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I dont understand market reactions past few months

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  • First Post: Nov 6, 2008 10:26am Nov 6, 2008 10:26am
It used to be (3 months ago), a big news event would come out bad and a nations currency would go down (and vice versa). Lately, 7 out of 10 times, the currency will go the opposite way.

Today for example, we had the UK cut rates to an unexpected level (way below expectations). Normally, this would cause the GBPUSD to do down, however, we only got a short spike down, then a huge rally up.

In hindsight I know some of you will say its because X, Y, or Z factors that the price acted this way, but, a few months ago I can almost guarantee we would have had a nice long move down on the GBPUSD.

Yes, I am/was a news trader but after I keep losing money day after day trying to trade what makes sense fundementally, I am thinking about quiting forex.
Not sure I understand your point. You're not satisfied with a 200 pip spike downward on a rate-announcement?
Measure twice, cut once
I feel your pain. I used to try to trade the news and realized that I was better off flipping a coin and leaving a huge SLs to weather the news wave. I found it was near impossible to predict which direction the announcement would send a particular pair. For me personally I was either going to have to quit OR change my style of trading. I chose to change my style of trading. No doubt you know a thing or two about trading so commit to another style of trading. It's truly amazing how much stress goes away once you stop trading the news.

I found with larger TFs the quality of my life increased.

Best of luck to you!
Quoting aediaz1
Not sure I understand your point. You're not satisfied with a 200 pip spike downward on a rate-announcement?
Assuming you were able to get into a trade at the top of the spike and exit perfectly, sure, you could have caught 165 pips or so. However, that is not possible.

What I am complaining about is the lack of follow through, not neccessarily the spike itself. With such a large rate cut, you would think there would be some follow through to the downside, yet, we had a rally on the GU


I agree with the above poster, I have noticed some technical systems doing a lot better in the current market, maybe its time for me to shift my focus away from fundementals.
Quoting FrankTheTank
Assuming you were able to get into a trade at the top of the spike and exit perfectly, sure, you could have caught 165 pips or so. However, that is not possible.

What I am complaining about is the lack of follow through, not neccessarily the spike itself. With such a large rate cut, you would think there would be some follow through to the downside, yet, we had a rally on the GU


I agree with the above poster, I have noticed some technical systems doing a lot better in the current market, maybe its time for me to shift my focus away from fundementals.
Remember that you deal with probabilities. Also, if thing where so obvious that the nations currency would decrease in value instantly on every news-release wouldn't trading be far too easy ?

You said 7/10 times the nations currency did the opposite. Sounds like a system with 70% success-rate to me
Measure twice, cut once
Quoting aediaz1

You said 7/10 times the nations currency did the opposite. Sounds like a system with 70% success-rate to me
Thats what I am thinking too! The old buy the rumor sell the news trick!
Quote
Yes, I am/was a news trader but after I keep losing money day after day trying to trade what makes sense fundementally, I am thinking about quiting forex.
If you want to quit, quit. Or... you could learn a better way to trade. Up to you.

The market doesn't always react rationally. Sometimes the market has pre-priced stuff, or sometimes it's just big currency flow. It could be anything really, and I don't think you can reliably predict what events will effect a spike (or follow-thru). Atleast not over time. News trading isn't really effective at the retail level anymore.

Quote
What I am complaining about is the lack of follow through, not neccessarily the spike itself. With such a large rate cut, you would think there would be some follow through to the downside, yet, we had a rally on the GU
Unless it wasn't enough. Maybe the dollar is just overbought for now. We've seen a lot of funds move to cash, seems that right now they're the ones running the market. DOW moves, ppl sell dollars and buy stocks, dollar goes down. DOW moves again, ppl buy dollars, sell stocks, dollar goes up. Just mechanics tho, could change.

No system lasts forever. If you don't look to the mechanics of the market, you're always going to be blind.
So I have to ask after doing this for a few years, is there really a safe, long term way to make money trading forex?

I have had great success and also great failures over the past few years. No trading system I have ever seen on a forum or purshased seems to last in the long term, they have all failed. Some last longer then others.

