There have been many questions sent to me about how I do my daily habits. Members have been asking for clarity on how I do them, etc. They have correctly figured out that the daily habits are very powerful and if you do them, even just a few of them, they can put you on the fast track for success and profits.
So in this lesson, I will go over in much more detail how I do my daily habits as well as answer any questions that have been sent to me, and that I have brainstormed.
While I will be doing videos in the near future on these daily habits, I feel it is important to have a written version you can read and follow.
How I Do My Daily Habits (version 1.0 – Feb 24, 2013)
The first important question you may ask is: What is the purpose of the daily habits? Why are they important? Can’t you just wing it?
No you don’t just wing it! Especially if you are still in the learning stage and still soaking up knowledge and trading wisdom and trying to apply it. You may consider winging it after you have “made it” and hit your mark with regards to how much money you want to make from trading. But even then, you still probably do not want to wing it.
Sports teams and professional athletes don’t just wing it. They don’t wake up one day and decide to get together and go play a game and wherever the wind blows them and takes them.
They do not do that.
They need to practice before the game. Practice before the season starts.
In my opinion, one of the biggest reasons aspiring traders (and business people and people in general) fail is because they wake up every day and do not know what they need to do. They wake up every day and are confused about what they need to do to get results. They don’t have a list of things to do. Or if they do have a list, they don’t have much confidence in it, or do it in a poorly executed fashion. Most people fail because they wake up and start mucking around and go wherever the day happens to take them. Most people are wanderers. They are drifters. They lack discipline and focus.
It happened to me as well. I was waking up and unsure about how to analyze the market. I so desperately wanted a structured way to do my market analysis. So I can develop consistent, rational analysis, rooted in the market foundational principles. I didn’t want to just wake up and start browsing some trading forums trying out some hot new forex robot or technical indicator system.
Also, I did not start out with any mentors or teachers or parents or family members that could teach me how to trade. I had to develop skill starting from nothing. And I was trying to find a way to develop skill. Eventually I settled upon having the proper daily habits. Habits that I could do every day and after a few weeks or months notice that I was making progress. Personally, I didn’t see results quickly when I did my daily habits. Years ago, my daily habits were not fully formed and were not the way they are now. And I was lacking critical concepts such as information flow, scenarios, volatility, expectations, macro, etc. I was trying to do order flow habits using only knowledge of stops and barriers. And that was not making the progress I was hoping for. So it did take me 6-12 months to finally see some results. But for you, since you have the order flow mastery course in your hands and have these trading principles and concepts that I have refined for you over the past few years, the progress should come within weeks. When I started, I had no order flow mastery course, so I struggled with all the things I did not know. You don’t know what you don’t know! And you struggle to find the information that is valuable when you don’t know what to look for!
I knew I could not systemize 100% of it, but I did want to break the market analysis down into a process.
I wanted to break down trading success into certain universal principles and habits. And I believe I was able to do that with the daily habits in this mastery course.
The further purpose of the daily habits is to attain mastery of the most important and powerful market players: the news/sentiment/fundamental/macro players. This is what separates the true order flow trader from, say, a chart pattern or technical indicator trader. The order flow trader wants to do sufficient research to make sure they have the news/sentiment/fundamental/macro aggressive order flow and volatility in their favor. While the chart pattern or tech trader tries to hope that their tools will catch some of the market movements.
You may wonder how long do the daily habits take to complete? It depends on:
1. How many habits you decide to do
For example, someone who only decides to label the stops and option barriers is going to complete the daily habits much faster than someone else who decides to analyze the news impacts and read the articles for the little snippets of expectations/sentiment/macro. Someone who only labels the stops and barriers may finish the habits in less than twenty minutes. While the other person who does the news impact releases and article reading may take 1-3 hours.
The advantage of only doing the stops/barriers is that you finish the task quickly. The disadvantage is that your maximum opportunity set is lower as you only know about stops and barrier trading tactics. Also, your trading potential is capped since you are not learning about the most powerful market participants: The news/sentiment/fundamental/macro players.
The advantage of doing the news and article research is that your maximum opportunity set is very high. Your trading potential is unlimited as you are understanding how to play the game at a higher level. You understand information flow, expectations and that the markets are a battle of different scenarios. The disadvantage is that it takes 1-3 hours or so to complete the daily habits.
