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Identifying Market Swings - Medium and Long Term Trading

  • #261
  • Feb 19, 2010 1:45am Feb 19, 2010 1:45am
Quoting baron193
......aaaaaaand we have trend structure (hourly) change,
i thought the AUD might do a fake off the previous high, but no.
Razor, i'm happy i finaly seen a chart with properly drawn classic TL's,
Yes, as I mentioned before the strength of the fundamentals is that when used properly you can anticipate reversals in advance, but the downside is that they can't tell you exactly when they will happen, so you have to adjust your trading style to match.

My technical analysis is actually quite simple when you compare it to others on this forum.

Glad you like the charts!
-Razorjack
  • #262
  • Edited 2:28am Feb 19, 2010 1:58am | Edited 2:28am
So is everybody in on the commodities?

I was actually a week early, as I mentioned before I tend to jump the gun a bit when I can see these reversals coming.

But as you can see in the charts that we have our short term reversals into the medium term trends as we've been anticipating for weeks.

So what have you learned?

I hope this demonstrates to everyone that market reversals can be identified and anticipated in advance before they happen!

Hope you're all making good pips off these trades......
Attached Image(s) (click to enlarge)
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-Razorjack
  • #263
  • Feb 19, 2010 3:29am Feb 19, 2010 3:29am
Actually, I'm long on AUD/USD, but that is from an hourly TA point of view,
and irrelevant to this thread.
Too many bits fell into place for a long, to ignore it.
Biggest joker
  • #264
  • Feb 19, 2010 3:47am Feb 19, 2010 3:47am
Quoting baron193
Actually, I'm long on AUD/USD, but that is from an hourly TA point of view,
and irrelevant to this thread.
Too many bits fell into place for a long, to ignore it.
Different strokes .....

Just be careful to jump out of the way of the freight train should momentum start to pick up to the downside.
-Razorjack
  • #265
  • Feb 19, 2010 4:14am Feb 19, 2010 4:14am
I have jumped in front of them so many times now, i don't even blink.....
in fact most of my entries are fades, usually without any confirmation at all.
Biggest joker
  • #266
  • Feb 19, 2010 4:21am Feb 19, 2010 4:21am
Quoting Razorjack
So is everybody in on the commodities?

I was actually a week early, as I mentioned before I tend to jump the gun a bit when I can see these reversals coming.

But as you can see in the charts that we have our short term reversals into the medium term trends as we've been anticipating for weeks.

So what have you learned?

I hope this demonstrates to everyone that market reversals can be identified and anticipated in advance before they happen!

Hope you're all making good pips off these trades......
Hello Razor,

You are absolutely right. those mentioned pairs are reversing and hope the new trend will remain for sometime (medium term). I like to have your say on CAD/JPY pair. Anyway I expect it to go further up before any possible reversal.

Thanks again for your valuable teaching.
-happyTrading-myFx.
  • #267
  • Feb 19, 2010 4:27am Feb 19, 2010 4:27am
1. sorry for mis-phrasing question 2.
" what is the trend of EUR int rate ? "

can you comment on this ?

the current scenario is as follows:

EUR yield will probably stay put or lag US yield
because EUR economy will pick up later.
thus, the interest rate differential will narrow,
reducing the attractiveness of doing carry trade on EUR/USD
for medium term.

2. in order to reduce trade deficit of EUR , which (fiscal or monetary) policy EUR should implement?

with current anaemic economy, hiking rate will be bad for economy
but will be good to reduce trade deficit.

with current anaemic economy, pumping more money into economy will be bad to reduce trade deficit but good to economy.

3. which has a greater impact on the direction of EUR
(trade deficit or interest rate differential) ?


thank you
  • #268
  • Feb 19, 2010 4:46am Feb 19, 2010 4:46am
Quoting myfx
Hello Razor,

You are absolutely right. those mentioned pairs are reversing and hope the new trend will remain for sometime (medium term). I like to have your say on CAD/JPY pair. Anyway I expect it to go further up before any possible reversal.

