I purchased and started reading your course a few days before December, and I’ve been reading it non-stop straight everyday since then.
Even with all that reading, I’m still just now getting through the Bible of Forex News Trading section. Talk about a lot of content!
Anyways, I’ll be straight with you.
I started performing the daily habits as of yesterday. Translating and interpreting articles and trying to understand expectations, sentiment, and sensitivity was trickier than I thought. It seems so simple in the course examples. It may be because I have to learn more rhetoric and jargon so I can better visualize the impact the information has on the market.
I’d be very grateful if you could critique a portion of my Master Currency File.
____ start _____
12:30pm/20:30 – REINZ HPI m/m | -0.6%/ — /1.4%
1:00pm/21:00 – NZIER Business Confidence | 20/ — /8
NZD/USD: +7 pips FM, +27 pips over twenty two minutes, then NS
EUR/NZD: -20 pips FM, -51 pips over twenty two minutes, then NS
GBP/NZD: -19 pips FM, -67 pips over twenty two minutes, then NS
NZD/JPY: +6 pips FM, +19 pips over twenty two minutes, then NS
AUD/NZD: -15 pips FM, -37 pips over twenty two minutes, then NS
NZD/CHF: +10 pips FM, +28 pips over twenty two minutes, then NS
1:45pm/21:45 – FPI m/m | -0.2%/ — /-0.8%
“Business confidence improves strongly in the 4Q, although inflation pressures remain contained, according to the 4Q Business Confidence Survey released by the NZ Institute of Business Economic Research.”
New Zealand, Australian Dollars Strengthen as Commodities Rise
7:30am/15:30 – BOC Business Outlook Survey
USD/CAD: -3 pips FM, -24 pips over ninety minutes, then NS
CAD/JPY: +5 pips FM, +44 pips over ninety minutes, then NS
AUD/CAD: -3 pips FM, -22 pips over ninety minutes, then NS
“The Canadian dollar fell against its Australian and New Zealand counterparts as comments from the Chinese securities regulator indicated the possibility of more foreign investment in Chinese firms.”
“The Canadian currency declined versus a majority of its 16 most-traded peers as Chinese stocks rose the most in a month after Guo Shuqing, Chairman of the China Securities Regulatory Commission, said China can raise quotas to allow foreigners as well as offshoreyuan holders in Hong Kong to buy stocks and bonds in the mainland.”
_____ end _____
My hope is that my daily habits are more similar to your’s than not.
I’m also having issues understanding why a commodity currency like the CAD fell when other commodity currencies like the AUD and NZD rose in response to bullish Chinese news.
I’m also having trouble with scenario analysis, but I attribute that to not knowing enough rhetoric and jargon to successfully envision more scenarios. I’m sure that will disappear with time and knowledge.
Any help would be greatly appreciated.
My Response: (From January 16, 2013)
I have a lot of content, but it will all soak in for you. Once you develop the right market beliefs, have the right principles juggling around in your mind, then it all will come together.
It may seem simpler in the course since I do have a lot of scenarios, rhetoric, and jargon in my head, but also because I picked out the explosions of volatility, which are usually easier to analyze.
The scenarios, rhetoric, jargon, etc you will improve on with time. But you gave me an idea for additional content. I will make a lesson(s) in the future and help people play out scenarios from the current market moment. Scenario analysis is definitely a mental muscle that you can get better at. It just involves the radical pursuit of market movement truth, get rid of false beliefs, replace with right beliefs, have the right principles in your head, and practice.
Beginning of Critique:
For NZD I had:
REINZ HPI m/m at -0.6% / 1.4%
NZIER Business Confidence at 20 / 8
NZD/USD: +8 pips FM, +27 pips over next twenty min, then NS
FPI m/m at -0.2% / -0.8%
I didn’t even bother to record the little snippet since I already know in my head that improving business confidence can reduce the chance of NZ rate cut, thus causing NZD to rise. I already have that as a scenario along with improving NZ economic growth, so I didn’t need to record anything. I just knew it instinctively.