2. How many news releases there are to record and analyze
If there are only four news releases for the day on the ForexFactory calendar, then the habits can go quickly as you don’t have to analyze 10 different currency pair reaction to so many pieces of news. If there are twenty pieces of news, and some of them are major reports or central bank meetings, then it takes longer because not only are you inputting the news impacts, but you are reading the central bank statement and trying to find the key words and phrases, etc.
3. How many currency pairs / financial products you are trying to follow
If someone is only trying to trade the JPY, then doing the daily habits can go very quickly as you can quickly analyze the news/sentiment/fundamental/macro situation very quickly. On the other hand, if you are analyzing the eight currency pairs such as – EUR, GBP, USD, CHF, JPY, AUD, NZD, CAD, as well as the S&P, Gold, Crude Oil Bonds, etc, and even adding some stocks in there as well, then it becomes much more work.
The advantage of trading just a single currency or just a few is that the habits go faster. However, your maximum opportunity set is lower.
The advantage of trading many different currency pairs and financial instruments is that your maximum opportunity set is extremely high. The disadvantage is that the daily habits take more time.
4. If you are truly focused on completing the daily habits or are trying to multi task at the same time and trade or do other things, etc.
If you focused on doing the daily habits and do not get distracted by emails, facebook, kids, or staring at 1 min charts of currency pairs, then the daily habits can go faster since you are focusing your energies on the task at hand. If on the other hand, you are trying to do the habits while multi tasking, then the process can drag on for hours and hours.
Typically, I spend around 2-4 hours to complete my daily habits every day.
You may think that is a lot of time, but in the grand scheme of things I do not consider it to be so. Always remember that you are developing an interpretation advantage that will remain with you for your whole life.
You don’t need any “insider knowledge.”
Warren Buffet once said:
With enough insider information and a million dollars, you can go broke in a year.
And from the book The Alpha Masters:
One thing that mystified me was how, through various applied strategies, managers were able to profit by using publicly available information, and by seeing things in that data that the majority of investors could not see.
Always remember that you want to develop an interpretation advantage and edge that can last your entire life. The daily habits do that for you.
If you spend 1 hour per day doing the daily habits, that is 5 hours a week. Just 5 hours a week, and you can take weekends off if you want. If you spend 2 hours a day, that is 10 hours a week. If you spend 4 hours a day, that is 20 hours a week. But if you complete Friday’s habits on Friday, then you can take the weekend off.
Statistics show that the average American watches anywhere from 25-35 hours per week of television. If you spend 20 hours a week on the daily habits, then you still have time left over for television if you want to do that.
Of you can do further work and research on the weekend if you want to and are really committed to making fast trading progress.
Typically, if you want to make faster trading progress and make more money, and do it faster, then you should put in some time on the weekends. If you want to make a bit less money and make it slower, then you don’t have to work on weekends.
Of course when doing work, I am assuming you are doing smart work related to the core principles of speculation taught in this mastery course. The concepts and principles such as: information flow, volatility, all trades are not created equal, trade win rate does not stay the same, ODVE, MDMM, GM, liquidity, expectations, scenarios, sentiment, global macro, sensitivity, positioning, etc.
If you are spending loads of time trying out new technical indicators or forex robots without a clear market philosophy, then you may not get the results you seek.
How Do I handle Sunday news/habits?
Easy. Any news released on Sunday I cover together with Monday’s habits.
What time of day do I do the daily habits?
I keep this flexible. I am on the east coast, so I would consider beginning the daily habits any time after noon(12pm). If I start them at noon, then with watching the market and doing the habits, it could take me 3-4 hours to complete. So then I could be done by 3pm or 4pm. Other times, I may start the daily habits around 5pm or so. Other times, if there is an emergency during the day or other delays, then I may be forced to do the daily habits late at night between 8pm – 12am. On other rare occasions I may be unable to complete them and be forced to play catch up during the next trading way, which is not the best spot to be in.
Years ago, I only did the daily habits on an end of day basis. And I would initially recommend you do it on an end of day basis first. But once you get good, you can do it in real time during the trading day. Most traders are not glued every second to their 1 minute or tick charts, nor are they always busy 100% of the trading day. So during your idle moments you can be completing your daily habits, such as recording the news, collecting the snippets of sentiment and expectations from the articles and information flow, etc. So by the time the trading day is over, you can have completed most of your daily habits.