Thanks again for your valuable teaching.
I believe that CADJPY is going to reverse either today or the beginning of next week. But then again I thought it would reverse last week, so I could be wrong!

The factors for my analysis is that price has run into resistance in the 61.8% fib and we're seeing the JPY strengthen against the other major currencies AUD, NZD, EUR, GBP and possibly even towards USD.

The goal should always be to anticipate this in advance but to still watch your risk exposure and money management. So that even if you're wrong and take a small loss, you'll more than make up for it when it does start to move in the anticipated direction.

Easier said then done I know, but that should still be the goal.
Attached Image (click to enlarge)
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-Razorjack
  • #269
  • Feb 19, 2010 5:13am Feb 19, 2010 5:13am
Quoting peter lee
1. sorry for mis-phrasing question 2.
" what is the trend of EUR int rate ? "

can you comment on this ?

the current scenario is as follows:

EUR yield will probably stay put or lag US yield
because EUR economy will pick up later.
thus, the interest rate differential will narrow,
[color=#0000ff]reducing...
EUR yield will probably stay put or lag US yield because EUR economy will pick up later.

First of all we need to differentiate yields and interest rates. They are not the same thing.

I assume that you are referring to interest rates.

EuroZone interest rates will stay put for a while, the economy is weighted down by the lagging economies in Italy, Ireland, Spain, Portugal and Greece.

EuroZone rate hikes lagging behind US rate hikes?

Maybe, it depends on how fast the US economy will accelerate to warrant rate hikes.

2. in order to reduce trade deficit of EUR , which (fiscal or monetary) policy EUR should implement?

with current anaemic economy, hiking rate will be bad for economy but will be good to reduce trade deficit.

with current anaemic economy, pumping more money into economy will be bad to reduce trade deficit but good to economy.

I don't think the trade deficit is the EU's and ECB's top priority right now, I believe that it is sovereign debts (budget and national deficits) that need to be reduced in order to improve the economy.

3. which has a greater impact on the direction of EUR (trade deficit or interest rate differential) ?

I believe the debt problems are more important right now to the EU and ECB than trade deficits. The sovereign debt problems are interdependent with interest rates.

I can't see the ECB raising rates until there are clear indications that sovereign debts aren't going to hamper the EZ economy. IMO, it would be an economic disaster if the ECB raised rates before the PIIGS (Club Med as the Americans like to call these coutries) have their deficits under control, otherwise there are serious risks of defaults.
-Razorjack
  • #270
  • Edited 2:14pm Feb 19, 2010 5:24am | Edited 2:14pm
Quoting Razorjack
The Fed just hiked the discount rate by 25 basis points.

This is the first signal that the Fed is withdrawing emergency stimulus and tightening credit by via reduction of money supply.

The all important Fed Funds Rate is unchanged, but this is a signal that the US economy has recovered and will continue to accelerate.
Lets talk Carry Trade …

So, the Fed has raised the discount rate, and this can shortly be expected to feed into the Fed Funds (target) rate.

Therefore, when risk appetite returns it will be time to start looking out for the next big trend, a long play on AUDJPY, right ?
  • #271
  • Edited 6:08am Feb 19, 2010 5:57am | Edited 6:08am
Quoting Astellas
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 (target) rate.

Therefore, when risk appetite returns it will be time to start looking out for the next big trend, a long play on AUDJPY, right ?
That's almost correct. It's not certain that we'll see a hike in the Fed Funds Rate shortly.

IMO, the Fed will be cautious to raise the FFR before employment and inflation has been showing positive improvements for some months. The discount rate hike was mostly to help absorb the 1 trillion USD in excess bank reserves. In essence, it's to reduce the money supply and of course when the supply is reduced then there's a shift in balance between the supply / demand relationship and that's why we're seeing this boost to the USD.

But when the FFR is raised then I plan to short JPY across the board and hang on to my trades until the end of the current business cycle several years down the line.

