DislikedAnd as i said before if GU rise 10 pips and UJ drop the same 10 pips.... GY don't stay equal.... GY drop 9 pips.
Ignored
- #22
- Sep 9, 2007 6:29am Sep 9, 2007 6:29am
- Joined Jul 2006 | Status: Charts + PA > * | 3,251 Posts
hello SeekingLight! I was trading the 5 min charts of EJ, EU and GU, and believed that all three would go up based on a couple of moving averages. how did you make correct assessments of the directions of those pairs? what charts were you looking at? and what time frame?
for longer term key levels and trendlines I use Monthly, Weekly, Daily charts.
MY opinion is - if you're trading on the 5M chart, then you're asking for
trouble.
Especially when beginning.
And I didn't make any assessment on EJ or UJ. It was unclear to me at the time so I stayed away. I could have sold an s/r break or retest of a broken TL which both GJ and UJ did, but since earlier attempts got killed I let it be.
I didn't realize until later that the daily had a very clear bearish setup formed (double high lower close + inside bar => broke downwards)
EURUSD had been making another interim bottom at 1.3550 with a Pin Bar or "Hammer" and then higher highs. So it was moving up. I use Price Action to trade, as seen in my signature.
The meaning / impact of moving averages decreases with the timeframe. Daily is pretty "big", 4h is meh and 1h is tricky. Anything below that is, er, pretty much jumping into the frying pan.
I'm also learning to spot key levels to aid my trading. however I've noticed that most of the times price chop around those levels and by the time it really moved in earnest, I've lost my faith in those levels. how do you deal with this? and, how do you determine your key levels?
You don't trade s/r alone. You trade a price setup on s/r / areas of confluence (fibs+s/r for example).
I really think you need to do a lot more reading and studying on some of the basics like trendlines, the meaning of s/r and s/r flipping and so on..
The stuff is out there, just takes some reading
Take care,
SeekingLight
Trust price. Know yourself.
- #24
- Sep 9, 2007 7:08am Sep 9, 2007 7:08am
Ok, I see what I mean. Sorry I misunderstood your original post.
He thought that it was Eur/Usd that played a bigger role on Eur/Jpy. I just tried to say that it is the way around.
Anyway... i think we are spending too much time on this lol.
When i discuss something i like to think, "is this a crucial thing in my future? is this what will make the diference between the failure and sucess?"
In this case i have to say no, so... lets revise our possible trading for the next week. That makes money
.
Hi bluefox,
for longer term key levels and trendlines I use Monthly, Weekly, Daily charts.
MY opinion is - if you're trading on the 5M chart, then you're asking for
trouble.
Especially when beginning.
And I didn't make any assessment on EJ or UJ. It was unclear to me at the time so I stayed away. I could have sold an s/r break or retest of a broken TL which both GJ and UJ did, but since earlier attempts got killed I let it be.
I didn't realize until later that the daily had a very clear bearish setup formed (double high lower close + inside bar => broke downwards)
EURUSD had been making another interim bottom at 1.3550 with a Pin Bar or "Hammer" and then higher highs. So it was moving up. I use Price Action to trade, as seen in my signature.
The meaning / impact of moving averages decreases with the timeframe. Daily is pretty "big", 4h is meh and 1h is tricky. Anything below that is, er, pretty much jumping into the frying pan.
By looking for touches / reactions of price on the big timeframes. Check out posts on the James16 thread for examples.
You don't trade s/r alone. You trade a price setup on s/r / areas of confluence (fibs+s/r for example).
I really think you need to do a lot more reading and studying on some of the basics like trendlines, the meaning of s/r and s/r flipping and so on..
The stuff is out there, just takes some reading
Take care,
SeekingLight
http://www.forexfactory.com/images/icons/icon10.gif for the 1st phase of my trading career, I tried to stay away from the market and let a program trade for me. it didn't work out.
recently I've read an excellent book by Dr. Brett Steenbarger. he hammered home a point that in trading nothing beats screen time + structured training. that means, systematically expose oneself to the market as often as possible, and make as many trades as possible, it's the only way one can get a feel of the market. of course, he recommended that this should be done in simulation and under the supervision of an experienced mentor.
I don't have a mentor, nor do I trade in simulation. Instead, I trade real with very small lot size, and I'm experimenting with various ideas, hoping to finally come up with sth like a system and one that suits my style.
I must say that the last few weeks' screen time and real trading has really granted me a better understanding of myself and the market.
but I still dont' have a system yet. I've picked up bits and pieces here and there, I believe some of them contain real truth about trading. if only I could make the necessary connections. I trust the essential knowledge will come with more experience.
