Anyways on to the topic of this post, Identifying market swings in the medium and long term. The reason why I wanted to discuss this is because this is the key to low risk / high rewards opportunities and has been the key to my success so far. OK, so how do we identify market swings? . !how me the money" #nderstanding where money is $owing in di%erent market conditions and why. Is there risk appetite or risk a&ersion? And why is money $owing into one market / direction and not the other. '. Identifying what conditions need to change to change the money $ow and what the new direction will be. !imple as that. (ase in point) The #!* carry trade +ere is a huge trading opportunity for those that know what theyre doing. (arry trades ha&e been traditionally funded using - when there is risk appetite in the markets. 0ut after the 1nancial crisis interest rates in the #! ha&e been at near 23, in e%ect making #!*, the preferred currency for funding carry trades. This has caused it to weaken against all currencies, commodities, etc. and one of the ma4or reasons we&e seen record prices in gold, oil and other commodities as well as big gains in A#*, 56*, (A*, 0ra7ilian 8eal, etc. . !o the money has been $owing out of the #! into A#*, 56*, (A*, gold, oil, etc. The reason why is because of low interest rates near 23 in the #!. '. !o what needs to change in order to change the $ow of money? !imple" The interest rates in the #! need to rise higher than the country with the ne9t lowest rates, -apan at 2.3. In order for this to happen we need to see in$ation in the #! high enough for the :ed to hike rates by '; basis points. 5ow keep in mind that the markets factor in future e&ents before they happen so we dont need to wait for the :ed to actually hike rates,<(= I5*I(ATO8I =(O5O>I(I T8=0#I= !A #8>A8I> (A !A =*=> (A5* A >A8II 8AT=@= *O0A56II"""" only that it can be anticipated by the market &ia impro&ed economic data. !o what were seeing is that the - economy is in serious trouble with record low interest rates, national de1cit of nearly '223 B* and the most telling fact) while all other countries are winding down C=, -apan is looking in4ect more ..... there are estimation that it will push the de1cit to ';23 B*" It will take -apan at least ;D'2 years to reco&er from this" !o this means that there is a &ery good chance that the #! economy will reco&er faster than - and that the :ed will hike rates before the 0o-. Anticipation of this will cause the #!* funded carry trades to unwind and the - to dramatically
weaken against all other currencies. And for those that ha&e done their homework, the #!* has turned around after hitting bottom and is starting to re&erse the down trend. !o what does this mean for traders? To get an idea of what this means, look at A#*#!*, 56*#!* or #!*(A* daily charts from >arch / April 2E to 5o& 2E. Fere seeing the end of the st leg of the bull run. the carry trade funding currency shifts then well see the ne9t leg of the5ow bull when run mo&e the - crosses more than any other pairs. Fhew" I guess what I wanted to show was how trend changes can be identi1ed before they happen. !ometimes I 4ump the gun a bit early and can often get in a few days before a trend change. *oes anyone else e&er do this sort of analysis to get in on trends before they happen? And if so, how do you trade it? D8a7or4ack We observed that a monetary policy designed to encourage the extension of credit will tend to generate a business expansion. but only at the expense of an unavoidable recession. Deci trebuie sa stim ce incurajeaza monetary policy daca incurajeaza extensia de credit atunci va fii un bussines expansion(bull market) sau invers aybe this will help. !nce you get an idea of the fundamentals" follow this method to help you identify new opportunities. #ou start with the big picture and work your way down$ %. &irst figure out what the global long term economic conditions are$ 's the global economy in a state of risk appetite or risk aversion. emember to start with the long term" its the easiest to figure out. ight now" its in a state of risk appetite and expected to be there for some time. *. +hen figure what these conditions are in the medium term and short term. ,re they aligned or are they diverging- &or instance right now we have long term risk appetite" but were seeing medium term risk aversion" with the short term fluctuating between the two. . +hen if youve done your homework on macro economic and inter/market analysis" you should know which way the money flows in times of risk aversion and risk appetite. +his will tell you in which direction you should consider investing in long term and medium term. 0. +hen you move down to the next level" if the global economy is in a state of risk appetite" then what is the dominant force moving the markets- 's it the carry trade or are economies in a good enough state to make e1uities more profitable- ' dont think ' need to tell you that the economies have been dismal so its been the carry trade. 2. +hen you should have done your homework on the carry trade" look for countries with the lowest
and highest interest rates. +hat is where youve had the major portion of the carry trade" if we look at only the majors then it would be ,3D34D" and to a slight lesser extent 56D34D" if we want to include exotics then consider the ussian uble and 7razilian eal. 8. 5ow that we know this is the way the money is flowing" then we can identify new opportunities. What needs to change in order to shift the current conditions in the carry trade or current conditions in risk appetite9. !nce you listed what changes in economic conditions will cause market shifts" then you need to look at how these different possible changes will have different impacts. &or instance in the current conditions$ a) if the 34 economic recovery will accelerate then we will see a shift in carry trade funding from 34D to :;#$
in &ebruary. 'f b) doesnt occur then its because the global central banks believe that a) is certain to occur soon" so be a bit patient" wait for the opportunity then strike when the economic calendar indicators line up. c) if we have another sovereign debt crisis or another ?=%% or housing markets collapse" etc then we could see global risk aversion$ go long 34D on all the 34D pairs except 34D:;# and 34D@A&" short 34D:;#" and all the :;# crosses except @A&:;# (basically go long on 34D and :;#" except against @A& ) 4o ' just gave you a step by step process" with my analysis of the current global economic conditions. +he first * opportunities have very good probabilities of occurring soon with %BBBs of pips in profit potential. +his is where all the hard work on studying this stuff pays off. !nce you can create a list off opportunities like the one above" then guess what#!3 ,C ,AC,D !& +AC ,C+E #!3 ,C ,5+'@';,+'5< ,:! ,C+ 4A'&+4 7C&!C +AC# A,;;C5E #ou can anticipate market crashes or shift from a bear market to bull market before it happens. :ust imagine how much profit you could have made if you anticipated the 34 housing market collapse would be followed by the credit crisis in *BB9" look at how much the markets droppedE +hen not only that" you could also anticipate when the markets were likely to turn around and head back up again in ,pril *BB>E ' still dont understand WA# so many traders focus !5F# on short term technical based trading. +echnicals are good" ' also use technical analysis 73+ ' use it to time trades to what the fundamentals are telling me. 4o ' hope ' opened up your eyes a bit. 3nderstanding the fundamentals is a lot of work" but there is so much profit potential once you know what" where" why and when markets are moving or are going to move. ,ny 1uestions/azorjackGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
#oure definitely making progress" however youre trying to make predictions. , proper analysis doesnt make predictions" a proper analysis makes anticipations. +heres a difference. #ou missed several important parts from my previous reply$ %. &irst ' told you" that you need to look at a longer period at least 8 months. 'f you look at only the previous week" then you will get a very limited picture. *. What you want is a list of scenarios" each with different economic conditions and how the currencies will react in those situations. #ou only listed one outcome from one scenario. Fet me see if ' can give you an example" instead of looking at a specific pair" look at the overall economy and what it is telling you. What are the biggest events happening right now+he biggest event is the credit tightening happening in @hina. +hen you need to an analysis based on how the tightening of credit will effect the different economies. Which countries will be impacted by this+his is where you need to understand the kind of economy @hina has and how it is linked in to the global economy. 'll give you a couple of hints" but you need to do your own research on this to get a full understanding. @hina is in the midst of a credit fueled boom since early *BB? and has been a major consumer of commodities. +ightening of credit may have an impact on the demand in commodities and thus currency pairs like ,3D" 56D and @,D. 'nstead of looking at the economic data this week" you need look at the big picture. +he big picture tells us that this event in @hina will either cause risk aversion or risk appetite. Weve seen risk appetite through out most of *BB?" with @hinas booming economy clearly a driver of risk appetite. 4o theres a good chance that this will cause continued risk aversion until it is clear to investors that credit tightening will not have a major impact on economic growth. 5ote that ' am not predicting this will happen" ' am anticipating both risk appetite and risk aversion" ' will be ready to trade both ways. Aowever ' believe that risk aversion is the more likely scenario. What you need now is some more research on how money flows in times of risk aversion and in times of risk appetite. Aeres a little clue$ +he last time we had risk aversion was around 5ov *2/*9 B? during the Dubai debt crisis" take a look at your charts to see how the different markets reacted. +hen ask yourself why the different currencies reacted the way they did. We had risk appetite through the majority of the time between arch and 5ov B?. Fook at how the currencies reacted and research why. 5ow based on what ' wrote" why dont you reply with what will happen to C334D if we have risk aversion and what will happen if we have risk appetite. @hinas development and progress has been pulling the rest of the world out of the financial crisis and @hina will therefore exert a great influence over the next few years. ,nticipating what will happen with @hina and its economy will go you a major advantage in trading. +his seems like a lot of complicated work" but necessary as the different economies will be
impacted differently in different market conditions. &or example economies have reacted the way the have after the financial crisis due to the global conditions" once these conditions change so will the impact on different economies. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGG ' would first recommend that you start reading books by Hictor 4perandeo" he gives fantastic explanations of how economies work and an in depth explanation of how the &ed works. !nce you understand how the &ed works" then youll understand how every central bank works 5ext find a book called @urrency +rading and 'ntermarket ,nalysis" this will help you tie together the global economy and how its impacted by oil" commodities" bonds" carry trades" etc. +hen do a study of how the different economies react in conditions of risk aversion and risk appetite. &or instance how does the 34 economy react during risk aversion and risk appetite. +hen look at :apan" then Curope" 3" ,ustralia" 5ew 6eeland" etc. #oull see similarities and differences and this will help you foresee economic changes and their impacts in advance. ,fter doing this" then you should start to look at different news websites. 4tudying the above will help you filter through all of the bullshIt. ,s to the websites ' look at$ %. *. . 0.
7loomberg" @57@" and euters for news fx8B for athy Fiens comments @C for &ed &unds ate / provides market sentiment for &ed rate hikes ' also look at the H'J and 7ond 4preads once every */0 weeks to monitor economic KhealthK.
Aope this helps.
%. how you measure risk aversion if any +his is always done on a case by case basis. ,nd this is where fundamentals and a study of history will help. #ou have to look at what has been driving risk appetite and once this changes then you have risk aversion. &or instance" @hinas economic expansion has been driving the global recovery and this expansion has been driving the demand in commodities in particular. 4o now that @hina is taking measures towards tightening credit and monetary and fiscal policies" this impacts the KengineK behind the uptrend we saw from arch / 5ov B?. +hat is why we are seeing the long term correction. !nce prices are low enough to warrant investors to take risks" well see risk appetite back in the markets again. ' believe the engine behind the *nd leg" well be different from the %st leg. 't wont be just @hina" but will probably include the 34 as well as Curopean economy.
