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$ For The Week Of 10/16-With Some Trade Tips

  • #141
  • Edited 10:44am Oct 19, 2006 10:34am | Edited 10:44am
Quote
what's source do u use for the FED Fund Index....

Rick Santelli of CNBC.. He has great insights as he is always dwelving with the traders on the floor. He has been showing that Fed up Fund index and correlation with USD Index etc....

----------------------------

I am personally Long on USD vs EUR, GBP, JPY...

But seeing how the crap was beaten out of the USD, I started hedging those long usds. albeit late, I counter with more lots..

EUR seems to be the strongest of the 4 currencies.
JPY and GBP dropped some gains but EUR is still proving 1.2600...

---------------------------
Quote
I would look for a weak number and watch for profit taking if you want to trade it. If the $ shortens further watch for it to peak, then head below the pre-release number. You might want to trade at that point.

Historically, indeed a very good/bad Philly number drives the market into frenzy only to retrace back to zero. But if the deviation is benign, it moves the slowly, gradually..
  • #142
  • Oct 19, 2006 11:08am Oct 19, 2006 11:08am
Looks like you were right about the leak.
It's just made the dollar even more like a sinking ship!
Quoting NewstraderFX
Nice call on that $ short BK-BTW what's source do u use for the FED Fund Index....

Looking at the Philly Fed number-with all the sell off seen in the $ today-it makes me suspicious that the info on the number has either been leaked or that the professioanl money sees it as very weak. I've seen this happen many times before. If this is what's happened and the # does come out weak, you may see the $ weaken by another 15-20 pips and then see the $ go the other way as some profits get booked.

I would look for a weak number and watch for profit taking if you want to trade it. If the $ shortens further watch for it to peak, then head below the pre-release number. You might want to trade at that point.
GOD IS NOT SHORT OF CASH
  • #143
  • Oct 19, 2006 11:26am Oct 19, 2006 11:26am
Leak was the wrong word...The big investment houses that have FX desks can estimate this number pretty well with their own contacts...Other numbers cannot be estimated as well and revisions can change things as well...so when you see big moves in the absence of fundamental data, you know what's goin on

The big thing to note here is what the value of these reports are. In the GBP the value for most reports seems to be about 60-80 pips. That's about what we saw today with the $ sell-off prior to the report. After the initial pop off the weak number...it was bound to go down.

So we all learned something very important here. The big traders can esimate this number very well and they can probably do so with all the Fed surveys. Now we won't see a big variation from the consensus every time, but if you see the movement in the hours leading up to one of these Fed surveys, you'll know what to do. Sometimes we see this happen in the London session and sometimes during NY. I'll remember that for next time.
  • #144
  • Oct 19, 2006 12:01pm Oct 19, 2006 12:01pm
None, nada, zilch, zip, zero, no-way, impossible, absolutely not, nunca. No possible chance exists that the Fed will move at all next week. No big revelation there.

If you're into long term fundamental positions-short the $ against the 2 currencies most likely to see a rate rise, the GBP and NZD. You'll need to hold those until next Wed after the announcement comes out. You gotta watch the money management though-if you got $5000 in your account, maybe you can think about a $5 position, just for fun.
  • #145
  • Oct 19, 2006 3:13pm Oct 19, 2006 3:13pm
Quoting NewstraderFX
Leak was the wrong word...The big investment houses that have FX desks can estimate this number pretty well with their own contacts...Other numbers cannot be estimated as well and revisions can change things as well...so when you see big moves in the absence of fundamental data, you know what's goin on

The big thing to note here is what the value of these reports are. In the GBP the value for most reports seems to be about 60-80 pips. That's about what we saw today with the $ sell-off prior to the report. After the initial pop off the weak number...it was bound to go down.

So we all learned something very important here. The big traders can esimate this number very well and they can probably do so with all the Fed surveys. Now we won't see a big variation from the consensus every time, but if you see the movement in the hours leading up to one of these Fed surveys, you'll know what to do. Sometimes we see this happen in the London session and sometimes during NY. I'll remember that for next time.
I agree with this! In fact, I nominate that selected part of this thread be PINNED for everyone to remember!

I'd recommend going Long on NZDUSD.. Not only is NZD really soaring due to commodities, it is also giving you Positive Swaps everyday.