But years ago, I didn’t know that, so I had to copy over the little snippets so I can learn some economics and macro and how the information impacted the expectations of the market.
I still copy over snippets, I am just a bit more selective.
As for your CAD analysis, I personally didn’t write in anything for the BOC Business Outlook Survey.
The reason was that:
- My notes from 2012 indicated that it wasn’t a very important report
- The global macro scenario is not conducive for volatility in CAD unless something big happens. The CAD is sandwiched between bullish CAD forces in the form of stronger growth than the U.S., but the BoC doesn’t want to raise rates too fast and the market knows it, so it doesn’t want to buy CAD too much. Also, the market knows that if the USD/Cad drops too much, then that would adversely affect CAD growth since the CAD is already strong. So the market is leery of buying CAD too much because it is also a strong currency and is dampening CAD growth. Sort of like how the AUD hit 1.10, but the strong AUD was dampening AUD growth, so AUD is struggling to rally too much. A strong currency can act like an interest rate hike and cause an economy to slow down.
- The CAD doesn’t want to weaken too much because while Growth is slow, the FED has engaged in QE and is propping up the North American economy. Also, the BoC and Canadian finance minister have already ruled out any stimulus measures from the CAD side. Thus the CAD is sandwiched between conflicting macro forces, so you get very choppy action.
When I see a currency in such a choppy range as USD/CAD and AUD/USD, I try not to get into the ugly, ugly details of it. As you say you were confused about why the china data was interpreted as such and such.
The way I see it, if the currency is choppy, then I do not want to spend too much time splitting hairs and trying to figure out every tiny 3 pip 5 pip, 20 pip move within a 40 pip range. That will drive you insane in no time! Believe me, I used to do that in my early news trading days. I banged my head against the wall, until I learned.
I learned that you want to trade many different currencies, and if possible, futures and if further possible stocks, etc. You want to improve your maximum opportunity set. I know some people are trading with smaller accounts so FX is their only option.
Every day I ask myself where is the easy money vs the difficult money. I want to perform my daily habits in such a way as to spend more time on the financial instruments that will explode with volatility, or have a higher chance of forming cleaner intraday movements.
That is why over the past several days and weeks, for my CAD master files, I have been putting in as notes simply:
CAD is low beta meaning it is not responding to risk appetite or risk aversion too much and is staying choppy. And I am not in the mood to get chopped up.
Every time you or I or anyone else places a trade, they are taking risk. Risk that your analysis might be wrong. Risk that something unexpected happens and moves the market 50 or 100 pips. That is why you need to get compensated for taking risk. You get compensated by future potential volatility in your favor. If a currency pair or financial instrument does not stand a decent chance of forming some form of volatility, then I try not to tie up my capital in it.
In order to make money in the markets you need to either capture beta or alpha or both. Beta meaning some sort of general sentiment or market move. But the CAD is not really responding too aggressively to risk appetite or risk aversion. So you aren’t generating any beta return. Then the next up is alpha return. If there is no or little general market move, but the CAD forms volatility specific to changes in the CAD economy and policy, then that would be an “alpha” movement. But the CAD is not giving you that return because of the things I mentioned above. So you aren’t generating any beta or alpha. It’s hard to make money when you are not taking advantage of beta or alpha in the market.
I will make a future premium lesson on beta and alpha and trading philosophy so you can further understand what I am talking about.
I don’t think I have placed a trade in CAD in a long time. I have been focusing on the JPY pairs this past week.
So my advice would be: try not to focus too much of your time on the currency pairs that are chopping around too much and with no clear catalyst for future volatility. You can perform scenario analysis on them to see why they are in a choppy range and what would cause it to break out, but if your analysis reveals that the catalyst is not imminent, then search for another currency pair or financial instrument that will give you a volatility movement. Sometimes it is a market that is already trending. Other times it is a market that is retracing. Other times, it is a market that is choppy and getting ready to breakout.
Wherever it is, you want to acknowledge the battle of scenarios going on in the market. If that battle does not show any clear winners in the present or near future moment, then the market will probably stay choppy. If there is a clear winner in the battle of scenarios, then you can place a trade.