*. is it mkt is waiting for gd news to push up aud=usd" eur=usd" etc 'f depends on what you mean by good news. 'f you mean good numbers on the economic calendar" then no" it will take more than this before the markets turn upwards again in the long term. emember that the economic calendar only shows the 4A!+ +C fundamentals. 'nstead ' believe it will happen when things have settled down after the fallout of @hinas monetary tightening. ,nd prices need to fall low enough for investors to feel that risk is warranted. . are you using mkt action to news to time your enter and exit #es" thats part of it. ' still use technical analysis to time entries and exits" but ' look at the fundamentals (and thus the news) to tell me which instrument to invest in and WAC5 ' should look to the technicals to enter" add on" or exit positions. &or instance" fundamentals guide as to where the big trends will be and roughly when they would start = correct = end. !nce ' get the fundamental signal then ' look for a technical set up. +hen there are occasions where the markets are waiting for a particular news item to show directions. &or instance 5&; is big because employment is seen to be very important to the 34 recovery. 4o on these occasions" ' will plan for the different reactions from economic data releases. Aope this made sense -Razorjack
> GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Do you pick a trending pair first and then look at how fundies support it+he exact opposite. ' look at the current market conditions as well as the individual countries economies and this will tell me where the biggest trends will be. &or instance ' explained above that current conditions are pointing to risk appetite with the carry trade as the most dominant force moving the markets. +his tells me exactly which currency pairs ' should be looking at" those countries with the highest and lowest interest rates. +his is exactly what the financial institutions" hedge funds" banks and all the other big boys will be looking at. Fearn this stuff" do the analysis" get in slightly ahead of the big boys and make a killingE GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 'f you had read about how ' analyze the markets" you would see that ' do an analysis of the global economy first and that points me to the best trending currencies for the best opportunities. ' can tell you that after doing my analysis" C3,3D and <7;,3D didnt even register on the radar" there are 3@A better opportunities in other currency pairs" such as ,3D34D" 56D34D and 34D@,D. !k" now lets take a look at your statement$
because the ,3 fundamentals are better then any other major economy including C3 and 3 ,re you sure about this- What do you mean by Kbetter fundamentalsK#es" ,ustralias economy has done much better than other major economies" but its fragile. #ou need to look deeper into this. Why has the ,ustralian economy done so well- +his is the real 1uestion you need to ask. +he answer is @hina. @hinas economic boom created huge demands in commodities that benefited ,ustralia$ @oal" copper" etc 5ow that @hina is looking to tighten its monetary policy" what will that do ,ustralia in the short to medium term4o basically ,3D is heading down. +hen look at the C3" its burdened by large deficits in
!ne example of this was the great '+ bubble that burst in *BBB/*BB%. +here was so much euphoria around tech stocks and options" there was a feeling of no end to the uptrend in sight. Aowever the shrewd trader would have realized that tech stocks for companies showing no profits at all were being pushed up to record levels and eventually it will be time to pay the piper. 4o in this particular case" weeks. Cven though ' left 1uite a bit on the table" ' still managed to make more on this trade alone that most make over several years. @omments" 1uestions and feedback pleaseE GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
Quoting peter lee
i am still far away from you ... can i assume that you have deep pocketscan you comment on this$ for coming monday" probably" asian e1uity will go dwn and eur=usd will go dwn too in far east time probably" previous 8.20 will give support to mkt till it released after which " eur=usd will go in opposite direction to what happen to the... Ai ;eter" #oure definitely making progress" however youre trying to make predictions. , proper analysis doesnt make predictions" a proper analysis makes anticipations. +heres a difference. #ou missed several important parts from my previous reply$ %. &irst ' told you" that you need to look at a longer period at least 8 months. 'f you look at only the previous week" then you will get a very limited picture. *. What you want is a list of scenarios" each with different economic conditions and how the currencies will react in those situations. #ou only listed one outcome from one scenario. Fet me see if ' can give you an example" instead of looking at a specific pair" look at the overall economy and what it is telling you. What are the biggest events happening right now+he biggest event is the credit tightening happening in @hina. +hen you need to an analysis based on how the tightening of credit will effect the different economies. Which countries will be impacted by this+his is where you need to understand the kind of economy @hina has and how it is linked in to the global economy. 'll give you a couple of hints" but you need to do your own research on this to get a full understanding. @hina is in the midst of a credit fueled boom since early *BB? and has been a major consumer of commodities. +ightening of credit may have an impact on the demand in commodities and thus currency pairs like ,3D" 56D and @,D. 'nstead of looking at the economic data this week" you need look at the big picture. +he big picture tells us that this event in @hina will either cause risk aversion or risk appetite. Weve seen risk appetite through out most of *BB?" with @hinas booming economy clearly a driver of risk appetite.
4o theres a good chance that this will cause continued risk aversion until it is clear to investors that credit tightening will not have a major impact on economic growth. 5ote that ' am not predicting this will happen" ' am anticipating both risk appetite and risk aversion" ' will be ready to trade both ways. Aowever ' believe that risk aversion is the more likely scenario. What you need now is some more research on how money flows in times of risk aversion and in times of risk appetite. Aeres a little clue$ +he last time we had risk aversion was around 5ov *2/*9 B? during the Dubai debt crisis" take a look at your charts to see how the different markets reacted. +hen ask yourself why the different currencies reacted the way they did. We had risk appetite through the majority of the time between arch and 5ov B?. Fook at how the currencies reacted and research why. 5ow based on what ' wrote" why dont you reply with what will happen to C334D if we have risk aversion and what will happen if we have risk appetite. @hinas development and progress has been pulling the rest of the world out of the financial crisis and @hina will therefore exert a great influence over the next few years. ,nticipating what will happen with @hina and its economy will go you a major advantage in trading. +his seems like a lot of complicated work" but necessary as the different economies will be impacted differently in different market conditions. &or example economies have reacted the way the have after the financial crisis due to the global conditions" once these conditions change so will the impact on different economies. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG to strengthen the 34D. 'n the case of central bank intervention" this will help the economies of Curope" @hina and :apan" but it could dampen economic inflation in the 34 and thus delay interest rate hikes by the &ed. +hen we can expect the carry trade into commodities and commodity based economies (,3D" 56D"
@,D" etc) to continue to be financed by the 34D. 'f there is no central bank intervention at the next <9=>" then its because economic leaders are anticipating an accelerating recovery in the 34 and thus interest rate hikes by the &ed. 'n this case we should look for a shift in carry trade funding from the 34D to :;#. 4o what does this all meanFet me see if ' can summarize all this to clarify my strategy. +he * economies that will have the greatest impact on the *nd leg of the long term uptrend are 34 and @hina. 'f we see 34D strength" then 'm looking to short :;# throughout the *nd leg. 'f we see 34D weakness then we could see central bank intervention" with a 1uick burst of 34D strength" but it will delay the recovery in the 34. Aaving said this" ' believe the mostly likely scenario (and the favored scenario by global central banks) is 34 recovery accelerating" no central bank intervention and indications of interest rate hikes by the &ed in *B%B. ,t the same time" 'll be monitoring the situation in @hina. @hina can be seen as the KengineK behind the global economic recovery. +his means that once things have calmed down regarding @hinas fiscal and monetary policies" ' am anticipating a swing to the upside once this current correction is finished. ' will be looking for a swing to the upside if ,3D34D hits B.>9 and 34D@,D hits %.B>2B within the next * months.
Whether the strongest trends for the *nd leg of the long term uptrend will be in the 34D pairs or :;# crosses will depend on the 34 recovery in the upcoming weeks. 7+W" this is not a recommendation for anyone to take trades based on what ' wrote. +his is mostly for me to clarify my thoughts so ' can verify the robustness of my strategy. ;.4. Does anyone else see the ,44'HC opportunity in @hinas credit fueled expansion could bring in the next few yearsGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Aere are some recent developments$ %. 7ank of @hina has said that they will keep an Kappropriately loseK monetary policy" while it is tightening credit. 'f this holds true" we could see a move towards risk appetite. *. :apan just approved a budget increase of over % trillion :;# to stimulate the economy. +his could mean weakening of the :;# should the markets move towards risk appetite. &rom my previous posts" this was part of the news ' was looking for. ' am now looking to start building my long term positions. Aowever 'm still going to keep an eye on @hina and the fallout of its credit tightening. +he last piece of the puzzle will be the 34 economy. 'f we start to see good numbers in eco data" then ' will look to increase the size of my positions. 7asically if the @hina monetary policy holds and we start to see better numbers in the 34" then '
believe we @!3FD start to see the beginning of a long term uptrend in the :;# crosses. Aowever" ' believe the move upwards wont accelerate and really take off until we see ,3D34D" 56D34D" 34D@,D complete their corrections. 'f there are no other major shocks to the global markets like sovereign debts" ' believe that the :;# crosses are now only waiting for the 34 economic numbers to confirm a rate hike this year. 4o keep a close watch over the inflation and employment numbers. ,lso remember that this turn around will take several days to weeks" and trading the long term market swings takes an entirely different approach then intraday trading. 7uilding long term positions should be done over several days to weeks and on occasion even small losses can occur. 7ut playing it right can keep you on the right side of the market for months to years and more than make up for any losses. ,gain" ' dont recommend anyone take trades based on what ' wrote" you will only end up losing if you dont know what youre doing. GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG ' dont see how the 34 economy can continue to grow while burdened by so much debt. 'f ' owe tens of thousands of dollars then ' am going to have to change something about my life (better job" start saving to repay debt). What is the 34 going to change to deal with its debt- ;rint more money- 'nflation+he deficit is a major obstacle" however the deficit is still manageable in my opinion. 'f we dont start to see any reform for addressing the deficit from the 34 govt within this business cycle (up trend) before the next bear market" then there is real cause for concern and it will be even more difficult to recover from a bear market. ' believe that :apan is in actually much worse shape than the 34" with a deficit of nearly *BBL
Aowever as far as long term sustainable growth" ' dont believe the current systems take into account the human factor. 5amely that when you have economic stimulation by means of a credit expansion" the idea is to invest now but that investment needs to pay off to cover the cost of credit. 3nfortunately the human factor tends to make everyone think that easy" cheap money is available to everyone and there tends to be a lot of reckless spending that can never be recovered when it comes time to reign in credit. +hen when it comes time to pay the piper" we all know what happens. GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
Quoting to me itsilverheat looks like ,3D34D is the trade with the biggest advantage
who says giving back all the gains from B? is where price should beCxactlyE +he ,3D34D has been the strongest performer of the major currencies. Aeres a guideline ' use when looking for downside KpotentialK$ +he strongest performers will not drop a whole lot due to strong fundamentals" unless of course the fundamentals change. +he lowest performing instruments dont have very far to fall" because they never really took off. 4o the best pairs to ride to the downside are the medium performing pairs like C3 or <7;. GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG %.
how you measure risk aversion if any +his is always done on a case by case basis. ,nd this is where fundamentals and a study of history will help. #ou have to look at what has been driving risk appetite and once this changes then you have risk aversion. &or instance" @hinas economic expansion has been driving the global recovery and this expansion has been driving the demand in commodities in particular. 4o now that @hina is taking measures towards tightening credit and monetary and fiscal policies" this impacts the KengineK behind the uptrend we saw from arch / 5ov B?. +hat is why we are seeing the long term correction. !nce prices are low enough to warrant investors to take risks" well see risk appetite back in the markets again. ' believe the engine behind the *nd leg" well be different from the %st leg. 't wont be just @hina" but will probably include the 34 as well as Curopean economy. *. is it mkt is waiting for gd news to push up aud=usd" eur=usd" etc 'f depends on what you mean by good news. 'f you mean good numbers on the economic calendar" then no" it will take more than this before the markets turn upwards again in the long term. emember that the economic calendar only shows the 4A!+ +C fundamentals. 'nstead ' believe it will happen when things have settled down after the fallout of @hinas
monetary tightening. ,nd prices need to fall low enough for investors to feel that risk is warranted. . are you using mkt action to news to time your enter and exit #es" thats part of it. ' still use technical analysis to time entries and exits" but ' look at the fundamentals (and thus the news) to tell me which instrument to invest in and WAC5 ' should look to the technicals to enter" add on" or exit positions. &or instance" fundamentals guide as to where the big trends will be and roughly when they would start = correct = end. !nce ' get the fundamental signal then ' look for a technical set up. +hen there are occasions where the markets are waiting for a particular news item to show directions. &or instance 5&; is big because employment is seen to be very important to the 34 recovery. 4o on these occasions" ' will plan for the different reactions from economic data releases. Aope this made sense GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 'm beginning to see signs that <7; has hit bottom and is waiting for an event to trigger the upwards trend. +here was almost no change in price on <7;34D" after a worse than expected
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGG Quoting myfx
Aello azor" !n +hursday we expecting few market news including$
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ore than 2B earnings reports
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5ew Aome 4ales
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+he &!@ decision
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•
+he ,pple +ablet
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Fast but not least" ;resident !bamas first 4tate of the 3nion address.
We know you are a medium and long term trader" but ' am curious how you deal with these kinds of situation. 'f you have an open trade" do you close it- or let it run- 'f no trade is open" but you notice very nice setup is forming" will you enter considering... Cxcellent 1uestions" myfx. +hese are exactly the 1uestions ' wish ' had the answers to when ' first started. +his can get a bit complicated" because its very discretionary" so ' will try to explain it using some examples. We know you are a medium and long term trader" but ' am curious how you deal with these kinds of situation. 'f you have an open trade" do you close it- or let it run+his would depend where the markets are at" economical conditions and the market news. &irst you need to understand how ' trade. y goals as a trader are$ %. +o get in at the beginning of the long term trend *. unload part of my position on medium term swing highs for uptrends = swing lows for downtrends . +o add to my overall position on dips = rallies 0. +o unload my entire position once the long term trend is exhausted. Fets say 've got some open long positions" the trend has been going for some time but it hasnt reached long term exhaustion yet" the overall market conditions are bullish and we have some market news coming out. emember when ' mentioned that most market news and economic calendar releases are 4A!+ +C impacting. 7ut some times youll have items that impact more long term like interest rate changes" indications of interest rate changes" central bank intervention" indications of central bank intervention" etc 4o first ' determine how much impact the announcement could have and anticipate the different outcomes. 'f for instance the market is at a medium term uptrend exhaustion where good news wont push the markets much higher" but bad news can send the market plummeting then ' will unload part of my position then look to add more after the dip. 'f 'm long and the markets is at a medium term D!W5+C5D exhaustion point (meaning the market wont move down much on bad news" but can take a significant boost upwards on good news) then ' will look to add to my position. 'f the market is not near any exhaustion point and the news is only short term impacting" then 'll just ride it out. 'f no trade is open" but you notice very nice setup is forming" will you enter considering the given situation!h yes" definitely. 4ometimes these market news releases can be the turning point in a trend reversal. +ake a look at post M2" where ' describe how ' loaded up on orders during 5&; and then added on more when the 7, was releasing an interest rate statement. Aope this answers your 1uestions. 'f not just go ahead ask. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Ai ac" 'm learning how to trade KconservativeK currencies (:;#" 34D" and @A&) vs KliberalK currencies ,3D (and 56D)" @,D" and C3. 'n general they what we call KconservativeK currencies" as a whole group gain strenght when the KliberalK currencies loose it" creating cicles with opportunities. What you call KconservativeK is what most people call Ksafe havenK currencies and KliberalK is referred to as KriskierK currencies. 7ut yes" you have the right idea.
