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Rear-View Mirror Chart Thread

  • #1
  • First Post: May 15, 2011 7:45am May 15, 2011 7:45am
I am starting a new thread to highlight the importance of news and fundamentals using charts as my main tools. I will be posting intraday charts of EURUSD and EURJPY with important news and macroeconomic data releases highlighted. Hopefully this will improve my own understanding, but also the readers' understanding of the effect fundamentals have on price action. This is something that I've been thinking about doing for a few months now but for some reason I never got round to it.

Not all people here follow fundamentals and news but those who do are familiar with market reports from the likes of FT, Reuters, Bloomberg and WSJ. These news providers make sure to add every little piece of information that moved price into their reports, but they always lack charts. Hopefully this little project will fill that gap.

IMPORTANT
I only trade EURUSD and EURJPY thus I will only be posting charts for these two pairs. I welcome you to post charts of other pairs and to make additions to mine where so you see fit. See below for details.

PARTICIPATION
If you'd like to participate, please keep the discussion on topic. Please note that the voucher requirement serves a purpose and is not up for negotiation. It is there to keep the spammers, rookies and indecent people away thus providing a hassle free place for decent people to go about their business. If you've had the misfortune of ending up on my ignore list, too bad for you, you won't be able to participate.

If you'd like to post your own charts, there are three criteria I would like to see filled:
1) the chart should be easy on the eyes, this means:
--> pick a few colors and stick with them
--> if you'd like to add a moving average fine, but keep it thin and provide info on its inputs
--> please no separate window indicators as they take away space from price, if you really want them, perhaps you could publish to charts every time
2) post the chart to FF (via the attachment button), I don't like to open charts from outside providers as they usually open with a lot of distracting ads
3) major currencies only: EUR, USD, GBP, CHF, JPY, AUD, CAD, NZD

TIME
My chart feed uses London time. Please don't ask any questions on this topic or I'll add you to my ignore list. There's plenty of resources on the web to figure out your own and someone else's time zone, Google is the guy to go to. This should help as well.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: fiber may 13 2011 friday with hilo.gif Size: 27 KB
Click to Enlarge Name: yuppie may 13 2011 friday with hilo.gif Size: 26 KB
If you don't risk, you don't ever have to lose.
  • #2
  • May 15, 2011 8:42am May 15, 2011 8:42am
The big money will usually act on fundamental news weeks ahead of time. If they expect news to be bearish, they will sell the pair weeks ahead of time or visa versa for bullish expectations. It is a classic "Sell on the rumor...buy on the news" phenomenon. I know this instinctively...that's why I don't pay attention to the news. 90% of the time, the news will already be "baked" into the price. However, it is an interesting topic and something for me to think about.
  • #3
  • May 15, 2011 9:43am May 15, 2011 9:43am
Quoting Troikaone1
The big money will usually act on fundamental news weeks ahead of time. If they expect news to be bearish, they will sell the pair weeks ahead of time or visa versa for bullish expectations. It is a classic "Sell on the rumor...buy on the news" phenomenon. I know this instinctively...that's why I don't pay attention to the news. 90% of the time, the news will already be "baked" into the price. However, it is an interesting topic and something for me to think about.
I agree with the first part of what you said but I disagree with the latter part. News can only be priced in if the exact date, content and magnitude of the event can be predicted with a certain margin for error before the event takes place. News events like the Spiegel's article or CME's recent margin hikes are events that can have a huge impact on price intraday but it's quite literally impossible to predict exactly when they take place.

In any event, the charts here serve three purposes:

1) to learn how the market works and reacts to news so that we can learn to manage our trades better in the future

2) to provide a summary of the day's events and their relation to price movements

3) to 'predict' the future movement of price. This is something that I should've mentioned in the first post but I forgot. Let me explain. If you look at the EURUSD chart I posted it is clear that risk off dominated the day and good news from Europe only had a shelf life of around two hours. Bad news had more weight than good news.