There are other things that you also have the ability to adjust on an intraday basis. For example, with labeling the stop loss levels. You can do that only on an end of day basis. Or you can also choose to tweak them on an intraday basis as the stop loss levels are triggered and new highs and lows are created.
Habit #1 – Record News Articles
This is a habit that I stopped doing. I still read the articles, but I do not record them anymore.
Previously, I recorded the relevant news articles in their own Microsoft Word file. So for example, all the news articles from the Bloomberg, Reuters, Financial Times, and sometimes WSJ or Marketwatch, I could record them.
I would start off on Bloomberg, save one article about the equity markets, a few articles on currencies, one article about crude oil, one article about gold, one article about bonds. Then I would move on to Reuters, where I would save one article on the equity markets and a few articles on currencies. Then sometimes I would move over to Financial Times, WSJ, or Marketwatch. Then by the end of that process, I would have say 15-30 articles saved in their own separate word file that I would label with the day.
Note that I only recorded them in a Word file. I did not read them while I was saving them into the file. I was just making sure that I generally agreed with the article title or part of its contents and saved it in my Word file.
After this process, which took anywhere from 15-40 minutes, then I would read the articles from the Word file and copy and past the key phrases, paragraphs, quotes, snippets, etc into my currency master files. By the time you start reaching the end of the series of article, a lot of it is just regurgitation. By the time you get to the end of the article list, the articles probably start to say similar things, which is fine since you can go faster.
I did that for years. I feel that it helped to embed the market sentiment, expectations and global macro information into my subconscious. There were some days, weeks or months that I missed out on, but by and large, I kept up this habit fairly consistently for years.
You can see that I recorded the news for you between August 2011 – 2012.
However, I stopped that habit around December of last year. I am constantly trying to tweak my daily habits to either introduce new ones, tweak existing ones, or find ways to do them faster. I am constantly trying to figure out which ones are necessary and which ones I can get rid of. I am always trying to figure out how to shorten them or combine some of them if I can.
So what do I do now?
Now I just read the article or skim it from the internet browser and input the key information and snippets directly into my currency master files. I stopped saving all the articles into their own files in Microsoft Word. That saves me 15-40 minutes per day, so I can spend on other things.
Now I have two monitors open. The left one has the internet browser open with the article I am reading, and the right monitor has all my currency word files open and I just copy and past the little snippets into their proper files.
I keep separate Microsoft Word Files for the following currencies / financial instruments:
So these are 12 files that I keep. I create these files for every year. So for example, I have a separate EUR 2012 file, and a separate EUR 2013 file. Then when 2014 comes along, I will start another EUR 2014 file.
That way I keep things organized by year, so that I am not trying to scroll through information that is years old to get to the current things.
I keep these files in a folder I sync with Google Drive / Cloud at https://drive.google.com/.
That way the files are always saved in the cloud and I can access them from my laptop or any other computer. There are many other cloud storage / syncing services, so it can be worth exploring that possibility further, so you are not trying to carry around USB flash drives, external hard drives, etc trying to sync all your trading files between multiple computers.
In many cases, I don’t even read the whole article anymore. Sometimes I just skim the article if I know where the proper information should be. After reading the daily articles for several months or years, you tend to know how the authors of the various websites write. They have their standard structure for how they write and you kind of know where the little snippets of news, sentiment, expectations, etc will be. So I generally know where to look for the relevant information.
Habit #2 – Record Proprietary News Impacts
This is where I go through the ForexFactory calendar and record the name of the news and the actual/forecast/previous numbers into the relevant currency master files. Some days the news is light where there are very few news releases, say only 5. Other times it is jam packed with news releases and could number 20 or 30.
Most of the news reports will be No Market Impact (NMI), but I still input them into the currency master files anyways.
There will also be some Federal Reserve speakers that many times they give a speech, but that they make sure they don’t drop any clues about monetary policy. The like to do academic speeches that do not move the market, so I just avoid recording those if they did not move the market.
This process can take some time if there are major news reports being released, such as NFP or other ones and I am attempting to record 10-20 different currency pair reactions for them. It can be a time consuming process going through the 1 min charts and recorded the proper news impact.
I admit, that sometimes I try to speed up the process by only doing one currency pair of the bunch rather than all of them. For example if the NZD/USD moved +20 pips FM, + 40 pips over next two hours, then sometimes I try to speed up the process by avoiding recording the NZD/JPY or EUR/NZD, etc and just assuming that they made a similar impact. So sometimes I do try to speed up the process by assuming things, if I believe my time is spent better on doing more scenario analysis or on other things.