Fundamentals and Intermarket Analysis: ' found two books with the same name" one of them is Louis B. Mendelsohn and the other is sraf Laidi Which one is the one that you recommend-
' have the one by ,sraf Faidi and it is CJ@CFFC5+. ' havent read the one by Fouis 7. endelsohn" but 'll look into it. ' look for the opportunities in the short term. Would you cuncurr that in this week what we call KliberalK currencies ,3D" 56D" @,D and C3 will get strenght agains the conservative (:;#" 34D" @A&) creating opportunities to sell ,3D=:;#N ,3D=34DN 56D=:;#N 56D=34DN @,D=:;#N @,D=34D etc...4orry about my english. 'n the last post ' meant opportunities to 73# ,3D:;#" ,3D34D" ,3D@A&" 56D:;#" 56D34D" @,D:;#" etc +hanks 5o problem" there is a button where you can edit your posts" just click on the KeditK button at the bottom of the post you want to change. !k" now to your 1uestion$ +here are many trends that are happening right now. ' focus on of them" 4hort +erm (Days to weeks)" edium +erm (Weeks to months) and Fong +erm (onths to years). +he Fong +erm is pointing upwards. +he edium +erm is currently down" this is what ' would call a correction of the Fong +erm. +hen there is the short term. +he 4hort +erm '
Aowever" ' do not trade the short term" so 'm not making any recommendations. What 'm looking for is the edium +erm down trend (Fong +erm correction) to swing back upwards and so ' can get in at the start of the *nd leg of the Fong +erm. 7efore this will happen" 'm looking for ,3D34D to get below B.>9 and 34D@,D to get above %.B92B. !nce these * pairs reach these levels then ' will look for 4'<54 and '5D'@,+'!54 of a reversal. Aope this made sense. GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
how to determine the major turning point with precision. as far i can remember three major events happened in se1uence$ %. china increases bank reserve ratio *. Dubai debt problem . !bama proposed financial reform Dubai debt crisis started 5ov *2" *BB?. @hina increased reserve ratios over the weekend of */*0 :an *B%B and !bama proposed financial reform last week. C3=34D turned after event *. #es" C3" ,3D" 56D" @,D" etc turned downward after the Dubai crisis not only against the 34D but also against :;#. if we short C3=34D after event " is there a possibility we only can only catch a small part of the big move +he market reaction from this announcement is already over. 't will take several weeks=months before we see what the actual reformations are. Aow the markets will react to that will depend on the what the reforms look like and the market conditions. ' personally would not look for shorting C334D after this event alone. ' think there are much better opportunities. &or instance" if ' were tell you that after the fall out of @hina tightening monetary policy and commodity prices fall to a low enough level" then we can expect to see demand for commodities surge again. Were also starting to see the 3 and 34 economy pick up momentum with the 34 possibly raising interest rates later this year. ,nd we can expect the :apanese economy struggle for a while longer" with very low inflation and thus low interest rates for year to come. +hese are the F,
Quoting peter lee
sorry. i have the se1uence of the events mixed up. based on your described scenario" since 34 economy will pick up" commodities price will go up" e1uity will go up too.
this means eur=usd" gbpusd" aud=usd will go up. with jpy interest rate remains low" gbp interest rate and 34 interest rate on up trend i think it is better to long gbp=jpy on dips" which is also in line with carry trade. pse comment the above.
!" youre getting closer but youre misinterpreting some information. ' think you will learn much more if ' guide you and you figure out the answers. 4o lets try again$ since 34 economy will pick up" commodities price will go up" e1uity will go up too. #es" ' believe this is true" but your reasoning is a bit off. @ommodities prices will not go up because the 34 economy is picking up. 'n my opinion" commodities had a huge uptrend in *BB? because of * main reasons$ %. +he weak 34D. +he value of 34D is driven by supply and demand just like every thing else. @ommodity prices are denominated in 34D and a weaker 34D means more dollars are re1uired to by the same amount of commodities. *. @hinas credit fueled economic boom. @hinas massive credit expansion has fueled an economic boom that drove up demand for commodities especially metals. 4o commodities prices wont go up because the 34 economy is picking up. @ommodities prices will go up again if we see increased demand from 34" @hina" Curope" etc and if we see the 34D appreciate at a 4F!WC pace than commodities prices. ,nd if commodities will go up" then which countries will benefit from thisthis means eur=usd" gbpusd" aud=usd will go up. ,3D34D" yes. C334D will depend upon how well the Curopean economy does while being dragged down by the ;'<4 (;ortugal" 'reland"
<7;34D looks like its close to the bottom" but it depends on how 1uickly the 3 economy will accelerate in comparison to the 34. 7ut one of the most important things here is that right now the 34 economy 4CC4 to be accelerating faster than the C6 and the 3. with jpy interest rate remains low" gbp interest rate and 34 interest rate on up trend i think it is better to long gbp=jpy on dips"
which is also in line with carry trade. @lose but not 1uite. %. +hink about how the carry trade works" what should you be looking for in currency pairs when considering the carry trade- 'f you dont have this then the carry trade wont be profitable. *. :; interest rates (B.%L) will be low for 1uite some time and 34 interest rates are likely to be raised this year to B.2L. 7ased on this" which currency will be used for the carry trade in *B%B. emember that carry trades are not only for currencies" but carry trades can be used for commodities" investments in to developing countries" etc. We saw this with alot cheap 34D to fund investments into gold" oil" copper" etc as well as e1uities in developing countries like 7razil" @hina" ussia" etc. !" now give it another try. 7ased on all of the above" which currency pairs can we expect to make the biggest gains in *B%B-
Quoting rac
Ai azor" +hank you for your kind answer" ' already ordered the books" 'm looking forward to read them soon. 't seems that the KriskierK currencies are definetilly gaining strenght against the Ksafe heavenK currencies.... 't seems that the KriskierK currencies are definetilly gaining strenght against the Ksafe heavenK currencies. ' cannot tell if this is the actual begining of an upward mid term cicle yet" but my indicators show gain. #es" it looks like this but there is a tricky part here. We may see the uptrend sooner in currencies like ,3D" 56D and @,D against the :;# before they gain on the 34D. ' dont trade @A&. +he reason is that the 34 economy is accelerating and ' dont think that ,3D34D and 34D@,D have completed their corrections yet. +his you can see if you look at 34D:;#" if it breaks upward out of the down trend then its a good sign that the :;# crosses are appreciating. +hey might be raising the ,3D interest rate today" that will give the ,3D even more strenght against :;#" 34D and @A&. 5ot 1uite" an 7, interest rate hike was already factored into ,3D prices. +hats why we saw it drop when the 7, didnt raise rates. Aowever there are much bigger economic forces than interest rates in ,ustralia. &or instance the 7, tightening monetary policy wont impact the global economy as much as @hina tightening monetary policy. +his means that in the current situation @hinas monetary policy has a bigger influence on the global economy" including ,3D" 56D" etc then ,ustralias monetary policy. ,nd it looks like investors are interpreting no further monetary tightening in @hina. +his is why ' dont expect the ,3D to fall much further" right now the ,ussie economy is influenced more by @hina than what happens in ,ustralia. @an ' ask what kind of technical analysis you use to decide your enter points that show signs of reversal-
!nce ' have my fundamental views clear then ' look at price action around major 4upport = esistance levels" long term fib levels" round numbers" KpsychK numbers" trend lines and volume. ' also compare the latest short" medium and long term swings and compare them to historical swings for getting an idea of price exhaustion. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Quoting dre!"#$
' notice you said ,ud wont fall much further because of the china monetary tightening. ,re you sure that is correctAi Dre" Did ' write that- ' couldnt find it. @ould you please copy and paste the text youre referring to' meant the exact opposite. What ' meant was that @hinas monetary policy will have a much bigger impact on the global economy than ,ustralias monetary policy" simply because @hina is a much larger economy which trades with every major economy in the world. +hats all. 5othing about how this will impact the ,3D. +he point ' was trying to make was to look at the 7'<
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGG 4o youre saying that a pair like audjpy will appreciate because of the carry trade #es" when the markets move towards risk appetite. and people buying ,3D is gonna push the audusd up+his depends on how fast the 34D strengthens" when we move towards risk appetite. ight now it looks like ,3D will strengthen faster than 34D in *B%B. Aowever ' think the biggest gains will be in the :;# crosses" not in the 34D pairs. ,s the 34 economy looks like it will recover faster than :; economy. 4o ' am not really even looking at the 34D pairs unless there is major risk aversion.
% forgot to mention& that it's not ()L* +ecause of the carry trade& +ut , is a commodities currency. o an uptrend in commodities /ill push up ,& )0 and1or 2& depending on the commodity. o there are several fundamental indicators pointing to ,& /hich in my opinion makes it a very good opportunity. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Quoting dre!"#$
4orryEE 't was post M?B. ' looked and the wrong number. 7ut this is what you wrote$
Aowever there are much bigger economic forces than interest rates in ,ustralia. &or instance the 7, tightening monetary policy wont impact the global economy as much as @hina tightening monetary policy. +his is whyon ' dont the ,3D to fall further" the ,ussie economy is more dependent @hinaexpect than what happens in much ,ustralia. ,h" ' see how this can be misinterpreted. 'll go back and correct this. 't should read like this$
3o/ever there are much +igger economic forces than interest rates in ustralia. 4or instance the RB tightening monetary policy /on't impact the glo+al economy as much as 2hina tightening monetary policy. 5his means that in the current situation 2hina's monetary policy has a +igger influence on the glo+al economy& including ,& )0& etc then ustralia's monetary policy. nd it looks like investors are interpreting no further monetary tightening in 2hina. 5his is /hy % don't expect the , to fall much further& right no/ the ussie economy is influenced more +y 2hina than /hat happens in ustralia. +hanks for pointing that out.
-Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG do market differeniate inflation/related and growth/related econ data Depends on what you mean by inflation/related and growth related. @ould you give some examples of what you are referring todo you look at the market sentiment- if yes" how to recognise it#es. +here are several ways$ %. @!+ (@ommitment of +raders) reports" there is % week delay so it doesnt give the latest info and should be used for medium to long term *. 7ond #ield @urves" this gives me a long term view and changes very slowly over time . ' combine fundamental developments with price action on the charts. &or instance" there was a market KshockK when the 7, didnt raise interest rates" but it ,3D:;# didnt make a new low and ,3D34D barely went lower than the previous days low. +his tells me that the market isnt too keen on shorting the ,ussie in the short term. GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Quoting stellas
Ai azor ,re you referring to taking profits from the x=jpy position mentioned in post ?*. 'f so" please could you tell me how you came to the conclusion 1uoted above" and that it was time to close your longs - Was it based on a fundamental" technical or a mixed view - ,t time of your post the 34D=:;# pair was making a strong run north and from a technical point of view ' would probably have stayed with it (only to probably give back profits later). +his thread is being of 'C54C help in trying to put all the pieces of the puzzle together.... Ai ,stellas" #es" its referring to my positions taken from post M?*. 't was based on both fundamentals and technicals. 'll go into a bit more detail. &undamental reasoning$ ' first thought that there was a chance that wed seen the fallout out from @hinas monetary policy and that the markets were back in risk appetite mode after seeing all the positive earnings reports and economic acceleration in the 34. ,s ' mentioned" patience is not a virtue ' possess and ' tend to get in very early. ,nyways" it looks like were still in '4 ,HC4'!5 mode in the CD'3 +C" with whats happening in Curope (;'<4) and @hina. 'ts still not over yet. +echnical reasoning$ ,t time of your post the 34D=:;# pair was making a strong run north and from a technical point of view ' would probably have stayed with it (only to probably give back profits later). #es" true but price action in the :;# crosses didnt react the way markets react when you have a trend change. +ake a look at the 34D@,D trade in post M%> and the ,3D34D trade in post M%?. Do you see how the prices explode in the new direction- @ompare that to the price action in the ,3D:;#" @,D:;#" 56D:;# and 34D:;# today. When we see the reversal upwards" believe me you will know itE 5ow the markets could be waiting for 5&; this coming friday" but some more clues are$ ,3D:;# failed to sustain new highs above >2 and its knocking on the door of the major support level >B. @,D:;# failed to sustain new highs above ?B 56D:;# broke the key support level at 8" then failed to make a new high above 9B and now looks like it will break 8 again. C3:;# broke through the major support level %*9. We could see the :;# crosses drift upward in the 4A!+ +C" but there isnt much momentum" its very slow" showing that there arent very many buyers. 'f traders felt that prices were low enough to warrant taking risks in the carry trade" we would have seen dramatic :;# weakening. +his isnt the case" so we need to wait a bit longer. ore than likely a few more weeks.