GBPUSD is another good LONG. I can already smell +25bp rate hike from as far as 10,000 miles over here! Even if it is plain RUMOR, the last 8-2 decision was a clear indication that a rate hike is already heavily considered last month due to the consecutive inflation, and this month 5h in a raw is too much pressure to ignore.
  • #146
  • Edited 3:43pm Oct 19, 2006 3:29pm | Edited 3:43pm
Tahnks for the props...wish I could get paid for doing this...lol.

I like to find pairs who's rates are looking to go opposite...the FED definately is not gonna raise...the GBP and NZD are not done deals for an increase, but they're looking very good, maybe too good for the big money to ignore (not that they've ignored either currency; the $ has lost about 6.5% in the last couple of months vs. the NZD and the world seems to be diversifying into pounds)...but with a really small position relative to your account, you can hold it for a few days, at least until the FOMC next Wed.
  • #147
  • Oct 19, 2006 3:43pm Oct 19, 2006 3:43pm
Quoting NewstraderFX
Tahnks for the props...wish I could get paid for doing this...lol.

I like to find pairs who's rates are looking to go opposite...the FED definately is not gonna raise...the GBP and NZD are not done deals for an increase, but they're looking very good, maybe too good for the big money to ignore...but with a really small position relative to your account, you can hold it for a few days, at least until the FOMC next Wed.
I put money where my mouth is, so its either I blew my account or I go home run.

Nahh.. just kidding. I am putting 10% risk for this one and ride it off to the sunset! Fundamentally, I am 95% confident this not going awry on me!

For those undecided, it is your chance to come aboard! GBPUSD and EURUSD just retraced. It knocked out several resistances in its path so going LONG gives you breather that barriers are of no hindrance. I dont know about NZDUSD's resistances though.
  • #148
  • Oct 19, 2006 3:53pm Oct 19, 2006 3:53pm
Fresh off the news prints:

Quote
[IFR Forex Watch] [SQUAWK BOX]

[20:38 FOREX: Fed Custody Holdings Slump $11 bln in Oct 18th Week] San Francisco, October 19. Fed custody holdings have declined $11.330 bln in the week ending October 18th with custody holdings dropping to $1.678 bln. The decline notably comes after news this week that Russia is looking to diversify reserves into JPY but with signs that central bank diversification is showing the EUR preference waning and the JPY and GBP are finding stronger demand. Note that both Germany, who will chair the G-8 next year, and Australian Treasurer Costello have raised the issue this week of Asian foreign reserves and the imbalance caused by their holdings of dollars. Average Fed custody holdings declined $1.67 bln to $1.685 tln. [email protected]

More are clearing away from the USD.

China still holds $1T; and they have been contemplating on EUR reserve a few weeks back (when strong USD sentiment abound) but averted as adviced by some european bankers then (remember that story?). If they so decide NOW to dump USD, it would be added holes to the sinking ship.

Japan holds 2nd largest FX reserve followed by Russia (?). Russia has already shown their intention to diversify.; I am not sure about Japan but they are always fond of buying other currencies that net high swap rates (carry).. So GBP, USD, NZD, EUR (AUD too?) are the preferred money they buy.
  • #149
  • Oct 19, 2006 4:26pm Oct 19, 2006 4:26pm
Ok now we can get into a money management debate-

If you want to put up 10% of your account into this trade, that's OK but it's a question of how you're gonna do it. If you have 2500 in your account and you are willing to risk the 250, how many lots are u gonna buy? How do you see the upside here?

Let's talk about a GBP/USD trade first.

If you buy 1 lot (100k=$10 position) you only have 25 pips to play with before you're stopped out. You have virtually no chance to be successful with this in my opinion; you'll get stopped out and that'll be that, unless you have the most incredible luck.

How about 1 mini lot (10k=$1 position)? I think that's too small. I don't think you're gonna need a 250 pip cushion here, so you can go bigger.

5 minis-50k-gives you 50 pips to play with...still not enough, in my opinion.

2 or 3 minis seems about right to me...gives you between 83 and 125 pips cushion. Personally I would go with 3 myself, because there's no significant US fudamental data due out before the FOMC next Wed.

I would still wait for the British GDP tomorrow before entering this trade. If it's positive for the pound, take the long position and hold on thru next Wed at least...but only at these levels because of the longer term trade.