Actually let me correct this: I plan to short JPY across the board when risk appetite is back into the markets, whether the Fed hikes the FFR or not, then I plan to hold on to these trades until the end of the current business cycle. This way I would already be in position by the time the rates are hiked.
-Razorjack
  • #272
  • Edited 2:13pm Feb 19, 2010 6:36am | Edited 2:13pm
Quoting Razorjack

Actually let me correct this: I plan to short JPY across the board when risk appetite is back into the markets, whether the Fed hikes the FFR or not, then I plan to hold on to these trades until the end of the current business cycle. This way I would already be in position by the time the rates are hiked.
Ah, I see.
  • #273
  • Feb 19, 2010 10:32am Feb 19, 2010 10:32am
hi razor
thx for reply and sorry for my bad english
what u said is exactly what i ment but still no daily close below 23 fibo at 141.17 -price gets rejected upwards from there-
so that can take the price to break 38 fibo upwards again w ll see todays close.
best regards
  • #274
  • Feb 19, 2010 10:39am Feb 19, 2010 10:39am
Razor,

Im just a lil confused/concerned with respect to this analysis -

In relation to the parabolic rise (and much needed pullback) in the $DXY...

Would we not expect to see even better entires on these commodities currencies - if looking to go short?

short term....mid term?

The dollar is seemingly unstoppable here....and even moreso lends thought to the idea of "dollar low" - "commodities high" no?....this thing can't keep its upward trend line going like this for much longer.
  • #275
  • Edited 7:30am Feb 20, 2010 6:00am | Edited 7:30am
Quoting Stock_Rocket
Razor,

Im just a lil confused/concerned with respect to this analysis -

In relation to the parabolic rise (and much needed pullback) in the $DXY...

Would we not expect to see even better entires on these commodities currencies - if looking to go short?

short term....mid term?

The dollar is seemingly unstoppable here....and even moreso lends thought to the idea of "dollar low" - "commodities high" no?....this thing can't keep its upward trend line going like this for much longer.
You could be right.

I'll try to give you my perspective.

I'm looking more at how the commodity currencies are reacting to developments in the USD. Which says that the commodities have NOT been losing ground to the USD. While the USD has been making new highs, the commodity currencies have been ranging. All this in SPITE of the fundamental developments.

I just can't ignore the fundamentals. And they're telling me to look at China's monetary tightening, the European debt crisis, the Fed soaking up excess liquidity in the reserves and there are indications that the Fed will withdraw even more out of the money markets. All this can threaten to reduce demand on commodities.

I can't see the commodity currencies continuing into a sustained uptrend when there are some questions to whether the current demand can be sustained.

So now I will rant a bit to get my thoughts out.

There has been some interesting reactions the last 2 Fridays. First there was very little reaction to China's surprise credit tightening before the Chinese holiday. Which can lead to a temporary slowdown in demand for commodities, yet the commodities still gained on the USD.

Then after the Fed raised the discount rates, this reduced the money supply which shifts the balance in the supply / demand relationship. This should drive the dollar up, reducing commodity prices and after a temporary reaction the commodities rallied late yesterday.

I'm not sure why the markets reacted like this, but it could be the "Friday effect", combined with the Chinese holiday closing the Asian markets this week. The Friday effect started after the global financial crisis, there seems to be bull market rallies on Fridays in order to not spook the Asian session when trading opens after the weekend. This is in order to keep the markets from collapsing by the time the US session opens after the weekend.

Not sure whether this is true or not, but it does offer an explanation of this weeks rally against fundamental developments when the Asian markets were closed. I guess the coming week should confirm this. If the commodity currencies continue upwards then the markets are shrugging off the fundamentals and then I'll look to sell the currencies again from the top (opposite for USDCAD) of the channels.

However if the Asian markets start a sell off then we should the see the fundamental developments get factored into the markets and the commodity currencies head downwards.

It's days like these when the markets humble me.