;atience" patience ..... ' think there are better trades in holding 34D longs against C3" ,3D" 56D and @,D and shorting the :;# crosses in the CD'3 +C. +his thread is being of 'C54C help in trying to put all the pieces of the puzzle together. any thanks. 5o problem" 'll continue to post my thoughts and trades until ' feel that 've done enough to relieve my karma. 'n the meantime" keep asking 1uestions on things that dont seem very clear and 'll do my best to explain it. Aope this post made sense. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 't looks like the uncertainty regarding @hinas monetary policy will continue for a little longer. 'nflationary pressures are increasing and @hina will need to let the #uan appreciate. 5ot to mention that developed economies like :apan" 34 and Curo6one could threaten to impose import tariffs" if the #uan doesnt appreciate. +his development over the CD'3 +C" looks like risk aversion is here to stay for a while longer. 'f there is a sudden change or an announcement of further tightening in @hinas economic policy" which ' believe is inevitable" look for another KshockK to the market and to further risk aversion. ' write KshockK because when things like this happen" most investors and economic analysts" are surprised by the event rather than anticipating it in advance. ,nyways" 'll continue to go long on 34D and :;# until ' see a break of the CD'3 +C downtrend and a break of major resistance (support for 34D@,D) levels. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 'Om not 1uite clear here. WouldnOt all the positive earnings reports and economic acceleration coming from the 34 only strengthen the 34D:;# #es" but only if the markets were in isk ,ppetite. ;ositive earnings and economic acceleration wont matter if everyone is running towards safer investments. !r are you implying that the settling of @hinaOs monetary policy would lead to risk appetite" which in turn would weaken the P as investors leave safe/haven 34 assets in search of riskier non/34 assets. #es" exactlyE ,nd not only 34 assets" but :; assets are seen as KsaferK havens than 34 assets. 4o risk appetite would weaken both the 34D and :;# against currencies like ,3D" 56D as well as exotics like the 7razilian eal.
+herefore" the risk appetite will outweigh the good numbers coming out of the 34" and the 34D:;# pair will weaken. Aeres where you have to be a bit careful with 34D:;#. '4 ,HC4'!5 is currently outweighing the good numbers coming out of the 34" basically e1uities" commodities and riskier assets heading down with 34D and :;# heading up. 5ow in regards to the 34D:;#" you have to be aware of the economic conditions when interpreting this currency pair. +hink of it this way" the :;# is probably the KsafestK currency" with the 34D in *nd. @A& can also apply" but the fundamentals arent as clear cut as it is with 34D and :;#" so thats why ' dont trade @A&. 5ow lets look at risk aversion. #ou will see different degrees of risk aversion. #ou will have dramatic or ,:! risk aversion like a housing market collapse" credit crisis" etc. +his sort of risk aversion impacts the F!5< +C. +hen you will have risk aversion of a lesser degree like @hina tightening its monetary policy. +his will have an impact on the CD'3 +C. +hen you can have 4A!+ +C risk aversion like bad numbers in economic data releases. With dramatic risk aversion you will see 34D:;# drop like a stone. When there is milder forms of risk aversion you wont see 34D:;# affected as much.
5ow the exception has been the 34D:;# down trend since :une=:uly *BB9. 't started off as ,:! F!5< +C '4 ,HC4'!5 triggered by the financial crisis. 7ut then at around arch *BB?" the down trend was due to record low interest rates in the 34" which led to the 34D preferred for funding carry trades. +his is one of the reasons" why :apan has been so vocal about :;# appreciating towards the 34D. 'ts put the :apanese economy in a difficult position" as usually its the :;#" with low :; interest rates thats preferred for funding carry trades" which leads to a weakening of the :;# during times of risk appetite. Did this clear things upGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 'm trying to fit it all into place but think ' need a little help to clarify one of the basic relationships. Aave you had a chance to look at the 'ntermarket analysis book ' recommended earlier in this thread+hat book can explain this in much more detail than ' can. 7ut 'll try to answer your 1uestions in more general terms. 7ut what else is it about these currencies that make them low risk - ,re there low/risk assets that investors are putting their money in - ,nd if so" what are they - ' canOt think that investors are simply placing their money in 34 or :;# interest/paying bank accounts as the interest rates are so low" or in times of risk aversion perhaps they are -
+he low risk in 34D and :;# has to do with the 34 and :; economies. Fow risk assets can be just keeping the money in cash in an account like you mentioned or bonds" money markets" etc. +here are lots of them" do a bit of research in low risk investments and youll find a ton of info. ,nd also" why is the :;# considered QsaferO than the 34D - 'n fact" what makes a currency considered to be one of the safer ones to start with - y understanding is that these countries are more financially and politically stable" and therefore are less likely to default on paying out. 7ut is there more to it +hink of a scale. !n one end you have export based economies" on the other end you have consumption based economies. !ne side produces" the other side consumes. @ountries with higher interest rates tend to be higher risk" thats why they have higher interest rates$ to attract money into the country and the higher interest rates are to justify the risk investors will take. +hese countries need foreign money to invest in their economies and usually are consumption based economies. Where as countries with lower interest rates tend to be export based economies" like :apan. @onsumption based economies are higher risk because when there is risk aversion or economic downturns" people lose jobs and dont have money to consume and and if they dont consume the driving force behind the economy weakens. Where as export based economies still have investments (export production) and can continue to produce during risk aversion or economic downturns albeit less than during times of economic expansion. 5ow no country is strictly export based or strictly consumption based" they all have different combinations of both with some closer to export and others closer to consumption based. :; is closest to the export based side that is why it is considered KsafeK. 34 is an exception" it is closer to consumption based than export based but still has 1uite a bit of exports. Aowever the 34D is the worlds reserve currency and all commodities are denominated in 34D. +his gives it a Ksafe havenK status but after :;#. Aope this made sense" it can get complicated. Which is why ' suggest that you first go through the 4perandeo book and go through the 'ntermarket ,nalysis book. +hose * can explain it in much better detail than ' ever could.GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGG Ai Diogo" Welcome to the thread. what i do not understand is if china is going down and that influences a lot in usd currency why that usd is gaining power against the euro-&irst of all" @hina is not going down. @hina is tightening its monetary and fiscal policies" this is a
%.
4overeign debt problems in Curope$ ;ortugal" 4pain"
*.
34 economic recovery is accelerating and the possibility of the &ed hiking rates this year looks promising
.
@hinas monetary tightening has caused a slow down in demand for commodities" which triggered an unwinding of the 34D funded carry trades and is moving investor money from commodities" ,3D" 56D" @,D" etc back to the 34D.
' think you are looking at economics one dimensionally" you are not the only one. #ou have to understand things like economic cycles and fair value. ' will make a post on this soon to give you a better idea of this.
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG 9" or possibly B.>2 or lower before looking for a long in ,3D:;# and possibly ,3D34D" but that this will depend on fundamental development and the presence of medium term RtechnicalS exhaustion points. ay ' ask you to elaborate a little on how you will know when you see these two line up. Fet me start by saying that" right now ' can only speculate as to what will happen and its impossible to know a lot of these things ahead of time. &or instance it can be one event" like the sovereign debt problems in Curope" that trigger risk aversion and a completely different unrelated development that triggers risk appetite. 4o we have to keep up with current events to see what is happening. +he good news is that these develop over time so there are never really any 1uick sudden changes. &or example" with regards to the fundamentals ' believe youOll be looking for @hina to settle its monetary tightening policy" #es" ' think everyone would like to see the fallout of @hinas monetary tightening to make sure that the KengineK behind the global recovery will be just as strong when the global economy moves from recovery to expansion. and that this" combined with what investors will consider to be bargain commodity prices" will lead to risk appetitive. #es" dont forget the Curopean sovereign debt problems. ' think many investors would like to see that these deficits are under control and arent going to weigh down economic developments. 7ut most definitely" when commodity prices get low enough" it will mean low inflation" which will mean the economy has cooled down enough to continue economic expansion and thus to warrant risk taking again. 7ut how will you derive fundamentally that this might be about to occur - Will you be monitoring for news announcements coming out of @hina that suggest easing" and then combined with the fact that ,3D34D isnOt making lower lows (exhaustion at major support) consider that itOs time to start
placing long orders We shouldnt limit ourselves only to the developments in @hina. 'nstead we need to look at the bigger picture and look at the different scenarios that can develop over time. 7y doing this" we can see all possible outcomes and anticipate likely events and how they will impact the currency markets. What if ,3D34D starts going up before ,3D:;# - Will you look for evidence that the carry/trade isnOt shifting over to the :;# just yet and therefore go long ,3D34D until there is such evidence of :;# becoming the preferred carry trade +his is good and exactly what ' was going to suggest. Fets play the KWhat ifK game and see what would need to happen in the different scenarios. ' can give you all of my opinions" but lets do this interactively. 'll ask some 1uestions and you give me your opinions and together we can come up with some likely scenarios. &irst some basics. ,ustralia has the highest interest rates of the major economies" so it will attract a lot of foreign money into the country. ,ustralia is also highly exposed to developments in @hina" so the ,ussie economy can not expand without demand for its commodities" if it doesnt come from @hina it needs to come from somewhere else. !" so we have several different outcomes that can happen at the end of the current correction when risk appetite comes back in again. 4cenario %$ ,3D:;# and ,3D34D continue downwards. +his is the situation we are in now during risk aversion. 7ut lets assume that the markets move back into risk appetite and that all the other currencies are strengthening against the 34D and :;#. Aow would we get into a situation like this- What would need to happen in ,ustralia- What would need to happen with @hinas demand for commodities from ,ustralia4cenario *$ ,3D34D and ,3D:;# both turn upwards. +his can only happen if the markets move into risk appetite" rightAow would the economies in ,ustralia and @hina need to develop compared to the 34- compared to :apan&or instance" would the ,ustralian economy need to expand faster or slower than 34- :apan4cenario $ ,3D34D heads up" ,3D:;# continues down. Would this be risk appetite or risk aversion- 'f you said risk appetite then you are correct" ,3D34D cant appreciate in risk aversion. Aow would the economies in ,ustralia and @hina need to develop compared to the 34- compared to :apan+hen 34 compared to :apan4cenario0$ ,3D34D continues down" ,3D:;# heads upwards. Would this be risk appetite or risk aversion- 'f you said risk appetite then you are correct" ,3D:;# cant appreciate in risk aversion. Aow would the economies in ,ustralia and @hina need to develop compared to the 34- compared to :apan-
+hen 34 compared to :apan'f we can answer these 1uestions" then we can see what developments will be the most probable and what we should be watching for. 4o go ahead" 'll wait for your answers to continue ...... -Razorjack
,4;3543F ,' :!4EEEEEEEEEEEEEEEE
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Ai guys" ' realy like this thread and especially azorjacks posts. ' learn lots of new stuff. ' even read books that were recommended here. 'll try to help to solve your scenarios $S 4cenario %$ ,3D:;# and ,3D34D continue downwards. 7ut markets move back into risk appetite and all the other currencies are strengthening against the 34D and :;#. 4o ' think it must something bad to happen in ,ustralia with regard to its economy (or they have to lower interest rates rapidly). @hina has finished with monetary tightening and has the demand for commodities" except from ,ustralia (for some reason). 4cenario *$ ,3D34D and ,3D:;# both turn upwards. @hina has finished with monetary tightening and has the demand for commodities. @hinas economy improves /T also ,ustralias economy improves. Cconomies of 34 and :apan expand much slower. 4cenario $ ,3D34D heads up" ,3D:;# continues down. isk appetite has raised" economies of @hina" ,ustralia and :apan improve and exapand. !n the other side" 34 economy expands much slower" or it retrogrades. Cxpanding :apanese economy raises the value of :;# and because of that" 34D is the preferable currency for carry trades. :apanese economy expand as fast or faster then economies of @hina and ,ustralia. 4cenario0$ ,3D34D continues down" ,3D:;# heads upwards. 'ts the same as in the scenario M" but the position of 34 and :apan is switched. Well" ' think that :apanese economy wont change much. 34 economy is starting to expand" but pretty slowly. @hina will finish with monetary tightening" and its economy will continue to expand pretty fast. ' have no idea about ,ustralia and its economy" but ' think" it will copy the situation in @hina. 'n the view of these facts" 'll tip the scenario M* as the most feasible. on't touch& just look... Quoting 6/!R
Ai guys" ' realy like this thread and especially azorjacks posts. ' learn lots of new stuff. ' even read books that were recommended here. 'll try to help to solve your scenarios $S 4cenario %$ ,3D:;# and ,3D34D continue downwards. 7ut markets move back into risk appetite and all the other currencies are strengthening against the 34D and :;#. 4o ' think it must something bad to happen in ,ustralia with regard to its economy (or they have to lower... Well done ,1wE ove to the head of the classE :ust remember that @hinas economy has been cooling off for the past few weeks and this has reduced the pressure for further monetary tightening. +here may be further tightening" but
the pressure will continue to ease the further the economy cools. +he real pressing matter is the sovereign debt problems in Curope that is fueling the CD'3 +C risk aversion. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Well done" ,stellasE ' give you an ,/. #ou have most of it" just a couple of things that are being overlooked. 'f all other currencies start showing strength" but not ,3D" then ' would assume the appetite is not for commodities" but elsewhere (eg. 34 stocks). ' would also infer that until @hina are happy that their inflation rate reflects steady growth then the demand for ,ustraliaOs commodities will not be as great" and therefore investors will be wary of the ,3D. +his condition is subject to change though so ' will keep watching the events in @hina" and also keep an eye on other economies that are returning to growth" and may soon have commodity demands (eg. +he 34). ' would also be aware of the ,ustralian interest rate as expectations are built in that it will rise later in the year" but if @hina is not importing" then ,ustralia will have to reconsider. ,lmost" there could be a demand for commodities because currencies like 56D" @,D and the 7razilian eal are also dependent on commodities. 'f all other currencies other than ,3D went up against 34D and :;#" then there would be something seriously wrong with the ,ussie economy" like out of control sovereign debts or extremely high interest rates strangling the economy. 'f ,3D34D and ,3D:;# both turn up then this must mean there is a demand for the ,3D" and this will come from either increased demand for its commodities" or investors wishing to invest in its higher risk asset classes. 4o yes" ' would expect markets to move back to risk appetite before this can happen. #es" exactly. Well done. ,ctually" hereOs something ' donOt 1uite understand. ,ustralian bonds are guaranteed by the government" and will offer a high rate of interest (if they are derived from the @ountrys national interest rate). 4o therefore" why does money flow out of the ,3D in times of isk ,version. ' would have thought these products would give it some protection. 'll let you conclude this one with some guidance. 'f you 7!!W money in a low interest currency to invest in higher risk currencies or assets" you have to make sure that the profits you make from your higher risk investments are enough to cover interest rate payments at the '5'3 otherwise you will end up losing money. !f course you would want more to make the reward worth the risk youre taking.