On the upside, given a positive GDP, with a rate incr secured for sterling and none for the $, I can see 150-200 pips here. Opinions?
  • #150
  • Oct 19, 2006 5:16pm Oct 19, 2006 5:16pm
Quoting NewstraderFX
I would still wait for the British GDP tomorrow before entering this trade. If it's positive for the pound, take the long position and hold on thru next Wed at least...but only at these levels because of the longer term trade.

On the upside, given a positive GDP, with a rate incr secured for sterling and none for the $, I can see 150-200 pips here. Opinions?
I've decided to try a hedge on the GBP, with a very small lot amount and a 20 pip stop loss with no limit. We'll see how it goes. The worst I can lose is $10 per trade ($20 max)
  • #151
  • Edited Oct 20, 2006 1:50am Oct 19, 2006 7:40pm | Edited Oct 20, 2006 1:50am
Quoting NewstraderFX
Ok now we can get into a money management debate-

If you want to put up 10% of your account into this trade, that's OK but it's a question of how you're gonna do it. If you have 2500 in your account and you are willing to risk the 250, how many lots are u gonna buy? How do you see the upside here?

Let's talk about a GBP/USD trade first.

If you buy 1 lot (100k=$10 position) you only have 25 pips to play with before you're stopped out. You have virtually no chance to be successful with this in my opinion; you'll get stopped out and that'll be that, unless you have the most incredible luck.

How about 1 mini lot (10k=$1 position)? I think that's too small. I don't think you're gonna need a 250 pip cushion here, so you can go bigger.

5 minis-50k-gives you 50 pips to play with...still not enough, in my opinion.

2 or 3 minis seems about right to me...gives you between 83 and 125 pips cushion. Personally I would go with 3 myself, because there's no significant US fudamental data due out before the FOMC next Wed.

I would still wait for the British GDP tomorrow before entering this trade. If it's positive for the pound, take the long position and hold on thru next Wed at least...but only at these levels because of the longer term trade.

On the upside, given a positive GDP, with a rate incr secured for sterling and none for the $, I can see 150-200 pips here. Opinions?
Buy a dip or buy a break strategy. I agree. Either way, GBPUSD will still move up thereafter. USD is just too neglected now seeing how unfavorable are the factors concerning USD.


Last Jul, UK GDP came out 0.1% better and GBPUSD spiked up only to return back to normal level. GBPUSD rose eventually around 6AM ...

Last Aug, UK GDP came out at par with expectation and nothing much happened immediately.. GBPUSD eventually rose 50 pips by 6AM...

Last Sep, UK GBP cae out 0.1% lower and GBPUSD spiked down only to return back to normal level. GBPUSD still managed to climb up 20 pips by 7AM...

???
Even a bad UK number did not dent GBP back then? Oh yah, USD was just too weak to hold water back then.

Same situation as today?

ADDENDUM:
GBPUSD is currently trading withn 1.8760 and 1.8780 movely above 1.8770s. It has tested the support 1.8760 twice. First at Asia open; second at London Open.

Watching it for further development.
  • #152
  • Oct 20, 2006 6:40am Oct 20, 2006 6:40am
Dreams DO come true!

I shorted the Dollar in favor of GBP @ 1.8780 before NY cut yesterday thinking that all these good US news did no good to USD so I assume it was totally bye bye USD....

GBPUSD is now at 1.8850! I am targetting 1.8900, then 1.8950.
This is the best LIVE trade so far!

Thanks to all the people who contributed fundamental information such as NewsTrader, abobtrader, Rick Santelli (CNBC). Your arguments, tidbits were all DECISIVE!!
  • #153
  • Oct 20, 2006 9:57am Oct 20, 2006 9:57am
OK did pretty well off the Brit GDP...it was in the 50's, before it started droppin back and I got out in the low 30's so I got about 35 pips profit...overall the report was worth about 60 pips. I would have got out sooner, but I kept thinkin it would come back. Still not a bad trade to finish the week on.

I have a mini position (long GBP) from 8780 that I'm hopin to be able to stay in all the way till the BoE annouces the rate. That's a long term fundamental play on the diverging rates between the $ the pound. I'm putting 80 pips on the line from 8780 so I still have alot of room here...but again, the amount of money is small so I can't get hurt.