The biggest problem with forex is the high spreads, the shady brokers, and market manipulation by big players. The odds are so stacked against you that the average retail trader probably has betters odds at playing poker or gambling at a casino. Heck, even large banks and comericial trading groups are getting killed in this market.

So why do we do it?

(sorry, just had to rant after a bad day)
Quote
So I have to ask after doing this for a few years, is there really a safe, long term way to make money trading forex?

Sure, but I doubt anyone will just give you all of the pieces to the puzzle, even for a price. There are a lot of elements spread around this forum, just takes a lot of time.

You sound like a short term trader. Look into market profile, the CBOT used to teach it... and a lot of ppl still trade it, so it's worth a look.
Emotions, (Fear/greed), move prices, and fear trumps all else when it is wide spread. News/fundamentals do not move markets, at best they add some catalyst or fuel to trends that were already in place.

Frank, try trading day charts with smaller leverage or lot sizes. There are some powerful trends to profit from, but one needs to survive the volatility.
Thanks guys. Glad to hear some people are doing well long term. Gives me hope.
Quoting aediaz1
Remember that you deal with probabilities. Also, if thing where so obvious that the nations currency would decrease in value instantly on every news-release wouldn't trading be far too easy ?

You said 7/10 times the nations currency did the opposite. Sounds like a system with 70% success-rate to me
My thoughts eggshackly.
The market reveals who we really are...
Think about it. Market is pricing in the fact that UK is in huge trouble and that explains the levels pre-announcement. GBP has been dropping like a rock lately. Market even priced in the .75% cut which is designed to help relieve the credit problems and hopefully restore some order. So, the cut of 1.5% should really help relieve these credit problems and hence because GBP was oversold based on .75% cut expectations, it rallied back up. It's still fundamentals, just different way of thinking about it.

Just my 2 cents.
It does seem odd that economic news (other than interest rates) does not seem to be effect fx as much as it used to a few months ago. I guess this is just a very volatile time.
Quoting FrankTheTank
Assuming you were able to get into a trade at the top of the spike and exit perfectly, sure, you could have caught 165 pips or so. However, that is not possible.

What I am complaining about is the lack of follow through, not neccessarily the spike itself. With such a large rate cut, you would think there would be some follow through to the downside, yet, we had a rally on the GU
What rally? It looked like a textbook negative news event to me. Spike down to support, bounce back up to resistance and down from there.
Quoting Pipwaves
It does seem odd that economic news (other than interest rates) does not seem to be effect fx as much as it used to a few months ago. I guess this is just a very volatile time.
I agree with you, I also agree with the guy who started the thread because I have experienced the same situation, I just do not complain because I'm realistic and I know that the market's behavior is not at all the usual, the current economic situation is not usual. I honestly would not dare to trade the new these days nor for a few months to come.
I would say don’t get desperate. It is truth the currencies are not going the way we think they will these days, but it is a good opportunity to learn and try to apply different strategies. If you feel like quitting because the GBP went to a different direction from what you thought then Forex is not for you, it has happened, it’s happening and will continue to happen, with all currencies or pairs, even more in the current conditions.
I guess..u dun need to understand,,,u just need to trade what u see...Out problem is trying hard to out flank the market...in stead of going in flow...
I ever come across one paper/article..its heading is like this...

"Are you dumb enough to become a Techincal Trader?? "

I do agree on this on some extend...


Sonic
Interesting idea to go in flow of the market...what will happen than?
Today was another example and REALLY my last day of trading news. Non-farm payroll came out worse then expected, plus huge negative revision and worse unemployment rate. This is like the perfect storm of news trading and under normal market conditions, you would have a huge drop in pairs like USDJPY with little retracement for the first hour or two.

Today, we got almost nothing and we actually saw the USDJPY go up a few minutes after the news

So in summary, I have traded around news events for the past few years and have done very well (made about 10x my starting account). I have given back about 30% of that over the past two months. I am done trading around news. I guess it was fun while it lasted.....
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