From this we can conclude that risk off will remain the dominant theme in for the week to come unless something happens to calm the markets. So in effect we know that there is more supply at important resistance levels than there is demand at important support levels. This provides us with potential entry, exit and/or mid-target levels. The announcement of another bailout for Greece would send fiber higher squeezing out all the shorts and could potentially lead to investors seeking risk again. The catalyst that pushes the market from risk aversion to risk seeking could be anything really, but for now it seems that both fiber and yuppie are prone to show more pronounced moves on the downside.

I'm sure many FF members are already doing something similar to this, they're just not putting it all on a chart. I'm not saying you have to do this by putting the news up on your chart, that's just the way I've prefer to do it.
If you don't risk, you don't ever have to lose.
  • #4
  • May 15, 2011 11:01am May 15, 2011 11:01am
Quoting bug
News events like the Spiegel's article or CME's recent margin hikes are events that can have a huge impact on price intraday but it's quite literally impossible to predict exactly when they take place.
CME margin hikes were a surprise only to those who don't understand how the CME works. CME guarantees for both sides of a trade. But this does not happen on a real time basis as with a FX broker, instead it happens only once a day, when the transactions are settled. So they MUST raise the margin when volatility spikes (like 10% days in silver) to ensure they are not left holding the bag in case you are bankrupt. This is common knowledge in the futures business. Whenever an asset prices is too volatile relative to it's margin, the margin is raised. When volatility drops, the margin is lowered.

Of course, this is the non-conspiratorial explanation. You might like the JPM/BTFD/ZH/banksters version more.
  • #5
  • May 15, 2011 11:21am May 15, 2011 11:21am
Quoting Adal
CME margin hikes were a surprise only to those who don't understand how the CME works. CME guarantees for both sides of a trade. But this does not happen on a real time basis as with a FX broker, instead it happens only once a day, when the transactions are settled. So they MUST raise the margin when volatility spikes (like 10% days in silver) to ensure they are not left holding the bag in case you are bankrupt. This is common knowledge in the futures business. Whenever an asset prices is too volatile relative to it's margin, the margin is raised....
Yes, I'm aware of that. I actually had a whole paragraph in my post on the margin hike but I decided to scrap it before posting as I deemed it a bit off-topic and I really didn't want to start beating the horse with the GATA crowd. What I meant by 'surprise' was that one could not have foreseen the magnitude of the spike in volatility and thus correctly predicted the number of margin hikes. Margin requirements are intended to cover roughly 95% of expected losses and after the surge in volatility it was no longer a surprise that CME would margin requirements. But don't tell me you can predict volatility spikes. We can all make an educated guess, especially when things are going parabolic, but don't tell me you can predict the specifics of those hikes well before the surge in volatility. So in short, the hikes were not a surprise, but the magnitude of the surge in volatility certainly was (several std. deviations if I'm not wrong).

Maybe I went too far by calling it a 'surprise' in which case I'm sorry for confusing you and the rest of the readers.

Quoting Adal
Of course, this is the non-conspiratorial explanation. You might like the JPM/BTFD/ZH/banksters version more.
Why would you say that about me? Do I give off a specific lunatic vibe or something?
If you don't risk, you don't ever have to lose.
  • #6
  • May 15, 2011 11:51am May 15, 2011 11:51am
Quoting bug
What I meant by 'surprise' was that one could not have foreseen the magnitude of the spike in volatility and thus correctly predicted the number of margin hikes.
I understand. Your original post was not very clear. Indeed, predicting the margin hike after volatility spiked is not the same thing as predicting the volatility spike. So we are both right

But if we are to get technical, I am aware of algorithms which scan the Internet (news articles, twitter, forums - hi there ...) and count what stocks/crosses/commodities people talk about. They use that information to predict volatility spikes - if everybody talks about silver you can make an educated guess that it's volatility it's going to rise. These bots were first created 10 years ago by option seller banks, since as you probably know an option is just a bet on volatility (not direction).