EDIT: There's one more thing I forgot to mention. At the beginning of Feb, AUDUSD had an interest rate hike factored into it's price around 0.89. The RBA unexpectedly left interest rates alone on Feb 2, the effects of this combined with the European debt crisis pushed AUDUSD down, but look at where AUDUSD is at now: 0.90. It's 100 pips HIGHER even though the fundamentals have not improved for AUDUSD, in fact one can argue that fundamentals have worsened slightly for AUDUSD.
-Razorjack
  • #276
  • Feb 21, 2010 7:56am Feb 21, 2010 7:56am
Razorjack

One heck of a thread you have here. Most, if not all, threads are devoted to trade shorter TF (1Hr and Lower), it is great to see some real long term trading dedicated thread.

Before reading your intros in the first few posts of this thread, I used to think fundies were more on retrospection rather foresight. As in , why did something happen rather than what might happen. Those posts have shaken my belief to an extent and I got myself the book "Intermarket analysis". Lets see how things go.

I have one question though, Would you agree when I say: To fully utilise fundies in your trading it is important to have order flow data too? Those cud actually point to whether you are right on the dot or not.
  • #277
  • Feb 21, 2010 12:03pm Feb 21, 2010 12:03pm
Quoting vicky_ag
Razorjack

One heck of a thread you have here. Most, if not all, threads are devoted to trade shorter TF (1Hr and Lower), it is great to see some real long term trading dedicated thread.

Before reading your intros in the first few posts of this thread, I used to think fundies were more on retrospection rather foresight. As in , why did something happen rather than what might happen. Those posts have shaken my belief to an extent and I got myself the book "Intermarket analysis". Lets see how things go.

I have one question though, Would...
Hi Vicky,

Welcome to the thread.

Most, if not all, threads are devoted to trade shorter TF (1Hr and Lower), it is great to see some real long term trading dedicated thread.

I've tried both short term and long term. I can honestly say that long term has been much more profitable for me.

Before reading your intros in the first few posts of this thread, I used to think fundies were more on retrospection rather foresight. As in , why did something happen rather than what might happen.

This is a common misconception. Fundamental analysis is a tool just like technical analysis. You have to separate the tools themselves from the finished products built by the tools. I use fundamentals to help me anticipate trend changes, others might use technical analysis to do the same thing.

I have one question though, Would you agree when I say: To fully utilise fundies in your trading it is important to have order flow data too? Those cud actually point to whether you are right on the dot or not.

I don't use order flow data. What I do is to anticipate all possible scenarios, what would cause them and how the markets would react. Then I try to establish the most likely scenario and the odds of it occurring. This helps med decide how much to risk and when I would know that my view was right or wrong.

For long term trading, I don't think order flow data is needed. For 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 WHEN. This is where technical analysis comes in and being able to recognize business cycle phases, accumulation, distribution, etc. In long term trading, trend changes happen over several weeks, even months, I don't think that order flow data can help much in these cases.
-Razorjack
  • #278
  • Feb 21, 2010 1:21pm Feb 21, 2010 1:21pm
Quoting Razorjack
Hi Vicky,

Welcome to the thread.

Most, if not all, threads are devoted to trade shorter TF (1Hr and Lower), it is great to see some real long term trading dedicated thread.

I've tried both short term and long term. I can honestly say that long term has been much more profitable for me.

Before reading your intros in the first few posts of this thread, I used to think fundies were more on retrospection rather foresight. As in , why did something happen rather than what might happen.

This is a common...
Well lets see..

I've tried both short term and long term. I can honestly say that long term has been much more profitable for me.

I think in the longer term (not long term trading ), it is the only way to go about. I have a friend who scalps, works hard everyday for 8-9 hrs, just to take 4% on a good week. For the same period, depending on a setup, I might make that much in 1-2 trades.

This is a common misconception. Fundamental analysis is a tool just like technical analysis.