Habit #3 and #4 – Recording other intraday events and IFR
If throughout the above two habits, I feel there was a movement in the currency pair / financial instrument that I was not able to understand why, then the reason can be found in that there was some news that was released that was unscheduled. So this is where I go through IFR news on Oanda to find out what happened. Sometimes I look through the “currency briefings” pieces of news. Other times I type in the currency that I am looking for. If there was a strange move in the EUR that I was unsure of, then I would type in “EUR” in the search field to focus on only the EUR specific pieces of news so I can see what happened. For example, if the move occurred because some central banker in Europe said something, then I would record that in my EUR currency file. I would write out what he said that caused the movement, then apply the news impact recording method to that as best as I could.
Throughout this process I am also scanning IFR for any important information said by various central bank officials, etc. If some Federal Reserve members said something that I believe is important for helping me anticipate future monetary policy decisions, then I will record this into my currency files. Even if what they said did not cause movement, if I deem it important information, then I still record it.
Important information is not always immediate market moving information. Even if the information is not immediate market moving, it can be good to know and record in your currency files so they give you insight into the mind of the central bankers and how they can vote and formulate monetary policy going forward.
For example, if a Fed official talks about some Dodd-frank regulation, etc, then I am probably going to ignore it. If however, another Fed official talks about how he believes that bond buying is great for the economy and outweighs the risks, then I will record that information into my USD currency files. That is an important tidbit of information even if it didn’t cause any massive immediate movements. Why? Because I can therefore assume that as long as the economic data doesn’t surprise to the upside by a very big amount, that this Fed official is going to continue to support more Fed QE, since he believes that the benefits outweigh the risks, etc.
For example for Friday, February 22, 2013, for my USD currency master files I recorded:
Fed Powell: There are legitimate concerns with costs vs benefits of continued bond-buying
Fed Rosengren: bond buying of great value to economy
– bond buying benefits outweigh the risks
Fed Williams: fear of future losses shouldn’t deter fed action
– Fed’s primary goal should be aiding economy
– Losing money won’t thwart monetary policy goals
– Now is not the time to pull back on Fed aid
– Economy still faces plenty of downside risks
This helps to get inside the minds of the central bankers. Predicting humans is a lot easier for me than predicting economic data. Although you cannot predict them all the time.
After I finish the IFR recap, then this is when I look over all that is in my currency master files – the news impacts, the little snippets from articles, IFR, any stops/barriers that were triggered etc, and I formulate it into a sentence or few sentence explanation for the days action. This is my interpretation of the days action distilled into 1-3 key sentences. In most cases, you don’t need elaborate 3-5 page academic theories about the market. You don’t need that stuff. What you do need is the truth of the markets (the 1-5 key elements) movements distilled into 1-3 sentences.
So for example for the GBP/USD on Feb 22, 2013, I wrote in my GBP currency file:
GBP/USD: tripped stops above 1.5300, then macro exhaustion and macro sellers came back after UK lost AAA rating.
That is what I do. I use a combination of stops/barriers, news, macro, etc.
Habit #5 – Label the stops and option barriers and set price alerts
Here is where I go through the currency pair charts and find out the nearest topside stop level and nearest bottomside stop level. I draw horizontal lines across them. Then I set price alerts for them. So in every currency pair, I have two price alerts. One for if the topside stops get triggered, and another for if the bottomside stops get triggered. Sometimes the stop level is also the barrier level.
Here is an example from the EUR/USD at the end of the week on Feb 22, 2013:
If any stop loss level gets triggered, then I reset the price alert to the next nearest stop level.
This way I don’t have 10 different price alerts for a single currency pair. For example, if the EUR/USD is trading at 1.3000, and there are topside stops at 1.3100, and bottomside stops at 1.2950, then I will set a price alert at 1.3100 and another price alert at 1.2950. Assuming those remain the two closest stop loss concentrations, then I will not need to change them. So then when one of them gets triggered, I go find the next nearest stop loss level and reset the price alert to that. For example, lets say the downside stops at 1.2950 get triggered and my price alert is firing off. Then, assuming that the next downside layer of stops is at 1.2900, then I will reset the price alert to 1.2900. Then I just repeat this process at an end of day basis or even multiples time on an intraday basis.