4o in the above scenario" WAC5 will you decide to move your money from the higher risk investment to a safer investment or convert to cash to pay back the loan'f this doesnt turn on the light bulb" think a bit more about how the carry trade works. 'f the 34 economy grows at a slower rate than expected" and=or @hina returns to steady growth before the 34 gets going" then this would lead to ,3D strength. 'Od also be aware of changes to the carry trade once the 34 strengthens though. :ust one correction" it would lead to ,3D strength ,<,'54+ 34D. ,nd the carry trade would shift if
the 34D strengthens enough to warrant interest rate hikes leading to 34 interest rates to be A'
7ut" if we are in a risk appetite" is it possible for the :;# to remain stronger than the ,3D - ' would of thought :;#" being the QsafestO currency would be weaker than the ,3D in times of risk appetite. CxcellentE 5ow are you thinking in the right directionE 'n times of risk appetite" :;# can be stronger than ,3D" but the ,ussie economy would have to be in very serious trouble. ,nd in this scenario" the :; economy would have to be accelerating faster than both the ,ussie and the 34" and the ,ussie accelerating faster than the 34. 4o given the current economic situation how likely is this4o we are seeing dollar strength against the ,3D" but :;# weakness against the ,3D. Well" we canOt be in a time of risk aversion as weOd also expect the :;# to be strong against the ,3D. 4o ' think we are probably in a time of risk appetite" the 34 economy is strengthening" which is leading to the carry trade unwinding" and thus the ,3D34D will go down" while the ,3D:;# goes up (thanks to :;# now having the lowest interest rate). 5ot exactly the ,3D34D carry trade unwinding. +hink again. We are in CD'3 +C risk aversion" what happened=is happening to the ,3D34D carry trade right now7ut yes" you are correct on the rest. With regards to the carry trade unwinding" how much will the expectation of the 34 raising interest rates have - 7y this ' mean / by the time the 34 has increased its rate higher do you think that the carry trade will already have been unwound. ,gain" ' will let you come to the conclusion yourself with some guidance.
,t the end of *BB?" the markets were in risk appetite" with ,3D34D the preferred carry trade. 'n order for the &ed to raise rates we would need to see much improved employment and inflation numbers. +ake a look at the ,3D34D and ,3D:;# charts when 5&; was released on Dec 0th. +he numbers were very positive. Aow did ,3D34D and ,3D:;# react5ow describe why they reacted the way they did and you will have your answer. ' feel like 'Om obsessing about the carry trade too much. 5ot at all" ' obsess about the carry trade all the time. +he carry trade is A3
Dear ,ll " how we can determine when the turning point from risk aversion to risk appetite or when the correction is coming to an endfor the past one week " ' have not seen any major news. is it based on price action have a nice day
+his is going to be individual to each trader. &or me" ' would ask myself some 1uestions$ ight now ' am shorting everything except @A&" against 34D and :;#. Where would prices reach a low enough level to warrant risk taking- ,re the prices there yet- ,re the causes of the current risk aversion still having an effect- What is the market sentiment- Aow are the markets reacting to good news- to bad news+his tells me to either hold my positions or look for areas to unload my current positions and load up on positions going the other way. What you will notice after some experience is that the markets dont shift from risk aversion to risk appetite and vice versa in just one day" it takes place over a period of time. Aow long of a time depends on how 1uickly the fundamentals develop. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG i am curious to know when you will favor risk appetite. 'll lean towards risk appetite when$ %. @lear plan from the C3 that the sovereign debt problems will be contained *. the fall out of @hinas monetary tightening . prices fall low enough to warrant risk taking again !f course this is provided that no new major events impact the current fundamentals.
-Razorjack GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG Ai ;ilatus" Welcome to the thread. 4o" as ' understood you correctly" you pay attention to find a pair which can be good for carry trade. +his is wrong" 'm not sure where you got this from. ;lease re/read post M% and M%B. What ' wrote is that ' look at the overall global economy and determine what those conditions are. +hen go further down to determine where the biggest trends will be. 't could be carry trades or e1uities driven currencies" etc. +hat is the main goal" to find a pair which can have a large trend(talking about medium and long term trend). #es" that is always the goal" to figure out where the biggest trend will be. 5ext" you find a currency with high interest rate versus low interest rate or two pairs on which you pay attention.
' would do this '& and !5F# '& the carry trade will be a dominant force in the markets. Fet say that right now that is ,3D versus 34D. When you spot those currency you go in analysis of those currencies in deep. #oure putting the cart before the horse. +he global analysis comes first then that points me to where ' should be looking for the biggest trends. +he currencies come later. 'f all that ' mentioned is correct here come my 1uestions. %. #ou mentioned in previous posts that for ,3D you look for if the currency is in risk appetite or risk aversion condition. Fets assume that we have risk appetite. +his risk appetite will attract investors to buy ,3D and hold positons longer time to make money of differention. 5ow if that is true" why we should look for ,3D economies in correlation with @hina for example-- !k ' understand that @hinas demand for ,ustralian commodities will results in demand for ,3D and automatically strenght ,3D against other currencies" but will currencie strenght if we have demand because of international transaction(buying commodities)" because of investors to get differential interest or both or something else--- Which one has greater impact to strenght the currencie!" youre not connecting the dots" you think these incidents are all isolated when they are interlinked. ,ustralia has highest interest rates making it attractive for the carry trade. @hinas high demand for commodities boosts ,ussie economy /T ,ussie economic expansion leads to higher inflation /T higher inflation leads to interest rate hikes /T interest rate hikes lead to even more interest in ,3D34D carry trade.
'ts not one or the other its all connected together. *. 's there anything else to pay attention or we just need to look what you mentioned before'ts not what ' say that matters. #ou should learn how to do your own analysis so that you can draw your own conclusions. Fooks like it is easy but ' think that 'f analysis spread to much we can be lost in right conclusion. 'ts never clear cut. +here is so much information out there" your job is to figure out what the best trades are. ,nd its never guaranteed" we can only play the odds. 4orry for my bad english and please correct me and give us right path to make right analysis. #ou certainly must have some spreadshit to make analysis and which you fill from time to time to get a picture what is happening. 'f you have somthing like that" can you share that with us please.-E +here is no right or wrong path" its only probabilities of what can happen. #our job as an investor is to assess what those probabilities are" so that you can profit from it. ' dont use any spreadsheets" what you see on this thread is basically what ' use to keep track of my thoughts. -Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGG ' think you are focusing too much on the short term and need to get a bit more familiar with the medium and long term.
We had the ,3D employment rate unveiled hour and a half ago and prices are moving like if risk of apetite is growing. +his just means there were good numbers and the ,ussie economy is getting stronger. +his doesnt mean that most investors will be willing to take on greater risk based on these numbers alone. +he 7, raised interest rates Dec %" this should have been very good for the ,3D" but take a look at what happened the next few days. +he markets were in the process of shifting from risk appetite to risk aversion in the CD'3 +C. @an you also see that the shift from risk appetite to risk aversion took nearly * months- (from mid 5ov to mid :an) +hats * months to shift from uptrend to downtrend. 't took me awhile to adjust to this longer time perspective. 's this reaction a small indicator that the risk of apetite is slowly taking over' know that there are much bigger things going on in Curope and Dubai" but the trends already changed direction in the short term. +ake a look at ,3D34D chart during the uptrend from ar / 5ov *BB?" did you see any short term movements against the trend+here will always be times where the short" medium and long term trends will be moving in opposing directions.
!ur jobs as investors is to decide which time frame we want to trade and stick to it. ,lso it seems that tomorrow they will be anouncing news about
look beyond the surface of what is being said in the news and ,5,F#6C the situation. Aaving said all this" yes" you could be right" but ' dont think prices have reached a low enough level to warrant risk appetite. +o get a picture of what 'm talking about. Fook at your !5+AF# charts on ,3D34D" 56D34D" 34D@,D over *BB? to now. +o me it looks like prices have reached exhaustion and are turning around to make a correction. ,nd there is still a ways to go before a correction is complete. What does it look like to you!f course ' could be completely wrong" but ' still think the odds are in favor of continued risk aversion over the CD'3 +C.
