It seems I may have caused some confusion in the mastery course about the order flow generator / scenario sheets, as well as about the currency master files. I need to give you more clarity on them and I will do so over the coming weeks.
Question: You have mentioned in the course a few times of order flow generator sheets, news trigger sheets, news impact sheets, etc…..
I’m interested in learning more about how you do your currency master files ..cause that sounds like the way to go. Is this explained more in the course? I would like to do something similar to this as it sounds easier to do…as well as easier to maintain on a daily basis as well as stay organized with all the info. every day.
Order flow generator or simply Scenario sheets: These are the lists you have of what will cause the financial instrument you are looking at to go up or down. You have two sheets – one of them for bullish scenarios, another for bearish scenarios. Or you can have them all on one sheet with two columns. I don’t make separate for the EUR/USD and another for the EUR/GBP. Instead I make one for the EUR, one for the USD, one for the GBP. You can and should create these for whatever you trade. If you trade the S&P you create bullish and bearish macro scenarios. If you trade Apple stock, you can create bullish and bearish scenarios that would cause the news/sentiment/fundamental/macro players to come in and push the market.
I will be posting scenario sheets for the S&P, gold, crude, and general individual stocks as well in a few weeks. I don’t think they are that hard to create if you know how to interpret the information flow and interpret the news articles.
These scenario sheets help you to understand the macro forces that are at play in each financial instrument. Every time I place a trade, I want to know what scenario I am betting on. So if I go long the EUR, and I am fading some downside stops for a long trade, I still want to know what scenario I am betting on. Am I betting on the ECB not lowering rates? Am I betting on stronger Eurozone growth? Am I betting on Spain to request a bailout? Am I betting on some USD weakness specific scenario? I always want to be aware of what is priced into the market and what scenarios can cause the market to move up and down.
The news impact sheets: these are the specific way I record the news.
So if a news comes out for the EUR/USD and I record it as say:
+20 pips FM, +15 pips over next hour
Then that data I input into the currency master file. If it was a EURO news, then I put it into the EUR mastery currency file.
If it was USD news, then it goes into the USD master file.
These master files contain my news impact data, they contain the little snippets of expectations, little snippets of sentiment, little snippets of macro, and any other intraday events that moved the market, etc. Usually I write in my own comments in a sentence or two as well.
For example, for the gold market at the end of day on DEC 18, in my gold master files I simply wrote:
“Gold got annihilated on increase in risk appetite. Huge sell orders came in tripping wave after wave of downside stops, finally stopping at the 200 daily moving average. As the S&P went up, gold cratered.”
For the EUR at the end of day Dec 19, I wrote in my master files:
“EUR rallied strongly, cracked the 1.3300 barriers then macro exhaustion and profit taking and risk aversion kicked in to drop prices 100 pips.”
Back in the days I used that News Trading Trigger Sheet Template on the http://orderflowforex.com/news-releases-recording-method/
I used to use that trigger sheet template. It helped me to establish triggers for a news report as you could see the deviation from forecast and see the market impact going back a few months. The disadvantage is that you can only record one currency pair there. Nowadays I just search for the info in my currency master file as it contains the impacts for many currency pairs.
My Response #2:
Yes, the order flow generator sheets are the scenario sheets. You can call them anything you want. In the beginning I called them order flow generator sheets. But in the middle of the mastery course, I may have just changed the name to scenario sheets, since almost everything revolves a scenario, a script for what could happen in the market.
I give you my list of reasons why the currency can move to the bullish and bearish side. I tried to put in as many as possible. But it is still not the complete list. Because market sensitivity changes. So every day, when I do my daily habits, I look to see if the market is moving to a new scenario. If it is, then I add the scenario to the sheet in the proper column. Once you add it to one side either bullish or bearish, you can reverse the scenario to get the opposite effect.
For example, in the summer, I was reading the news articles and noticed that the fiscal cliff was going to be a potential order flow generator for the S&P. I knew that from basic macro knowledge, but also from what happened to the S&P the last time the debt ceiling argument happened in the summer of 2011. So I looked at my S&P scenario sheets and saw it wasn’t in there. So I added it in there. So If I added it to the bearish side as:
“fiscal cliff / tax cuts expiring / dividend hike / spending cuts”
Then if the S&P sells off hard on the fears of the above, you can add in to the bullish column a reversal of the bearish scenario. So bullish scenario would be: “good news / progress to avert fiscal cliff”
You want to have clarity on what scenario you are betting on. Always. So if the S&P has gotten hammered on fiscal cliff fears, and you still want to short it, then you need to know what scenario you are betting on. What macro scenario. If you are shorting it, then one scenario that could cause your trade to work out is an intensification of fiscal cliff fears. A scenario that would cause a loss to your short trade would be a resolution, or perceived progress on fiscal cliff deal.
Remember when I said trading is all about interpreting information to determine whether you should “Go with the move”, “fade the move”, or do nothing? You want to have intellectual clarity on what scenarios can cause profits and losses to your positions.
Don’t get overwhelmed by the scenario sheets. In order to memorize them years ago, I had to read them like 5 times a day for months. But then I figured out that the market cannot possibly be focused on all of them at the same time. The market will typically only focus on 1-5 key elements and drivers at any given moment in time. I have written this somewhere in the course, it’s just so big that I forgot which lesson I put it in.
The scenario sheets I give you are the actual scenarios that I believe can move the market. Now, you may agree with some of them, all of them, or nothing. It is up to you what you believe is true about the market. The key I found out years ago is that you want to switch from a pure stop hunting / option barrier mindset to a global macro mindset. And in order to do that, it greatly helps if you have the scenario sheets in front of you, it helps if you have the news release recording method, it helps if you have the proper daily habits. Because the truth is that, while there are many different types of stops hunted / tripped, they can’t explain everything.
You can create your own scenario sheets from scratch if you want. How do you do it? Well that depends on what sources of information you use. It’s actually really easy once you get the hang of properly interpreting news articles.
I think I need to make a few more lessons in the premium section to explain all of this and give people more clarity. If someone is going to do the daily habits, then I want them to know how I do them fully correctly.