What time frame do I use? I am flexible with this. Usually I do not got lower than 15 min time frame to find the charts. Sometimes, I use 15 min, or 30 min, or 1 hour, or sometimes even 4 hour charts.
Here is an example from a 1hr chart of the gbp/usd:
If the stops below 1.5130 were taken out, then I would reset the price alert to the barrier at 1.5100.
Labeling the stops is important, because I do not want to always be staring at my screen. Sometimes I am away from the computer, but I hear the price alert going off and I know something is triggering stops or breaking out. So then I can go back to the computer and see if I want to “go with the move”, “fade the move”, or do nothing. Sometimes I already have a limit order set to fade the stops. Other times I may want to go with the move, but wait for a retracement because usually I do not like to enter the market using buy or sell stops. Other times I do nothing because I am uncertain as to the macro order flow. There may be all sorts of price alerts that get triggered during the day but I may do nothing because I am uncertain as to what is going on. There may be 10 or 20 price alerts during the day, but I may only place 1 or 2 trades. You definitely do not trade every price alert that gets triggered because it will drive you insane.
There are some trades that I believe there is a decent possibility that I will have the macro in my favor, but that I will only enter the trade if stop losses are triggered, resulting in a better reward/risk ratio from my perspective. For example, lets say the GBP/USD is trading at 1. 5950, and I want to set up a short trade because I believe the overwhelming macro flow is going to come into the bearish side. But lets say I also do research and see that there is a decent chance the GBP/USD may want to trip topside stops above 1.6000 first. Then I will hold off shorting until the stops above 1.6000 are triggered first, which gets me in at a better price, assuming of course I am right in the ultimate direction. There are some trades that I will only take if stops are triggered getting me in at a better price, or else I deem the reward/risk not attractive.
For example, there are some uptrends that if you try to buy a fresh high, it is an unattractive reward/risk proposition. But if you switch to fading a tripping of the downside stops below a daily low for example, then the reward risk can be heavily in your favor, assuming the macro is still pointing to more bullish prices.
Similarly, there are some downtrends, that if you try to short a fresh low, it is an unattractive reward/risk proposition. But if you switch to fading a tripping of the topside stops, then it can become a much better trade if the market did some short covering, giving the macro time to regain its strength and short on a retracement of the move.
Then I go through IFR news to see if the reported any option barrier activity. Usually what I do is go into the search field and search for “barrier”, then “exotic”, then “binary.” I put them in one at a time and see if it shows any option activity in the search results. If there isn’t, then I move on to using my chart based method for locating potential barrier levels and marking them off
For example, if a currency pair is in a strong downtrend, then I can probably assume there are barriers below the most recent lows at key levels such as the 100 pip levels or 50 pip levels, etc. Or if the currency pair is in a tight range for a long time, then I can assume that people bought some DNT options, with barrier levels both above and below the market.
See the lesson: Finding the Barriers on the Chart:
Habit #7 – Prepare for next days news
This is where I go through the next days calendar seeing the news releases. Sometimes I automatically know which ones can cause volatility. Other times, I need to search for the news release in my master files to get a reminder of how much the market moved in the past due to a certain deviation change. I want to see which news releases are potential candidates for going with the move or for fading the spike. I want to know in a broad sense what the deviation from forecast needs to be to cause the market to spike FM and go with the move, and what deviation will only cause a FM spike, then reversal. This is where doing the daily habits is very nice because you can go back into your currency files and see that a certain deviation caused “x” amount of movement, etc. Then going forward you can sometimes assume a similar thing can happen in the future. Although it is certainly not perfect because market sensitivity can change and market environments can change. Also market positioning plays a role as well. For example, if a previous news release showed a 150 pip move, but then a similar deviation happens, but when it happens the currency pair has already moved 150 pips for the day, then the market may already be extended and you may not get a clean move as the expectation repricing macro order flow is fighting with intraday profit taking interest and it can be a choppy move.
If you want you can choose to prepare for the next days news the day before, which is what I usually do. Or you can prepare for all of next week during the weekend.
Habit #8 – Create Scenario Sheets and perform scenario analysis
If you are trading a financial instrument and starting from scratch, then you should create bullish and bearish scenarios. It is one of the most effective ways to get a handle on what can cause the market move up and down. You have bullish news/sentiment/fundamental/macro scenarios, and bearish news/sentiment/fundamental/macro scenarios. Markets a battle of scenarios so get used to them! Having a scenario sheet with these two columns is one of the most powerful and simple things you can do to learn how to trade.