Well that comes with watching a lots of the idiot box. All the experts talking about so much of the fundamentals and getting it dead wrong. In India, my resident country, for example there were experts who saw our major indexes slide from 21k to 16k after the "risk aversion"(sounds fancy when compared to Depression or slowdown) started maintaining that we were "Decoupled from the world" as in "We were funding our own economy". Guess what happened, the market went down from 16k to 8k, a spectacular downward spiral from 21k to 8k.

So, I had this feeling:
a. These so called experts are idiots and fundamentals are just a way to look back at what has happened.

b. These so called experts have vested interests and are there on the TV to spread disinformation.

Frankly, I believed in both a and b. Fundies are useless and experts are more than what they seem until your thread came along.

In long term trading, trend changes happen over several weeks, even months, I don't think that order flow data can help much in these cases.

Razorjack, that being the case there is one thing I always wonder.

a. It is true that for a market to exist, there should a buyer and seller, right? So, when EU price tops at 1.5141 during the Dubai crisis who is the person taking the other side of the trade? Who is taking the longs?

In a stock market, a floor dealer/trader working at an exchange as a specialist for one company (Say CitiBank) needs to take the other side of the trade when no one is willing to deal. So, on a bad day for Citibank when there is no one willing to buy the stocks and it is tumbling, he will buy it. (Conditions applied).

FX works like this? I think not.

b. Well that has been quite a ranting, lets do away with the previous question before asking another.
  • #279
  • Feb 21, 2010 2:35pm Feb 21, 2010 2:35pm
Quoting vicky_ag
Well lets see..
[color=Blue]
I've tried both short term and long term. I can honestly say that long...
Frankly, I believed in both a and b. Fundies are useless and experts are more than what they seem until your thread came along.

This is the same thing as listening to someone else's technical analysis, you can't trade or profit from it unless you have the entire picture. Fundamental analysis doesn't mean listening to someone else's predictions, it means understanding the economic fundamentals and making informed decisions based on facts not opinions.

So I listen to a lot of these experts on TV, but I only listen to the facts and ignore their opinions, predictions, etc. These "experts" actually come in very handy and can provide facts and information much faster than you can get by reading economic news releases. Then I make my own analysis and trade based on that.

a. It is true that for a market to exist, there should a buyer and seller, right? So, when EU price tops at 1.5141 during the Dubai crisis who is the person taking the other side of the trade? Who is taking the longs?

This is too simplistic a view, it's good for making an analogy but doesn't even come close to the real world.

For 1 seller, you can have 100 buyers or vice versa.

From the Dubai crisis, you had traders that both profited and made losses. There are plenty of parties that could have been taking the longs: banks, institutions, hedge funds, market makers, corporations hedging their profits against currency fluctuations or any trader that was unaware of the Dubai debt crisis or knew about it and though that it wouldn't last and they could get in at a good price, etc.
-Razorjack
  • #280
  • Feb 21, 2010 3:10pm Feb 21, 2010 3:10pm
Quoting vicky_ag
Well that comes with watching a lots of the idiot box. All the experts talking about so much of the fundamentals and getting it dead wrong. In India, my resident country, for example there were experts who saw our major indexes slide from 21k to 16k after the "risk aversion"(sounds fancy when compared to Depression or slowdown) started maintaining that we were "Decoupled from the world" as in "We were funding our own economy". Guess what happened, the market went down from 16k to 8k, a spectacular downward spiral from 21k to 8k.
for every possibility there is one expert talking about it on tv ... they have their view, however they came to their conclusion it doesn't matter, as all their models are just that, models based on assumptions based on statistical data, you can't blame them, so think on your own, you just need common sense, no mathematical predictions, no listening to experts, no signal providers, no cable update thread, ...a good book is fooled by randomness, after reading that you'll smile about all those expert opinions and move on
in fact those experts are only necessary to give justification for the people who do not think, to give the news channel/newspaper a glimmer of knowledge and the opinion leaders and politicians something important to talk about. doesn't help you as a trader, even if an expert is spot-on, how do you know who you can trust and when, and for how long ... ? you don't
Invincibility lies in the defence, the possibility of victory in the attack
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