I failed to see this "double high lower close + inside bar => broke downwards" setup on EJ chart. instead I noticed that a pin bar had formed on 4 Sep. however the tip of the pin has been broken now, this has got to be bearish, right?
- #29
- Edited 2:11pm Sep 9, 2007 1:11pm | Edited 2:11pm
First of all, i have to tell you that i'm not a pro, you can "listen" to me, just if you want. 
My humble knowledge on this issues is based on information that i gather from my University and sites that i consider to be reliable, based on good past fundamental calls and more important... based on coherence, which is the fact that they don't change opinion everyday. I trust them because they researched it deeply and not just by chance.
But no one can assure if i'm right or wrong.
Well, thats why the expression "risk aversion" exists. Risk aversion is a kind of behavior from investors under uncertainty, that prevents them from investing in a risky "game" even if the expected return is in their favor.
Since we have a positive return vs the risk, its almost impossible to antecipate when the panic might get installed because, its panic from the others not from the fundamentals of the investment.
This means that carry trades are still very good for them, the rates favor dolar vs yen investement, but they have fear of what others might do.
That's why hundreds of news sites and analysts tried to call a reversal almost everyday on the past year, but never got it right.
So... the best way to know when carries might be unwound again is when the fear is around. There is the VIX that it is a volatility index in the stock market. Carries work better in low volatibility environments, so when a high VIX is combined with a sideways kind of action, that could spell trouble.
Even being high... combined with a bullish action is bad because a bubble could form. Conclusion high volatility in the stock market is bad and a sign of raw emotion that can explode.
And as i said, in that fear times, the main currencies tend to act in a counter-intuitive way to the news. For example.... EU and GU dropped hundreds of pips in very few days after the first news of the hedge funds collapsing in America. This is a signal. A pair reacting oposite of what was supposed. Yesterday they were bullish, right as they should.
So this is the way to spot possible and further carrie unwind.
-High Volatibility in stock market mainly sideways, rising and droping everyday without any good reason
-EU and GU acting bearish on bad news from US
This is not a must unwind "ABC", this only means that in this periods the bad news tend to have a "100x impact" and good news almost ignored. Which leads to possible unwind if we consider 50-50 probability of the next new be bad.
No. I will give you an example of what i mean. Imagine that US carries unwind completly, to the max. EJ will drop too because of currency correlation but, what i mean is that we will reach a point when UJ has nothing left to loose but EJ is still with a value of being a carry trade pair.
In other words, yes you could consider that every single pip we see EJ droping is a "mini" carry trade unwind, but in the end what i'm saying is that UJ might end up completly dry but not EJ.
You are right, but everything has estimates. The dealers can estimate their own trading volume and give a general estimate. But the simple way you can know what pair is more or less traded is looking for the spread. The tighest the spread, more traded that pair is. (Don't confuse with spreads during major events, i mean just daily average spreads)
Its not about trends its about average volatibility of each pair and the characteristics of the number.
Look at UJ, 115.xx for example, and look for EU 1.xxxx
Are you noticing that UJ is a big number "115" and EU its just "1"
If Uj drops 100 pips it will pass from 115 to 114 losing one entire unity... EU will still be 1 unity.
Uj rises 1000 pips from 115 to 125 gaining 10 unities (125-115=10).... EU rises 1000 pips and it is still 1 unity 1.xxxx
So in terms of the number UJ will impact more the real value. In the case of USD CHF the numbers and volatility are very near. But i don't trade them to have a good opinion.
Everything has a relationship but this is another case of correlation. It is US that imports Oil from Canada and US is the biggest importer in the world i think, so they suffer the most against Canada.
But if EU can't rise more faster than USD/Cad drops so Eur/Cad drops too.
Its like water in a glass. It you put your finger in the glass the water seems to rise but its the same water there. It just moved.
Or for example... its like a tournament. The winner is the best of them all but he didn't beat for example, the guy who played in the semi final against the guy he played in the final. He did beat the guy who did it thought.
Complicated?
Its the same... Europe is not being beated by canada but canada is getting more faster stronger than America than Europe is getting stronger from that same america.
So CAD wins the tournament, because it was the best but he only beated USD, Euro didnt won because had less points than Cad against the same USD.
Do the same thinking for jpy pairs instead of cad.
Look... this might not be super important but the important thing to remember in this entire discussion is that, when you want to trade an US new on UJ you might use EY or GY to make more pips at anytime, just as i've been doing.
In other words you dont have to wonder... "Hmm will carries be unwind tomorrow with this new? Should i short? How is the fear?"