I have given you my scenario sheets that I have created. I have tried to list as many scenarios, big or small as possible. You may develop your own scenarios or revise them.
Occasionally, I do discover a new scenario as I go through the year and then I may want to add it to the scenario sheet.
While you have your “master scenario sheet” that can list 10-50 different scenarios, remember that the market cannot be focusing on all those scenarios at the same time. The market can only be focusing on 1-5 key elements or scenarios at any given time. Therefore, you want to focus on what is moving the market over the past day or few days/weeks. You want to focus on what the current market moment is, then play out the nearest bullish and bearish scenarios from that market moment. So while on the master scenario sheets, there are dozens of potential scenarios, when you drill down to the current moment, there are only 1-5 key elements and scenarios that are important, so it becomes a much more easier and manageable number.
So while I am doing the daily habits, I am thinking about the current market moment, thinking about the economic data and market environment and realizing what are the most important scenarios so I can prepare to place those in my correlation/sensitivity sheet. If you want, you can place those scenarios in your currency master files if you want. Wherever you want to put them. Tweak the habits to your hearts content to whatever works for you.
Habit #9 – Correlation Analysis / Sensitivity Sheet
There are all sorts of interesting relationships that can develop in the market action of the trading day. Some days you can have the EUR, GBP, AUD, NZD, appreciate in value vs the USD. Other time you can have the GBP fall in value, while the EUR gains in value. Other times you can have the GBP fall in value vs the EUR, but the GBP might rise vs the JPY if it is really weak. Other times you can have the S&P move higher, while Crude oils falls in value. Other times you can have the S&P move higher and bonds move high as well. Other times you can have the S&P move higher, while bonds fall in value. Other times you can have a stock that has risen 10% over the past week, while the S&P has only risen 2%.
There are just so many interesting relationships and divergences that can happen. The key thing is not to automatically assume some special statistical relation or correlation or any fancy mathematics, etc. I leave that to quants. I have to admit what I am good at and what I am not good at. I am not good at any big mathematical or quant stuff. But I have gotten very good at interpreting the macro information flow.
Therefore, the key is to use the relationships and divergences to find these interesting situations that you research further. You research them further from a news/sentiment/fundamental/macro perspective. You want to figure out what expectations are being adjusted. What scenarios is playing out? What story is the market moving to? Then from that analysis, you can determine whether to go with the move, fade it, or do nothing.
No one can do massive order flow research on every single market in the world every single day. So you need to find some way of knowing where you should spend your time. You need to find some way of knowing where to spend extra time researching a potential trade opportunity. Because you don’t want to spent 5 or 10 hours researching a trade or market that doesn’t post a volatility move, when you could of been spending that time researching another market that made a huge move.
That is why you want some way of finding these interesting relationships and divergences. And that is what I believe the correlation/sensitivity sheet helps you to do. You don’t have to use it. You may develop an alternative method for finding these situations.
Not only do I break down the market into three columns – risk appetite, neutral, and risk aversion. But I also have a notes section, where I describe the days action in a few words, then proceed to include some scenarios that are nearest to the current market moment as best as I can perceive them.
Here is my correlation/sensitivity sheet for February 22, 2013:
AUD rose on some more short covering after RBA Stevens remarks. I am not interested in chasing AUD strength. Will data point to recovery? Or deterioration?
CAD fell after lower inflation and retail sales. I am not interested in chasing USD/CAD higher and buying at top tick. Will the BoC go into more neutral mode?
Will the RBNZ intervene or ramp up rhetoric? Or will they wait for the NZD to appreciate more first?
EUR/USD tripped topside stops, then macro exhaustion, then tripped downside stops and then short covering. Fell on lower LTRO and italy uncertainty. Will crisis intensify? Credit downgrade for France or Germany? Lower growth? Or are they expanding?
More EZ tensions in periphery?
GBP tripped stops above 1.5300, then macro exhaustion and fell on UK losing AAA rating.
Will another rating agency downgrade them? More QE from BOE? Tolerate higher inflation? For longer? Interest rate guidance? Rate cut? Talk down the pound?
S&P rallied on better German data, better corporate earnings, and short covering on reversal of fears of QE removal. Even if bad data comes out, that should cause unwinding of bearish macro sellers who were betting on less QE. So downside should be limited. Will sequestration cliff cause stock sell off?