Quote
Why would you say that about me? Do I give off a specific lunatic vibe or something?
That was not my intention. I specifically used the word "might" instead of "probably", so that I wouldn't accuse you of being in that crowd. I mention the conspiracy theory just to signal that I am aware of a likely rebuttal of my explanation of the margin hike.
  • #7
  • May 15, 2011 12:06pm May 15, 2011 12:06pm
Quoting Adal
But if we are to get technical, I am aware of algorithms which scan the Internet (news articles, twitter, forums - hi there ...) and count what stocks/crosses/commodities people talk about. They use that information to predict volatility spikes - if everybody talks about silver you can make an educated guess that it's volatility it's going to rise. These bots were first created 10 years ago by option seller banks, since as you probably know an option is just a bet on volatility (not direction).
It seems to me that a robot that looks for volatility or any other information is for junkies who can't keep themselves away from trading so they use robots to generate ideas. It would be much easier to concentrate on a couple of markets and get to know them. But that's just me.

Quoting Adal
That was not my intention. I specifically used the word "might" instead of "probably", so that I wouldn't accuse you of being in that crowd. I mention the conspiracy theory just to signal that I am aware of a likely rebuttal of my explanation of the margin hike.
OK, I see. I've had my share of trying to put sense into those naive little minds but in the end I didn't see the point anymore so I know what you were shielding yourself against.
If you don't risk, you don't ever have to lose.
  • #8
  • May 16, 2011 4:44pm May 16, 2011 4:44pm
Today has been a hell of a day in terms of news flow and I'm pretty sure I didn't put everything important on the charts. I've also had problems with pinpointing some of the news as I don't have a Bloomberg terminal and can't perform search on my Dow Jones feed (via my broker). In other words, those arrows you see on the chart are not very accurate. The ones that are accurate are very close to bars, those with fuzzy release times are further away from price.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: fiber may 16 2011 monday.gif Size: 29 KB
Click to Enlarge Name: yuppie may 16 2011 monday.gif Size: 26 KB
If you don't risk, you don't ever have to lose.
  • #9
  • May 16, 2011 4:54pm May 16, 2011 4:54pm
Quoting Troikaone1
The big money will usually act on fundamental news weeks ahead of time. If they expect news to be bearish, they will sell the pair weeks ahead of time or visa versa for bullish expectations. It is a classic "Sell on the rumor...buy on the news" phenomenon. I know this instinctively...that's why I don't pay attention to the news. 90% of the time, the news will already be "baked" into the price. However, it is an interesting topic and something for me to think about.
Heya Troikaone1,

Sure participants position themselves ahead of events according to their expectations, but I'm not so sure they do it weeks ahead of time, since the market has acute ADD and tends to shift focus from one event to another as it feels. Perhaps you can take advantage of the fact that these participants have expectations? My experience tells me that 90% is kinda on the high side, but then again it's just my experience.

Quoting bug
The announcement of another bailout for Greece...
I'm watching Greece so closely, my phone is always going off from RSS updates! I'm very interested to see how they will approach the privatisation issue.

OANDA actually has a nifty feature where it puts the news on the chart for you, along with the time. I think there may even be an MT4 plugin for FF's calendar somewhere around here, but it could just be a fantasy of mine.

I'm subscribed!

Regards,
xXTrizzleXx
  • #10
  • May 17, 2011 2:04am May 17, 2011 2:04am
Quoting xXTrizzleXx
OANDA actually has a nifty feature where it puts the news on the chart for you, along with the time. I think there may even be an MT4 plugin for FF's calendar somewhere around here, but it could just be a fantasy of mine.
Yeah I've seen it, didn't think much of it. I like to do things my own way.
If you don't risk, you don't ever have to lose.
  • #11
  • Last Post: May 19, 2011 2:57pm May 19, 2011 2:57pm
I quite busy right now outside of trading, been reading up a lot of economics and central banking so I'm afraid I won't be posting charts for Wednesday and Thursday. Reviewing the information, deciding what to add on the chart and so forth takes about half an hour if done properly and right now time is in short supply. It is possible that this trend will last for some time to come, but I'm not closing this thread yet. As Arnie said: I'll be back!
If you don't risk, you don't ever have to lose.
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