-Razorjack
GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGG '!" its still way too early to say that there is a move towards risk appetite in the medium term. y analysis is that the medium term risk aversion has just started and still has some more weeks and possibly months to go. 7efore ' look at building my positions towards risk appetite" 'd like to see ,3D34D first break B.?B then ' would like to see it make and sustain new highs above B.?0 before it changes my views. Dont worry rac" the markets usually test and re/test highs and lows before shifting trends. 'll give you an example. +ake a look at the ,3D34D charts. !n %8=%%" prices made a new high" but couldnt sustain it above the previous high from *8=%B. Which meant that investors werent willing to buy at higher prices" reduced risk appetite. +hen we had the Dubai debt crisis *8=%% / *9=%% that pushed prices down to test the minor low from =%%. +hen the markets retested the highs but failed" but it has been making new lows. +his is the CD'3 +C. Do you see how the markets test and re/test old trends before we see a full reversal#oull see the same thing in 56D34D" 56D:;#" ,3D:;#" etc. +he difference is that the strongest trending pairs KconsolidatedK to the testing and re/testing areas later than the more weaker trending pairs. @ompare C3:;# with ,3D:;# and you will see what ' mean. C3:;# consolidated much sooner than ,3D:;#. 4o during the medium term risk appetite while ,3D:;# was making new highs" C3:;# was swinging within a range. +hen risk aversion over the medium term moved ,3D:;# down and C3:;# broke out of its range to the downside. 4o '!" before we see a move towards risk appetite again" the markets will test the lows and fail to sustain new lows. When this happens then ' will look for building positions in the other direction. -Razorjack
GGGGGGGGGGGGGGGGGGGDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDGGGGGGGGGGGGGGGG GGGGGGGDDDDDDDDDDDDDDDDDDDDDDDDDD 'n anticipation of monetary tightening" there has been a record amount of loans in :anuary" more than the previous months combined. eal estate prices are also up close to %BL from the previous year.
+his to me is a warning of an overheating economy and possible economic bubbles in real estate markets. ,nyone want to take a crack at how this can affect @hinas monetary policy and how it can affect the commodities and the forex markets-Razorjack
RASPUNS: Quoting Razorjack
'n anticipation of monetary tightening" there has been a record amount of loans in :anuary" more than theyear. previous months combined. eal estate prices are also up close to %BL from the previous +his to me is a warning of an overheating economy and possible economic bubbles in real estate markets. ,nyone want to take a crack at how this can affect @hinas monetary policy and how it can affect the commodities and the forex marketsif its an overheating economy then this could be shown by rapid inflation/couldnt @hina want to raise rates to slow down- o i dont know
RAZORJACK” Well doneE 'ts a first step. emember that monetary policy is more than just rates. @hina may choose to not raise rates" but there could be other ways of tightening monetary policy" like letting the #uan appreciate" tightening credit availability" etc. 4o now the next step. What does this mean for the forex markets- Which currencies will be affected-
-Razorjack +o get a good understanding of how the developments in @hina can impact its economy. Fets try a parallel exercise. 'ts a high probability that @hina will need to cool the economy and there are several ways that they can do this. %. +ighten credit availability / Aow will this impact @hinas economy*. 'ncrease interest rates / Aow will this impact @hinas economy. Fetting the #uan appreciate / Aow will this impact @hinas economy'f you think in terms of the @hinese national economy" imports and exports and it will give help put the pieces in place. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ if i can remember" @hina has restricted loan to property related areas.
#es" this is correct. 't was to reduce real estate market speculation. +his lending was for other areas as well including real estate. When you have this much lending" it tends to lead to economic expansion (economic boom) but if the investments dont pay off before the cost of credit (interest rates) is so high that its no longer sustainable then you get the downturn (economic bust). 'n this particular case" with this much stimulus there needs to be some tightening soon. thus" there will be less demand for commodities e.g. iron " oil " etc ,3D and @,D will drop #es" there will be less demand from @hina. When you say ,3D and @,D will drop" we need to be clear as to which time frame. emember that markets factor in future events into the prices. 4o when there are more clues about @hinas monetary policy" it will impact the CD'3 +C. 7ut in the F!5< +C" there should be a continued uptrend in commodities due to @hina" 34 and a global economic expansion. +hen the F!5< +C trend will change when monetary policies are so tight that they strangle economic development. 7ut that is still a few years away. Well done mateE ;retty soon ' wont be needed here anymoreE -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ ' love fundamentals" ' believe it gives me an edge as to whats happening and whats going to happen in the markets. +he drawback with fundamentals" or maybe its just me that hasnt figured this out yet" is exact timing. &or instance" the odds are in favor of CD'3 +C risk aversion. +he uncertain part is when risk aversion will start to accelerate and really show in prices. We can see that the C3 and to a lesser extend <7; have headed down to due risk aversion. 7ut we still have the @hinese markets supporting the commodity currencies$ ,3D" 56D and @,D. ' also believe the odds are in favor of a major correction in commodities. When this will happen will depend on when @hina tightens its monetary and fiscal policies. ,nd this leaves a bit of uncertainty. +he commodities are at ;!44'7FC turning points right now" ,3D" 56D and @,D all fell from :an %0 to &eb 2 and we saw a short term rally this week. 5ow what is uncertain is whether well see these currencies continue their fall or whether they will continue to rally to their previous highs from :an %0. +he uncertainty is around the @hinese 5ew #ear celebrations all through next week" when businesses and banks will be closed. ' hear that @hina may not do or say anything regarding monetary tightening to jinx the new year. 4o will the commodity currencies turn and head downwards today and continue next week- !nly time will tell.
+his is one of the areas 'm trying to improve upon" 'm making progress but this is where technical analysis and risk management are C# GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG ' respectfully hope to hear=read azors view / with respect to the consideration of the carry trade winding down...and any proposed timeline as to when one might consider the 3.4 to raise rates. 5o problem. ,round *BBB/*BB%" we had the '+ bubble pop" and there was in an immediate flee to safe haven investments" thats why we see the 34D appreciate. &rom *BB* / *BB>" we can see " with the collapse of the housing market" Fehman 7rothers" other financial institutions and banks" there was a global flee to safe havens driving up demand for 34D. &rom arch *BB? to 5ov *BB?" the 34D was the preferred currency for funding carry trades" due to the near zero interest rates. +his one of the main reasons for the decline in the 34D index. &rom 5ov *BB? to present" were seeing the 34 economy start to pick up steam and accelerate. ,t the same time there is increasing risk aversion driven by sovereign debt problems initiating unwinding of the carry trade. ,s the 34 economy moves from recovery to expansion" there is a good probability of the &ed raising rates before 7o:" causing further unwinding of the 34D funded carry trade and shifting it over to :;#. 5ow whether well see the 34D index rally upwards will depend upon !bamas economic policies and whether the administration will focus on reducing govt spending" national deficit and money supply. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++
razor as you know using technical analysis is more simple than funadmental when you use an indictaor only thing you should care is e.g. red line is above green line or histogram bar is above some number and i think this is why many traders stick to technical but fundamental needs more knowledge more experience........ #es" this is true. Aowever fundamentals and technical analysis provide different views. +echnical analysis provides the KwhenK a price movement could take place. Where as fundamentals provide Kwhich directionK and Khow farK a price movement could take place. &or instance" many traders trade on technical analysis alone" but technical analysis cant warn you of a potential market crash for instance much less allow you to profit from it. ' personally could not trade if didnt use both. risk appetite=aversion situation due to what or why traders wants to risk more or what motivates them to risk-
Cconomic conditions" of course. 3nder certain economic conditions" risky investments can be much more profitable than safer investments. Fike for instance in a bull market. 3nder other economic conditions" safer investments are more prudent" such as during the economic crisis = bear market. and these situations cause what'n forex" you have Ksafe havenK currencies$ 34D" :;#" @A& ,nd you have KriskierK currencies$ ,3D" 56D" @,D" 7razilian eal" etc 'n times of risk appetite" money flows from the Ksafe havenK economies to the KriskierK economies and the KriskierK currencies appreciate against the KsaferK currencies. 'n times of risk aversion" money flows from the KriskierK economies to the Ksafe havenK economies and the KsaferK currencies appreciate against the KriskierK currencies. im sorry
if my 1uestions is repetitive
5o problem" but try to read the thread. 't explains all of this. ,nd the references in this thread are also very good at explaining how the global economy works. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++ 'n the meantime" back to ,3D34D. What do you now derive from the way the commodity currencies have reacted to @hinaOs next leg of tightening ' would have expected the news to have had a lot more strength in pushing the ,3D34D lower. +he fact that it hasnOt and is now testing the high of the last few days tells me investors are shrugging off the news. What is your view @hina released the news of credit tightening after the close of the ,sian session and before a long weekend in the 34. +oday the markets are closed in the 34" @hina and other parts of ,sia. 'f you look at the volume you will see that it is very thin" so 'm not 1uite convinced of whats happened so far. 'd like to see how the markets react in the Fondon and 5ew #ork sessions tomorrow before drawing any conclusions. ' could be wrong" but right now ' still cant see risk appetite coming back into the market with all the negative events in the world$ 4overeign debts crisis in Curope and Dubai" monetary tightening in @hina" etc. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Quoting rac
Aello azor" your job here is inspiring" you are making us study" 'm almost half way on the H'@ ' book" ' wish ' had more time to read it" it is eyes opening. Ai rac" 'm glad this is helping you see things from a different perspective. +his is only the beginning" once you learn the fundamentals enough to KseeK the medium and long term trends" it will help you anticipate the reversals.
#ou are absolutelly right ' barelly understand mid term trend and 'm actually cannot imagine myself taking long term positions yet. +he psicology is so different" ' dont know how ' could put up with the stress to see the trend going %2B pips agains my position. 'm looking forward to learn and ' hope you will be here to help us +his is exactly what ' meant. ,s for the trend going %2B pips against your position" this is all depends on how you manage your trades. &or instance ' shorted ,3D34D from B.?" unloaded half my position around B.>88B" then was looking to add to my overall position again around B.>> but ' ended up losing U percent on that add on because the market didnt turn down and continue. ,nd then my total position got taken out around >?.2B. 4o yes" technically the market did go %2B pips against ;,+ of my position but overall ' still ended up making substantial profit. +rade management is +AC !4+ ';!+,5+ ;,+ of any trading system" what ' find funny is that HC# few traders actually talk about it. 'nstead its all about taking entries based on indicators. +his is the beauty of medium and long term trading" that you can not do with short term trading" creative trade management to maximize profits. 'f you manage your trades properly you can end up making *BBL" BBL or higher profit with an initial risk of B.2L/%L by riding out the entire trend. 'f ' remember correct" short term is days to weeks" mid term is weeks to months and long term is months to years. Aow many more days do the riskier currencies need to go up to be considered a mid term risk of apetite'ts hard to measure this in days. #ou can use statistics for this but it isnt very reliable. What ' do is use a combination of technical and fundamental analysis. 'll explain further down. y long ,3D34D position +; is at >?.?0 and then" ' might still go up for short period until it reverses" the momentum is set up now" but my analysis might not be valid because is not based on the fundamentals. +hey are still confusing for me" ' will have a more educated answer once i read the second book. +ake your time with this and C,FF# learn it. ight now you may not have a full grasp of the fundamentals but when you do" it will give you an advantage over purely technical traders. &or instance" you can read markets extremes when they go against the fundamentals or KseeK a market crash coming and adjust your position size for more profit when the reversal comes. Fooking at the weekly and monthly charts" is it possible that the long term investors li1uidated their long positions in !ct/5ov last year because the ,3D got near the high marks from mid *BB>+his depends on the the particular investors strategy. 'f ' took my strategy to trade the F!5< +C (' trade the medium term)" ' would have unloaded ;,+ of my F!5< position around B.? during the Dubai @risis and then look for adding to my overall long position around B.>*" B.>B and B.9>. ' would also trail the stops on my open positions to B.90.