Crude tripped downside stops, then macro exhaustion and short covering. Crude acting worse than S&P. Crude is near retracement lows, while S&P bounced nicely. Unless there will be a bigger short squeeze specific to Crude oil.
Will the ceasefire between Israel and Hamas be maintained? Or will rockets and bombs start flying again?
Will Israel strike Iran? Egypt tensions? Syria spillover? Obama release oil reserves?
Gold mixed as macro sellers battling it out with short covering interest. More hedge fund liquidation? Fed to vary QE or not yet?
Bonds tested previous highs. Will the macro sellers return? Or will the threat of slow economy support bond prices?
USD/JPY consolidating. Will new BoJ gov QE even faster or not? Will Japan buy foreign debt or stocks? Will japan officials talk about “too fast paced” yen gains? 100 to act as a magnet?
China – Japan tensions?
Market looking for catalysts
More good or bad corporate earnings? More M&A activity?
China slowing down or accelerating?
More Swiss banks put in big negative rates on deposits?
More Swiss deflation to spur more CHF action?
When will Fed end QE?
U.S. economy expanding how fast?
Any risk aversion scenarios on the horizon?
Habit #10 (optional) – Learn about one new scenario
If you want to expand your knowledge about trading, then you should learn about different markets outside of the foreign exchange market.
With the mastery course, I have given you powerful tools and exercises that can applied to any market, not just forex. Things such as scenario sheets, expectations, volatility news/sentiment/fundamental/macro players, etc can all be applied to virtually any market that trades. You can do the daily habits and article research and interpretation for any market. You can literally analyze so many different financial instruments from the comfort of your own home or office.
With the right trading mindset and proper habits, you can literally go into any market and become extremely knowledgeable about it within days. You don’t need 5 or 10 or 30 years experience trading a market. The people who say things like you need 10 or 20 years trading a market are trying to intimidate you. You just need to know the truth about the market movements. The truth about what caused volatility in the past and what can cause it in the future. You just need to know the information that matters.
Most people struggle to find the information that matters because they are looking at the markets in an inefficient way. They are trying to explain the markets movements with moving averages, stochastics and chart patterns. And if they are just stuck in that world, then they will never be able to truly understand what trading is all about. Such traders will never be able to get the full experience of the global game of trading and how the markets really work.
So how do you go about finding new scenarios and inefficiencies in other financial instruments? Simple. You go find a market or financial instrument that made a volatility movement such as ODVE, MDMM, or GM move over the past day, week or month, then go analyze it. The same way you analyze currencies where you follow a sequence of articles, sequence of news, sequence of expectation shifts, sequence of scenarios, etc. You just do the same thing with the new financial instrument that you are analyzing.
You could also analyze dull markets and attempt to figure out why they are dull, and what would need to change to see them go from being dull to being volatile.
Generally, I choose to prefer to analyze the volatility moves as those are usually the easiest to find the proper catalyst.
For example for the week of February 18 – 22, you can go find a volatility movement:
Lets say you choose a stock that made a ODVE. In this case lets choose Hewlett Packard (HPQ):
With your knowledge of the markets that you should now have, you know that the move was not caused by any chart patterns or tech indicators. You know that the volatility movement was a result of something related to news/sentiment/fundamental/macro order flow. And the same process you use for figuring it out for forex with the article research and interpretation and scenario sheets, is what you use to analyze this situation as well.
You have to gather some information flow.
But just gathering 5-10 articles is not enough. You need to make sure they are good articles and that they include good information and facts about what happened. Then you need to analyze them and collect the little snippets of information that are important. You create the bullish and bearish scenario sheets.
It is a very similar process to what you do to analyze the forex market.
Why is it the same/similar process?
Because they are just prices on a screen! The markets are just a bunch of prices. And these prices move up and down. Some of them have more volatility than others at different moments in time. Some of them have easy money, while others have difficult money.
Volatility is volatility no matter where it is found. ODVE, MDMM, and GM moves are virtually the same no matter where they are found. Clean volatility and easy money are the same no matter where they found. Choppy volatility and difficult money are the same no matter where they found.
Of course there can be differences in liquidity, etc, but volatility is volatility.
This is an update to the daily habits and regimen lesson. I will call this version 1.0. I will release an updated version 2.0 with the daily habits order changed slightly and answer more questions within the next week.