If its bad for UJ and you short the other jpy pairs, you will always win or at least you dont lose nothing, no matter what other reasons might exist.
That will never change until xxx/usd pairs become all beasts and Uj become a normal value pair.
We are far from that.
Good trading for the next week!
My humble knowledge on this issues is based on information that i gather from my University and sites that i consider to be reliable, based on good past fundamental calls and more important... based on coherence, which is the fact that they don't change opinion everyday. I trust them because they researched it deeply and not just by chance.
But no one can assure if i'm right or wrong.
I was more interested in knowing how to predict this kind of event. and when accurate predictions are not possible, how to recognise the signs when things like this might happen.
Since we have a positive return vs the risk, its almost impossible to antecipate when the panic might get installed because, its panic from the others not from the fundamentals of the investment.
This means that carry trades are still very good for them, the rates favor dolar vs yen investement, but they have fear of what others might do.
That's why hundreds of news sites and analysts tried to call a reversal almost everyday on the past year, but never got it right.
So... the best way to know when carries might be unwound again is when the fear is around. There is the VIX that it is a volatility index in the stock market. Carries work better in low volatibility environments, so when a high VIX is combined with a sideways kind of action, that could spell trouble.
Even being high... combined with a bullish action is bad because a bubble could form. Conclusion high volatility in the stock market is bad and a sign of raw emotion that can explode.
And as i said, in that fear times, the main currencies tend to act in a counter-intuitive way to the news. For example.... EU and GU dropped hundreds of pips in very few days after the first news of the hedge funds collapsing in America. This is a signal. A pair reacting oposite of what was supposed. Yesterday they were bullish, right as they should.
So this is the way to spot possible and further carrie unwind.
-High Volatibility in stock market mainly sideways, rising and droping everyday without any good reason
-EU and GU acting bearish on bad news from US
This is not a must unwind "ABC", this only means that in this periods the bad news tend to have a "100x impact" and good news almost ignored. Which leads to possible unwind if we consider 50-50 probability of the next new be bad.
I don't understand this part very well. you said "Yesterday was one of the days where maybe the carry trades from US were falling but not the Euros and Pounds carry trades.", but EUR/JPY did drop a lot. is this a typo? or am I missing sth?
In other words, yes you could consider that every single pip we see EJ droping is a "mini" carry trade unwind, but in the end what i'm saying is that UJ might end up completly dry but not EJ.
I've been told that volume is not known for any particular currency pair, because there is no centralised exchang for forex. how do you determine the volume for this market?
if this is indeed the case, how can one determine which multicator is the stronger one? for example, according to your theory, EUR/CHF = EUR/USD * USD/CHF, right? can I assume that in this case euro is the stronger multiplicator, since EUR/USD has been in an uptrend?
Look at UJ, 115.xx for example, and look for EU 1.xxxx
Are you noticing that UJ is a big number "115" and EU its just "1"
If Uj drops 100 pips it will pass from 115 to 114 losing one entire unity... EU will still be 1 unity.
Uj rises 1000 pips from 115 to 125 gaining 10 unities (125-115=10).... EU rises 1000 pips and it is still 1 unity 1.xxxx
So in terms of the number UJ will impact more the real value. In the case of USD CHF the numbers and volatility are very near. But i don't trade them to have a good opinion.
ok, I understand a bit more now. both euro and cad have been appreciating against the dollar. but because cad value is increasing faster and stronger, eur/cad drops, right? is this all to it? does the economic relationships between europe and canada play no role at all?
But if EU can't rise more faster than USD/Cad drops so Eur/Cad drops too.
Its like water in a glass. It you put your finger in the glass the water seems to rise but its the same water there. It just moved.
Or for example... its like a tournament. The winner is the best of them all but he didn't beat for example, the guy who played in the semi final against the guy he played in the final. He did beat the guy who did it thought.
Complicated?
Its the same... Europe is not being beated by canada but canada is getting more faster stronger than America than Europe is getting stronger from that same america.
So CAD wins the tournament, because it was the best but he only beated USD, Euro didnt won because had less points than Cad against the same USD.
Do the same thinking for jpy pairs instead of cad.
ok, I get your point. bad news does not necessarily mean the carry trades will fall. their directions depend more on the stronger multiplicator.
Look... this might not be super important but the important thing to remember in this entire discussion is that, when you want to trade an US new on UJ you might use EY or GY to make more pips at anytime, just as i've been doing.
In other words you dont have to wonder... "Hmm will carries be unwind tomorrow with this new? Should i short? How is the fear?"