#ou asked me if ' see the mid term going down" and ' do see it in the attached picture. ' hope we make some moeny with the reversal. ,ctually you are looking at ;,+ of the medium term. +ake a look at the attached chart. Do you see the trend line from &eb=arch *BB? to 5ov *BB?+A,+ is the CD'3 +C and it is the %st leg of the F!5< +C. 5ow where you were asking about how long it will be before we see CD'3 +C risk appetite in the markets again. +ake a look at the gray colored rectangle on the >.*L of the fib. +hat is the target ' am looking at before seeing it turn to the upside. 5ow the price may 5!+ get there" if the medium term fundamentals turn to the upside very 1uickly. 7ut to me B.>* would be a price extreme where investors will feel that prices are low enough to warrant risk taking again. +his is what the @3C5+ market conditions are telling me. 5ow remember that ' could be wrong and it could turn upwards a bit later or sooner" this depends on how the fundamentals develop over the next several weeks. ttached %mage 7click to enlarge8
-Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ +he trend and crowd both;erhaps show midterm ,3Dshed and some Curo weakening" andthis look has happened boththe have gained. others can light but ' feel is what the case only in short term trading when we have overbought=sold levels. 'n the end fundamentals will take prices where they should be. 3sually the fundamentals do drive the markets over the long term" but yes in the short term the markets can swing 1uite a bit. +he great trades come when you can see that fundamentals are telling you one thing and the short term pushes prices in the other direction to extreme price levels. ' am glad to hear azor used a 4F while he was still in his profit range even though he knows
it will go down" i guess ' just assumed when trading midterm it was expected for the price to go up and down and figuered he would just stay in as he got in at .?. DoesnNt this count as a short term trade you did though#es" you can call this a short term trade. ' never looked at ,3D34D as the pair to trade down in the medium term. ,nother poster wanted to use ,3D34D as an example. ' mentioned in earlier posts that the strongest performing currencies" i.e. ,3D" 56D" etc are not the ones that you want to short" instead ' look at shorting the medium performing currencies like C3 and <7;. +ake a look at C3,3D and C334D to see what ' mean. +he problem with ,3D34D is that ,3D is getting a lot of support from @hina and the downtrend isnt going to be as strong as the uptrend. 4o ' have to play it differently by trading the channel. ' just saw that it was at a price extreme at B.? and saw a shorting opportunity. 'ts different if you compare it to a strong down trending pair like C3,3D or C334D. emember when ' mentioned in the beginning that you have to look at the overall conditions to find the strongest trending currencies- +his means that ,3D34D and ,3D:;# are the strongest for the 3;+C5D and the strongest pair for the D!W5+C5D are pairs like <7;,3D" C3,3D" C334D" etc. 4o the goal should be to identify the best trending pairs during risk aversion and the best trending pairs during risk appetite then to trade them appropriately. Aow did you come up with >?.2B as your 4F- +hings fundamentally have 5!+ changed so the ,3D short is still in play for the midterm but how do you decided now when to reenter as you are now out- Do you use &'b levels>?.2B was above the 2BL fib level of the downswing. #es" the ,3D short is still in play but as ' mentioned ,3D is a fundamentally strong currency and wont fall as hard as C3 or <7;. 4o the ideal is to play ,3D" 56D and @,D to the upside at the same time playing C3" <7; and :;# to the downside. ,3D34D is not the optimal pair to short" but it is now at the 8%.>L fib level" 'll watch the price action around this area. 'f it breaks above B.?B2B" 'll be looking to get in around B.?*" otherwise 'll wait for it to break below B.>?2B. Cntering now will mean you will no longer have that nice cushion you had shorting at .?" if the midterm trend was to change to long while you have shorts opened at these levels now you may loose a lot as you wait for to go down. ,s ' mentioned ,3D34D is not the optimal pair for shorting" so holding on to it was only an option if it behaved like a strong downtrending pair. !therwise ' can short again close to where ' got in the first timeE +hank you for this great thread" ' have always known that midterm trading is the only safe way to trade but ' would get impatient and trade on the short term which looking back ' feel is much more of a gamble.+A,5 #!3E #oure welcome. 've also had problems with patience and waiting for medium trends to develop" but 'm starting to get better at this. ' want to move over the F!5< +C" its unbelievable how much money can be made there with little risk. 'm still trying to develop a system where ' can trade both the medium and long term" so ' can stay in trends for years. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ %. is there a way to judge whether the C3 problem has been discounted by market #es" the Curo6one debt problem was factored into the market several weeks ago. +he way ' read the markets is to do a comparison analysis" just using the analysis techni1ues we discussed on this thread. &irst of all the debt crisis pushed the markets into risk aversion. During risk aversion the Curo strengthens against currencies like ,3D and 56D. +ake a look at what happened in the C3,3D charts. +he green ellipse is when the medium term risk aversion hit the markets but there was no trend change. +his is a pretty big clue that debt crisis has been factored into the market. +hat Curo horse seems like its been flogged to death. 'ts very late in the trend" if youre not already in" it could be a tough trade. *. what is the trend of C3 int rate ' assume youre referring to yield curves' use
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ +he &ed just hiked the discount rate by *2 basis points. +his is the first signal that the &ed is withdrawing emergency stimulus and tightening credit by via reduction of money supply.
+he all important &ed &unds ate is unchanged" but this is a signal that the 34 economy has recovered and will continue to accelerate. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++C3 yield will probably stay put or lag 34 yield because C3 economy will pick up later. &irst of all we need to differentiate yields and interest rates. +hey are not the same thing. ' assume that you are referring to interest rates. Curo6one interest rates will stay put for a while" the economy is weighted down by the lagging economies in 'taly" 'reland" 4pain" ;ortugal and
-Razorjack •
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+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++ Quoting stellas
Lets talk Carry Trade … I love it ! So, the Fed has raised the discount rate, and this can shortly be expected to feed into the Fed Funds (taret rate" Therefore, #hen risk appetite returns it #ill be ti$e to start lookin out for the next bi trend, a lon play on %&')*, riht + +hats almost correct. 'ts not certain that well see a hike in the &ed &unds ate shortly. '!" the &ed will be cautious to raise the && before employment and inflation has been showing positive improvements for bank somereserves. months. 'n +he discountits rate wasthe mostly to supply help absorb the % trillion 34D in excess essence" to hike reduce money and of course when the supply is reduced then theres a shift in balance between the supply = demand relationship and thats why were seeing this boost to the 34D. 7ut when the && is raised then ' plan to short :;# across the board and hang on to my trades until the end of the current business cycle several years down the line. ,ctually let me correct this$ ' plan to short :;# across the board when risk appetite is back into the markets" whether the &ed hikes the && or not" then ' plan to hold on to these trades until the end of the current business cycle. +his way ' would already be in position by the time the rates are hiked. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++ ost" if not all" threads are devoted to trade shorter +& (%Ar and Fower)" it is great to see some real long term trading dedicated thread. 've tried both short term and long term. ' can honestly say that long term has been much more profitable for me. 7efore reading your intros in the first few posts of this thread" ' used to think fundies were more on retrospection rather foresight. ,s in " why did something happen rather than what might happen. +his is a common misconception. &undamental analysis is a tool just like technical analysis. #ou have to separate the tools themselves from the finished products built by the tools. ' use fundamentals to help me anticipate trend changes" others might use technical analysis to do the same thing. ' have one 1uestion though" Would you agree when ' say$ +o fully utilise fundies in your trading it is important to have order flow data too- +hose cud actually point to whether you are right on the dot or not. ' dont use order flow data. What ' do is to anticipate all possible scenarios" what would cause them and how the markets would react. +hen ' try to establish the most likely scenario and the odds of it occurring. +his helps med decide how much to risk and when ' would know that my view was right or wrong. &or long term trading" ' dont think order flow data is needed. &or instance if you know that there has been a major fundamental shift in the global economy that will start a new trend" then the job becomes to find out WAC5. +his is where technical analysis comes in and being able to recognize business cycle phases" accumulation" distribution" etc. 'n long term trading" trend changes happen over several weeks" even months" ' dont think that order flow data can help much in these cases.
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' heard something interesting on @57@ last week when the &!@ raised the discount rate. +here was a debate going on about whether the &ed signaled this in advance" but the markets were still surprised. ,nd the journalist said something to the effect of how it was unfair that the &!@ KshockedK the markets and caused some investors to lose money. +here was a former central bank employee who worked for an institution who came up with a brilliant response. Ae basically said that if an investor doesnt understand the &ed and the economic market forces that move the markets then he=she has no business investing and deserves to lose money. 7rilliantE
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ #es" but ' was hoping for a bit more fundamentals$
%.
+he bear market causing risk aversion from *BB9 to beginning of *BB? pushed the 34D:;# downwards.
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4ince the beginning of *BB?" the 34D has been the favored currency for funding the carry trade. @ausing a further weakening in 34D against :;# but this time in times of risk appetite
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#ou have the 34 economy accelerating and the :apanese economy in a state of deflation.
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@ombine this with :apans gigantic national deficit and the probability of the &ed raising rates before the 7o: is very high" essentially shifting carry trade funding from 34D to :;#
2.
+his will cause the 34D strengthen and the :;# to weaken" which just about every country in the world wants.
4o this translates to in my opinion" the end of the downtrend in 34D:;# and the accumulation phase started in Dec *BB? = :an *B%B.
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ ,lso what 'm trying to teach on this thread is that the news is 5!+ what drives the markets" its the fundamentals. &or instance" did you notice that the @7 @onsumer @onfidence was KbadK for the 34D but yet the 34D still gained on <7;" C3" ,3D" 56D" and @,D ..... why is that+he answer is fundamentals and medium term risk aversionE !nce you get a proper understanding of the fundamentals and how it can be used to trade then news items including 5&; wont affect your trading decisions and youll be able to hang on to trades that Kgo againstK the news items like we saw today. -Razorjack
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4o" now we are seeing a fundamental shift towards the :;#" it being bought to finance the carry trade. 5ext step" how do we go about trading it ,ctually WAC5 the shift happens :;# will be 4!FD to fund the carry trade. ;lease read up on how the carry trade really works so that you can take advantage of it. ,s to trading it" ' cant really help you there. +he reason for this is that your trading plan needs to coincide with your personality. &or instance ' already started building my position in 34D:;#" but it may not take off for months. Will your emotions allow you to stay in a trade showing negative profits for weeks=months&or me this is not a problem" but it could be a problem for other traders. +his is why you need to find a uni1ue trading style that works in conjunction with your emotions. ;lease shed light on this fact too " why in spite of a bad data 34D rallied- Aas it something to do with the fact that with rate hike 34D is no longer the favourable currency for the carry trade. 've explained the CD'3 +C '4 ,HC4'!5 in the thread. 'ts not much fun repeating myself" so please go through the thread and if you dont understand" point to the specific post you dont understand. +here is no rate hike in the 34 just yet" we are ,5+'@';,+'5< rate hikes just like the big boys do. +hat being the case" what we are seeing is unwinding of the carry trades. @orrect me if ' am wrong5o right now" there is no unwinding of the carry trade. ,n example of the carry trade unwinding is the Dubai Debt crisis that started on 5ov *2" *BB? look at ,3D34D" ,3D:;# on 5ov *8/*9" *BB?. &or other examples look at ,3D:;# during the collapse of the 34 housing markets that started in :uly *BB9 and then the collapse of financial institutions that started in late :uly *BB>. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ +he next leg of the bull run in what-...3.4 e1uities-..commodities+he global economy" i.e. risk appetite" so its basically every market that goes up during risk appetite. We get the Kselling of :;#K in @arry trade Kif=whenK 3.4 raises rates ( which many believe may not happen til mid *B%%...including <4) #ou forgot about the part where ' wrote that we wont need to wait for the &ed to actually hike rates" the market will factor rate hikes into prices much much sooner when the market ,5+'@';,+C4 a rate hike. ,lso the biggest move will come" if the &ed surprises the markets with a rate hike C,F'C than expected. @ombine these * factors and there is a very good chance that we will see the 34D:;# take off this year" CHC5 if the rate hike doesnt happen until *B%%. What 'm missing ....is the usual co relation of stocks=bonds=commod=e1uities...would have it that........ Aave you read the 'ntermarket ,nalysis book recommended in this thread-
'f 3.4 dollar will be bought ( in line with rise in L rate)...and=or :;# sold...then we would see the 3.4 e1uities &,FF in price...as risk is averted and 3.4 dollars are bought. (e1uities sold--) 5ot 1uite. arkets dont move in a black and white" cut and dry way like you are describing. 'ts all about balance. ,s an economy expands" interest rates will need to rise to keep it from overheating" strengthening the currency" but interest rates are low enough to continue expansion but 4F!WC expansion. ,s the market continues to expand" there will be more rate hikes" etc. 3ntil interest rates are too high to sustain economic expansion. ,s the 34D strengthens you will see a 4F!WD!W5 in the rise of the e1uities. 'ts not until interest rates get so high and the 34D so strong that the 34 economy can no longer sustain expansion that we will see a decline in the e1uities. emember that we are focused on the long term" not on just one interest rate hike. 4!.....in the face of the attached chart....and the endless print of 3.4 dollars...you feel strongly that we are seriously on the cusp of the full on turn around of the 3.4 dollar as seen (secular bear) for the past ten years&irst of all the &ed started to soak up excess li1uidity" endless print of 34D that you are referring to. ,nd what ' meant is that weve seen the 34D bottom from being used to finance the carry trade when you compare it to the other carry trade funding currency" :;#. Aad the 34 interest rates been *2 basis points higher in arch *BB?" we would not have seen the dramatic weakening in 34D against :;# from arch / 5ov *BB?. ,s for the long term decline in the 34D index" you can thank
9999999999999999999999999999999999999999999999999999999999 *) With your fundamental analysis are you currently also analysing other mid term risk aversion events that could possibly take place- +heres been some talks on the side about china overheating with a real estate bubble. ,ny views there-
' thought ' mentioned this earlier in the thread. @hinas real estate market overheating is one of the reasons why @hina is tightening credit. ' believe that we will see further measures by @hinas central bank soon. ' dont expect the real estate bubble to burst just yet. 'f the bubble persists" it will burst several years down the line when interest rates are so high that corporate revenues are no longer enough to pay back the increasing cost of loans. +hat will be the time to look for Fong +erm isk ,version. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++ PETER LEE HTTP://WWW.FOREXFACTORY.COM/SHOWTHREAD.PHP? T=21!"#$PA%E=1& occasionally" i will post because ' have a full time non/trading job. here is my storyN world bonds and world e1uities and commodities are linked. bond will rally first" followed by e1uities and lastly commodities. sometimes" they move in tandem with little time lag. when trading ccy pairs" remember to buy economy/strong cyy and sell economy weak ccy as specified by kathy lien when 34 hike rate" usually" most countries (not all) will hike too. because when 34 economy improved " usually" economies of most countries (not all) will improve too. this means the world e1uities rally" risk appetite increases and non/safe heaven ccy appreciate. usually" other countries interest rate is lower than that of 34 for example" consider the ,3D=34D " when 34 hike rate" ,ustralia may hike too. because both ecomony are getting better. thus" the interest rate differential may remain approx constant from carry trade point of view" it is better to be long in ,3D since ,3D has higher interest rate than that of 34.
