happen without volume, and all other indicators start and end with it!
Turning to today’s bus ride to the casino for fun & games, FX can’t decide whether
to fish or cut bait, and “Stock Bellies” are in the same old, same old grind lower
with quick, vicious rallies that go nowhere … the macro meme is killing “Stock
Bellies”, especially the NDX100, as the 10 YR. Treasury yield climbs further today
over 4%, and stands as I write at 4.08% [and rising] … at what level of interest rate
hikes does it dawn on the trading public that “Stock Bellies” can’t take any more
hikes and literally crash? … quite frankly, we’re getting close to that now, and a
“hot” jobs number next Friday from the math whiz kids [the most important jobs
number EVAHHHHHHH!] might just be the catalyst for pushing this overpriced,
worthless bubble shit over the edge back down to reality … until then, we aren’t
gonna see a sustained rally in “Stonks” … just more of the same grind lower
followed by vicious rallies that kill shorts … rinse, repeat and do it again.
Meanwhile over in GBPJPY, one of the worst range days I’ve seen in a good long
while … up to the criminal NYSE open, the range for the day was about 60 PIPS
… that got extended some to the downside after some useless & worthless econ
stats smacked the “Stock Bellies” … but from there it was the “Loser Formation”
until a short covering burst at the London Fix screwed some shorts and bailed
out scumbag banks who were long … and from the whistle ending the European
day, it’s been D.E.A.D. … we finish with an inside day from yesterday, and unless
something happens later in the New York session [unlikely but possible], we
have a pathetic 86 PIP range for the day … that’s about 50% BELOW its
20 Day Range MA.
Over the years I’ve been writing the blog, I’ve repeatedly mentioned the
infamous “Flying Wedge of Death” [FWD] … IMHO, it was always the one thing
that killed professional traders on the floor [back in pit trading days] more than
any other event … it occurs when we 1) get a small range that everybody and
their pet monkey thinks just has to expand cuz no way can it stay here … 2) the
price of the market [any of ‘em] goes back & forth to the high and the low of the
day, maybe hitting a new low or high but not by very much … maybe a PIP or tick
or two but that’s it … it then proceeds to race the other direction and now threaten
the other side of the range and does the same thing … and finally 3) traders load
up each time it makes a trip to the edges, thinking “this time for sure”, and it
doesn’t happen.
The only thing you can do is “leave it the Hell alone” until it breaks the pattern of
the FWD … whether that takes an hour, a day, or a frickin’ week doesn’t matter
… attempting to scalp the edges and take buy or sell signals from your trading
model is suicide! … it may work 10 times in a row, but ultimately it goes against
you, expands the range and then goes into the “Loser Formation” … and now
you’re screwed royally … made 10 trades, won 9 lost 1, and you’re down money!
… and many times a lot more money than you think … as ranges for the day
expand, the probability of an FWD goes down precipitously, and even if you get
one the range is usually big enough at that point to make and take some scalps
… but when it’s unusually tight? … fugetaboutit!
And how do I define “unusually tight” when a market is prone to the FWD?
… when it is more than 40% BELOW its 20 Day Range MA, or in the case of the
“Stock Bellies” and higher than normal VIX FX pairs, the session average that has
the highest volumes and liquidity … for “Stock Bellies” that would be the NYSE
session, and for FX the European session to the London FIX and maybe an hour
or so after that if it’s volatile … all of this means for GBPJPY, that I want to see a
range for the day of at least 90 PIPS, given its current 20 Day Range MA of 165
PIPS … so when I come into trade it around 5 AM EST, if that range isn’t there,
then I wait ‘til it gets there … “getting there” means it will be “trading” and not
sitting on its ass doing nothing, which is what we need to see … and if it doesn’t
get there? … I sit back and paint my toes aqua and swear like I was still in a
trading pit … today I come in and it’s 60 PIPS or so, and then with a small sell
stop hunt cuz they can, it becomes about 85 for the day and goes into the
“Loser Formation” .. well, OK if you insist on not playing, then be that way!
Cuz the real logistical problem for traders when any market goes FWD in a small
range is that it takes very little effort [read money] from the banks/HFT to shove
price towards the edges and in the process scare the living shit out of longs and
shorts … nobody wants to see their sell stop get hit on a fat red spike down … and
so, in effect, a FWD at the edges act like super magnets wanting to pull price
… and even if that doesn’t happen, by definition inside a FWD, what’s your profit
scalp gonna look like anyway? .., HINT … it will be puny … ANOTHER HINT
… YOUR LOSSES WON’T BE! … and that’s why I stay away from them.
Cable/Yen caught today where both pairs are getting smacked lower cuz of
higher U.S. interest rates … every macro whiz kid report is coming in higher than
consensus expectations, along with “sticky” [I’m being nice] inflation numbers
from all around the world … that’s putting a big lid on “Stock Bellies” and their
ability to rally, and likewise it’s underpinning the dollar.
No trades today in the PAMM … GBPJPY opting to not wanna play today, with one
of the worst daily ranges in months that isn’t part of some Holiday schedule … you
have to go back to August 2022 to see as bad a range as today, right at the height
of the European summer Holiday period … truly pathetic, but whaddaya gonna do?
… nuttin’ honey, just move on to tomorrow and make some algorithm trades.
… OUTTA HERE … “The future’s so bright I need 2 pairs of sunglasses 😎😎,
and my own Brinks armored truck” 💓!! … Onward & Upward!!
-vegas
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