Again the idea with fundamental trading in the short term is to be a weathervane...change direction as the fundamental wind blows...have no serious positions based on where I think things are going...just go with them for the short term...
  • #154
  • Oct 20, 2006 10:01am Oct 20, 2006 10:01am
I got it at 1.8780 and got out on the second assault upward @ 1.8850
So that makes it a full swing (less a pip or two). Too bad I did not fade it down... of course I cant - i dont even know it will drop to 1.8800


What worries me is what i hell happened to EURUSD? Why it dropped back down? Dont tell me USD sentiment is awaken????

  • #155
  • Oct 20, 2006 10:10am Oct 20, 2006 10:10am
Quoting 1Sundevil
I've decided to try a hedge on the GBP, with a very small lot amount and a 20 pip stop loss with no limit. We'll see how it goes. The worst I can lose is $10 per trade ($20 max)
Not sure what you have in your account, but the 20 pip stop loss is a waste of time in my opinion. For this type of long term play-you need like 80 pips at least to play with so you may need to adjust your lot size accordingly if you want to be able to stay with this...
  • #156
  • Oct 20, 2006 10:16am Oct 20, 2006 10:16am
I agree newstrader, a fundamental medium or long-term trade with a tight stop is taking a highly speculative punt. At the other extreme Buffet rode his long cable trade from the 1.90's down to mid 1.875 and seemingly all the way back up again. Fundamental trades need to breathe, and the degree to which you draw your breadth depends on your time horizon. Indeed, once you have your strategy figured, your trade size can be 'backed out' - almost automatically - without thinking twice.
"Always bet on black"
  • #157
  • Oct 20, 2006 10:18am Oct 20, 2006 10:18am
What he meant was instead of straddling, he would go LONG and SHORT at the same time then set 20 pips SL before the news...

The problem with this strategy is if the news is a dud causing less than 20 pips + 2 x spread of move....
  • #158
  • Oct 20, 2006 10:22am Oct 20, 2006 10:22am
Quoting abobtrader
I agree newstrader, a fundamental medium or long-term trade with a tight stop is taking a highly speculative punt. At the other extreme Buffet rode his long cable trade from the 1.90's down to mid 1.875 and seemingly all the way back up again. Fundamental trades need to breathe, and the degree to which you draw your breadth depends on your time horizon. Indeed, once you have your strategy figured, your trade size can be 'backed out' - almost automatically - without thinking twice.
I thought Buffet lost a large amount of money?
  • #159
  • Oct 20, 2006 10:33am Oct 20, 2006 10:33am
Quoting BurgerKing
What he meant was instead of straddling, he would go LONG and SHORT at the same time then set 20 pips SL before the news...

The problem with this strategy is if the news is a dud causing less than 20 pips + 2 x spread of move....
Is there any benefit in this over the straddle? It seems like you are paying double the spread for no good reason. Wouldn't it be the same to have a buy/sell order at the level of the SL without the hedge, for the same exposure? Correct me if I am wrong here.

BK dude, I thought Buffet never closed out his out-of-the-money USD trades, but this is from memory, so I may be wrong.
"Always bet on black"
  • #160
  • Oct 21, 2006 10:37am Oct 21, 2006 10:37am
Quoting abobtrader
Is there any benefit in this over the straddle? It seems like you are paying double the spread for no good reason. Wouldn't it be the same to have a buy/sell order at the level of the SL without the hedge, for the same exposure? Correct me if I am wrong here.
Straddling and Hedging (in the above example) are two schools of though for "undecided" news trading.

The better part of Straddling is that you dont pay x2 the spread.
The better part of Hedging is that you can enter the market much earlier when spread is still lower before the broker widens spread. Though you may appear to pay x2 the spread, however, the lower spread makes up for it.

I personally do not like the hedge strategy:
1) I'd need x2 the equity and most news traders often bet as much as they account can so hedging is totally not in their books (I dont bet all my money.. just a fraction is risked so I dont belong in this thinking..)
2) I need to control/watch/observe two orders... makes it difficult to figure out which is loosing...

One problem with Straddle is delayed execution of orders. Many brokers are delaying execution such that the market could have reversed already and it would hvae been tough luck we were not able to close it when it was still in black. For instance, last Philly Fed, my market order was delated and when I saw it filled, it was 3 minutes later and when the market is trending down again... So in the end, i ended with a few pips profit (any later and its a loss).. But if I went hedge, I could have seen the orders immedialtey and could control when to close them....
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