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Wow 'm surprised to see people still keeping this thread alive. 3nfortunately" ' dont have enough time to post actively" but since you asked ' can give you my take on the latest events. &irst of all ' suggest looking at all the current developments and not only the 34 credit downgrade.
%. slow down in @hina impacting commodities" i.e. ,3D" 56D and @,D. *. record high @A& and :;# levels impacting their economies causing direct or indirect (457 cutting interest rates and increasing money supply) intervention. . Curo debt crisis / the increased firepower to the C&4& will help stabilize the Curo in the long run but the real 1uestion is the amount of ammo" i.e. if the amount of money in the fund is enough to help 'taly and 4pain 0. 34 fiscal policy" the downgrade was caused by the unsustainable levels of debt meaning that the
govt didnt cut enough of the debt" which means that it will have to cut more in order to avoid further downgrades. +his would cause further slowdown and push the &ed to ease a bit more" i.e. VC 4o to sum it up" the safe havens (34D" :;# and @A&) govts and central banks are pushing to ease their policies thus depreciate their currencies" while the global economic slowdown will cause the riskier commdolls (,3D" 56D and @,D) to depreciate. 7ased on this" * weeks ago ' got in long on Curo and <7; vs the commdolls (,3D" 56D and @,D) right on the turn. ' believe these pairs have the biggest potential gains over the medium term" i.e. * to 8 months. !f course ' could end up being wrong but so far its going in the anticipated direction and ' have a profit. &inally" always make your own analysis and trade your own systems using fundamentals as a road map. emember that fundamentals can tell which way the markets will be headed" it just cant tell you when" thats where your own system comes in. Aope this helped" good luckE $/) CD'+$ !h yeah" almost forgot...look for gold to continue upwards over the medium term until the easing cycles are completed then short the hell out of it for a long long ride downE -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ Ai mikeyshaun" 'influence dont do the an in/depth analysis ofand the others) 34 market per but ' look at the fundamentals stock markets (34 such asse" inflation" manufacturing indexes" that unemployment figures for consumer dependent economies" @entral 7ank policies and sentiment" fiscal policies" elections" debt levels" etc. +hese are the things that influence the stock markets themselves. 5ow this is what ' do" because ' like to get slightly ahead of the market before a trend change. 7ut remember that this is just based on how ' like to do things. 'f you dont feel that all this is right for you" there is still plenty of money to be made following the long term trends. ,nd in this case you only need to look at the different indexes and keep an eye on inflation and monetary and fiscal policies of the currencies you want to trade. 'f youre just following the long term trends" then you dont need in depth analysis of anything you only need confirmation of the current trend or to know whether the current trend is going against the fundamentals so you can reduce your risk exposure. Aope this makes sense- emember to try to link all of this stuff back to trading #!3 style" you dont need to do what ' do or what Hictor 4perandeo does. Fook at different indexes to see if t helps with how you want to trade" if something helps" great keep it" if not remove it. 'm not sure if this was the answer you were looking for" but basically ' like to look at the fundamentals themselves and to relate it back to the stock market indexes and currencies. +his way if the trends in the indexes and currencies are in line with the fundamentals then ' can expect the trend to continue. !n the other side if the trends are going against the fundamentals then ' should look for an exit if 'm riding the current trend and=or look for opportunites to get in at a trend change. &or me the most valuable lessons from the +rader Hic book was the explanation of how the &ed works" how to consistently draw proper and objective trendlines" how he spots trend
changes and finally how he trades those trend changes. Aope this helps. -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++ Aello everyone" :ust thought ' would come back for just a short while to finish up some thoughts 've had regarding this thread. ' have to admit that its bothered me to not finish what ' started here" so heres the last of it. ' wont do a 1uestions and answers thing here" instead ' will just throw everything out and let the pieces fall where they may. Thinking like the Big Boys - Becoming an Apex Predator
' like this phrase" K7ecoming an ,pex ;redatorK" somehow it sums up what ' have learned and want to get across with this post. When you really understand what the big players in the financial markets are up against" you will see that there are a lot of losers even there. !f course not as many on the retail side" but still alot. ,nd when you learn" truly learn their weaknesses...... well lets just say that 've become a 7ig
successful traders need to look at how they can use the above weaknesses to their advantage. %. 7e independent / do not look to others for guidance" advice" tips" indicators etc. 7eing independent means being free from the herd" i.e. the ?2L losers" otherwise you will only be thinking like the herd and fall prey to the ,pex ;redators. %ronically this means stop posting and commenting on this forum a+out trading strategies& indicators and systems. *. +hink long term profitability / you want to stay in this game for a long time" dont try to make your entire fortune in one trade" build it over time. +his means dont just look for a profitable system" it wont be profitable unless it fits your personality and lifestyle. +rading shouldnt be something that you do" but should be a natural extension of who you are. +hink of also contingency plans of not only how to survive but to take advantage of market panics. . 5ever feel pressured to take a trade / only pull the trigger when your entry criteria are all met. &or me that means waiting for prices to reach extreme levels or during moments of market panic or euphoria 0. Fearn to recognize when markets are completely out of alignment under the influence of extreme levels fear and greed" then take advantage of it. ost people dont think rationally when under the influence of fear and greed" theyll sell valuable assets for a fraction of what theyre worth or buy assets that are way overpriced 2. Fearn how the markets really work" what influences trend changes" where the big trends will be etc etc" then learn to get in ahead of the big players so you can let them move the markets and make you money !k thats it" 'm done. ' feel 've given more than my share and 've relieved my karma. &eel free to ask 1uestions" but please do not ask me to do any analysis" give tips on pairs to trade" etc" instead look at what ' wrote above about being independent. 'll post a few more ramblings over the next few days" but then 'll close my part in this thread -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++ :ust me rambling....take it for what its worth Without trying to come off like boasting" ' have reached a new paradigm. ' no longer see myself as a trader. 'nstead ' am an investor" a long term investor at that. When ' started this thread" the focus was on edium and Fong +erm trading. y strength has always been to see trend changes before they happen" but one of my greatest weaknesses was not being able to hold on to a winning position throughout an entire long term trend. Well ' realized that ' was looking at it the wrong way and had to change how ' was perceiving the markets. 4trangely enough ' went and started to invest in stocks and that helped me see how to fix this weakness. ' can now hold on to positions indefinitely or at least until my conditions for investing change. atter of fact 've been holding on to short :;# positions for over a year now. ' wrote in earlier posts about a shift in the carry trade funding currency from the 34D to :;# when there are signs of the &ed ending the easing cycle. Well we couldnt have asked for a better opportunity with the new 7o: governor unleashing a massive amount of :;# on to the markets. +his will not only devalue the :;# over the next * years but it means that the &ed will start to unwind VC and raise interest rates well ahead of the 7o:" possibly adding another /0 years to the uptrend.
' hope all of you remembered when ' wrote about a massive opportunity shorting the :;#. !n the other hand" it looks like ' was wrong about the biggest trends being in the commodity dollars moving the most against the :;#" instead the biggest trends will be in the 34D" <7; and C3 vs :;#. !f course this can also change over the course fo the next * years" but most of this is easy to see well before it happens so plenty of profits available for the takingE ' hope be riding these trends for the next 9 yearsE +here are actually even larger market shifts happening right now. +he financial crisis with the very accommodating bank monetary policiesthe andmedia" politician follies have excellent once in a lifetimecentral opportunities. !ddly enough journalists and created analystssome are CJ+CCF# 1uite about this.....food for thought about thinking independently.......just apply what ' wrote in this thread and you should be able to spot these opportunities with a bit of effort. ' also tried to just live off of trading and nothing else. Cven though this was possible" my investment style only re1uires working an hour a day and ' just got bored to death....' realized that ' need an office to go to" an intellectual challenge to con1uer etc etc. 4o ' started my own business that includes investing as well as a few other revenue streams..... unning a business has also made me see how investing is a business in and of itself and must be treated as such. !ne of the interesting things about investing via a business is that instead of using a broker" ' go through fully licensed banks. What a difference it is to have invest through a bank compared to a broker. ' now have a sales rep that ' can yell at for fun and an account manager at my beckon call to kick in the ass when ' get boredE Amm" ' wonder if this is what its like to be one of the big fish in the financial markets#es" ' have gone over to the dark side and become one of the big boys" but hopefully without all of the disadvantages ' listed aboveE &inally living the dream of financial independence. ,nd yes" financial independence is all that its cracked up to beE Aehehe.... lets just say 'm enjoying life at the momentE -Razorjack
+++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++ &or me" the trick is to get in very early in a long term trend change and build a position through the turn. 'll try to explain how ' do this with an example using 34D:;#$ %. &irst it starts with looking at the current situation and history / 'n *B%* when 34D:;# was still in a long term downtrend" it was due to * main reasons. +he first were the &eds VC programs" the other was the nearly * decade long deflation in :apan" this caused the 34D to weaken and :;# to strengthen *. +o get ahead of a trend change ' look at what conditions would need to change to shift the fundamental driving force in the other direction. 'n my earlier posts ' wrote how the preferred currency to fund carry trades was the 34D due to the VC programs and very low interest
rates. With that in mind" 34D would strengthen dramatically with the unwinding of VC and an interest rate hike by the &ed. ,s soon as the 34 economy started recovering there was talk of unwinding VC" so ' buy a little 34D:;# X99.2B even though its in a downtrend" just a small amount. . ,s the 34 economy starts to recover" we see 34DD:;# start to range" then more talk of unwinding VC" better employment numbers etc etc" ' buy a bit more X99.BB as the range holds over time. 0. ore 34 economic strength" 34D:;# starts to head upwards" ' buy a little more X 99.92" 7y now it is 1uite clear that the &ed will raise rates and tighten monetary policy long before the 7o:" this means you can expect 34D to strengthen faster than :;#" so ' buy a little more X9?.BB 2. +here is a new government elected in :apan that pledges to defeat deflation once and for all" ' buy a little more X>*.2B" 34D:;# heads up a bit more 8. , new 7o: governor looks to be appointed (' buy more X>2.BB) and implements a very aggressive easing (VC) program" twice as aggressive as the &ed on . @ombine the fact that we will see VC in :apan until *B%2" the &ed to unwind VC in *B%2 and possibly moving into a rate hike cycle long before :;# strengthens and there is a very good chance of a trend lasting for about 2 years. ?. +o avoid uncertainty" ' need to make sure that ' buy only on dips" for example when price bounces off of 2B day 4, and that the pyramid doesnt become Ktop heavyK" e.g. trade management and money management %B. +he rest is just hanging on for the long" long ride upwardsE ,s ' mentioned before the trick for me is to build a position through the turn" even while price is moving against me" when ' learned to do it right it is a much lower risk then if ' waited for a confirmation of a trend change" contrary to what most people think. +his also makes it easier to ride the ups and downs as my average price for the position is around >*.2B" and well into profit with the current price in the upper ?Bs. Aope this was clear. CD'+$ !h yeah" ' almost forgot" ' try to look for extreme areas where price will not come back for years. &or example" buying longs 7CF!W 2B=*BB day 4,s or major psychological price levels" so when price moves to the other side" ' have some major heavy weight support protecting my positions. -Razorjack
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