If its bad for UJ and you short the other jpy pairs, you will always win or at least you dont lose nothing, no matter what other reasons might exist.
That will never change until xxx/usd pairs become all beasts and Uj become a normal value pair.
We are far from that.
Good trading for the next week!
What if this EUR hike against the USD was created by the banks in the US, who actually sold a lot of USD and bought YEN?
After all there is no way for the feds to cut the interest rate, because with that they will destroy the whole country's economy. Remember it isn't only about the present, the future is far more important right now.
Fridays sell off of the USD I see it as a buble on the stock market. Simply untrue. Next week should go back where it was if not even futher down. Meaning strenghtening USD.
On the other hand if the US is going to play in a way to totally destroy its own economy which will weaken the USD, a lot, then the only way out is a war. Syria already shoots at Israely planes. Israel already threatens Iran of putting her down, which I don't know how the hell they are going to do without US help. Actually even the US will have to fight big and a lot against Iran. On the other hand if this war happens, it will be a big one involving all continents and most countries. Then I suggest, that all of us who make money off of Forex, look for something else out there to make money, cause I don't think Forex will be tradeble for other than banks again.
Alright, it was a joke, so don't get carried away yet.
But somehow I have a feeling that it wasn't the ECB who went against the USD on Friday. But rather it happened from inside the US. Banks have problems to fix, and those problems can be fixed only with lots of money. The Fed can't fix this problem for them, because with a rate cut would be only temporary. Besides with a rate cut stock could fall thousands of points because international investors would have no interest in investing or keeping their money in here. And that would bring the US into recession, big time. Right now the market will go pretty bad until one of the banks pups up as went into bankruptcy.
But hey I am not an economist. I might even be giberish here.
Regards...
I'm not an economist either, but I try to think about how someone with millions/billions of dollars in the market may react to different situations. Speculation is based on anticipating market reaction which is usually predicated on human emotion (that's where TA is so instrumental to trading...FA gives us a long term perspective to frame our decisions, and if you have super deep pockets, build positions around).
Global markets are intrinsictly connected. If one major economy fails then eventually other markets will collapse as well. The US economy is instrumental in almost every other (who will buy from China if the US consumer can't buy?...Canada...the US is the largest trade partner...and a weak dollar strong loonie impacts Canadian Corporate Profits...good for their economy?). Overall a weak dollar is good for the US right now. Why? Because it leads to higher volume of oversea sales...which in effect could cause more revenue to US companies). Totally off-subject...
Where I want to go w/this post is the interest rate cut and the stock market. Interest rate cuts are usually bad for currency valuation BUT is usually positive for the stock market! it is an inverse relationship (normally). Why? Because Corporate Profits are usually higher when borrowing costs decrease. Higher profits = higher stock values. Based on strict fundamentals, there is no reason for the carry trade to unwind. Fundamentally, the strategy is still valid. But, the strategy depends on long term stability. Long term stability requires low volitility and high liquidity (will this occur w/interest rate cuts?). Is this what we see occuring? Is the VIX below 20? is the Yield on short term bonds decreasing? How do you see speculators reacting to a potential monetary loss (keeping in mind, markets have a short term memory)?
Then, think on the global scale...do you think the BOE or ECB will continue to raise rates on the short-term if the US is experiencing liquidity issues that could spread globaly? Who will buy their goods/invest in their markets and how will they do it? Do you believe that each bank acts independently without considering the viability of their partners economic conditions? Why didn't the BOE or ECB raise rates w/their last meeting? & again, how will the hedge fund managers/ large market participants react to perceived actions?
When trading currencies, the 2 basic FA concepts are interest rate differentials and Weak economy/Strong economy. When these concepts are fulfilled, but prices aren't acting accordingly -- what does it mean? How do we trade it? Again, TA -- the charts will tell us how market participants are acting. Correlations can diverge and it is possible to have U/J go one way and E/J and G/J and A/J go in different directions....especially considering premise 2 of FA: Strong/Weak (Aud is Strong/US is Weak...how many will speculate there? then hypothetically, little change with U/J other than transactions to convert to AUD). Nothing works independently...everything is intertwined. The thought process can drive you insane and overwhelm. The best measure at the moment, imho, is how much FEAR is present in the marketplace. FEAR will cause a decrease in carry pairs (temporarily?) until logic comes back and the participants realize nothing fundamentally has changed -- if this is indeed the case.
Personally, I just think Fear...is it there? If so, Carry's unwind accross the board. If not, then they stabilize and grow....Then I look for GREED. No need to quantify the correlation...Just look for the "tracks" on the charts. Can you tell, I'm short term trader
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