Silent Service Method

I shouldn't say this out loud in this forum, but there are ways to trade the NFP announcements. It normally involved fading extreme moves, but takes a lot of experience and nerves of steel. Sooner or later you can get caught though. In other words - it isn't worth it.

Something that became painfully obvious on Friday was some of the dynamics in the trading world have shifted. What I mean by this specifically is the role of the "safe haven" trade and the US dollar.

Traditionally, when the world got nervous, it would run to the US. While there is still some of that going on in the form of US Treasuries, the truth is that it is shifting away from that. How do I know? It's all in the charts. But there is one thing that you might want to keep in mind: The Federal Reserve is the largest buyer of US Treasury bonds. Think about what that actually means.

The normal correlations aren't holding up. People aren't ditching the commodity currencies in favor of the USD. Don't believe me? Take a look at the action in both NZD/USD and USD/CAD on Friday after a horrible jobs number out of the US. In normal times, we would have seen a sell off in both of those currencies as people ran to the bond markets.

We did see a sell off actually - which lasted about an hour. The CAD, NZD, Oil, and Gold all formed supportive hammers or shooting stars favoring the opposite side to the Dollar in all of those trades. It becomes clear that one of two things is happening: Either people are about to push for a larger rally, or they are leaving the USD.

When I thought about that, the answer became clear: All I had to do is look at my USD/CHF position. It rose slightly during the Friday session, only to fall again to new lows. This shows that people are looking for a safe haven. They found it in Switzerland.

Dollar weakness is what it is all about. The EUR/USD got a bid on news the Greece might actually do what it needs to do. But before people get too excited, they should think about what this means for countries like Ireland, Portugal, (which has a major election this weekend - and could rock the boat) Italy, and Spain. If the Greeks can get several handouts, what makes you think that the Italians won't want some free money?

The German people have to be pissed. Perhaps pissed enough to leave the Euro someday. Not now, but the Euro is a doomed currency to begin with. The longer this goes on, the less I think of the whole idea.

Think of it this way: Do you honestly think the US would feel great about bailing out other countries? Oh wait, we already do - and they still hate us. But that's another conversation altogether. What I meant to say is could you imagine the Russians putting up with baling out other countries who fail to see the need to correct their behavior? (As seen in street protests and the like) I didn't think so.

It all looks really gloomy. I believe it is only a matter of time when US ratings will be downgraded and the notoriously raised debt limit will get the appropriate wider attention. Greece debt problem is slowly moving on the second plan leaving empty space for new story.

Very possible. The one thing that could help the USD in general is if Europe blows up, which of course is very possible.

The reaction on EURUSD in relation to the NFP numbers surprised me too.

I was happy to see the initial spike up and then got in to ride short. That's what I did and then I closed the trade for certain reasons and thought no more of it even though I did expect to see further drop.

When I checked the charts later that evening I was surprised to see that the pair had again reversed and rallied up.

The fact that this happened leads me to the same conclusion that you reached Chris: the USD no longer enjoys quite the same safe haven status that it used to.

Ironically I think that's a good thing for the US. Back in the first half of the nineties Sweden was in a financial mess, much like the one of 2008 but localized to Sweden.

Back then we had the SEK pegged against a basket of foreign currencies. In late 1992 the Swedish Central Bank, Riksbanken, raised the interest rate to 500% during a day or a few, in a desperate attempt to defend the pegged exchange rate against the speculators of the free markets.

Of course they failed, and thank heaven for that! As the SEK was finally allowed to float free and the pegging abandoned, the self correcting mechanisms started to act on the Swedish economy.

As the SEK depreciated Sweden became more and more competitive as a producer and exporter and it also became cheaper for foreign money to invest in Sweden. Swedes became poorer in relative terms as the SEK dropped, but this was a passing thing and as the economy became healthier again, Swedes again started to regain what was lost.

Now Sweden is in competition with Norway, Denmark and Switzerland for the title as richest European country...

What I've tried to get at is this: it might actually not be a bad thing for the US if the USD were to lose its safe haven status. This status, in a way, props up the USD in a way that doesn't allow the USD to behave "normally".
If the US is going to get back in shape, its probably going to have to go through ten tough years like Sweden had to. Having a currency that doesn't drop like any other currency would is probably not going to be helpful.

In conclusion I think the safe haven status of the USD does the US more harm than good and so what happened during the aftermath of NFP might be the start of true healing for the US economy. (Please heal, I don't want to learn Chinese )

If you think about it, that statement says it all. Notice how none of these countries use the Euro. You Swedes don't have the Greeks dragging you down.....

Also, the EUR/USD also got a boost as the Greeks look like they are willing to take further austerity measures in order to receive welfare checks.....er, I mean "the next IMF and EU payment".

None the less, I think the Euro will go the way of the Dodo bird in a few years. There will still be some kind of common currency, but it will have far fewer countries. I mean, why in the hell do the Germans want to pay for someone else's luxury? However, it could be most reasonable for those same Germans to share economic prowess with the Dutch, as both nations are generally fiscally responsible.

As a side note, anyone here unfortunate enough to see the USA/Spain friendly yesterday? What a fucking joke. 4-0, and it should have been worse. The announcers kept saying "Well, it's Spain....and there's no shame in losing to Spain." There is if you are going backwards. I agree - the USA losing to Spain doesn't bother me, but they were obviously intimidated. Odd, considering we play Brazil a lot, and are normally fairly competitive - and the Spanish don't deserve to tie their boot laces. (I don't care who won the last WC.) It is frustrating to here the same attitudes that were prevalent 20 years ago - we are a second tier nation, and were once a third tier one and that's good. But it's time to move up the ladder.

Besides, 330 million people and you are trying to tell me we can't produce 11 world-class footballers?

I hadn't even thought about that common denominator... but you're spot on of course. I think the Euro is right now in a damned if you do, damned if you don't, situation. Something will happen but I'm not sure that the eurozone will break up. Maybe Greece will be forced out, but other than that I currently think its more likely that the zone will start acting more like a federation with more and more control moving to Brussels. I don't think that EU leaders will give up the euro if they can help it, imho its more likely that we will see the emergence of USE (United States of Europe). Its not what I want to see happen, but its what I think will happen. In fact, it is already beginning with the creation of the permanent bailout fund.

As for Spain, I've always been impressed they have time to actually play any soccer considering the vast amount of time they spend doing their hair... girls...

Sorry I haven't been around gang, I have been working on a new site that is taking up a lot of time recently. I still have a long way to go, but I am thinking that I will be able to open it in the next couple of months.

The new site will replace the old one, and will also be something that the old one never was: free to the public.

I did some thinking not too long ago, and decided that the Forex world is full of technical analysis "gurus" that tend to teach the same thing. I mean, you can't really reinvent the wheel too much, can you? It's a lot like music: I might prefer using a lot of Minor 3rds in my harmonies, while J16 prefers to use augmented 5ths in ways to emphasize passages in choruses, while someone else might prefer to use the Hungarian Harmonic Minor scales to add a "dark feel". But at the end of the day - we are still using the same 11 notes to produce music. (Ok, some call it 12, don't message me about this - it's an octave!)

The point is, I came to understand an inherent problem in the Forex world: Most FX traders have accounts at or about $1,000 in total value. The first time a friend of mine at a well-known broker told me this, I was floored. Of course, I have heard this several times since then. I mean - why exactly is it that you see so many places willing to open accounts for a little as $50? It's because the FX game is set up to do one thing: Take your money. Unfortunately, most of you don't have a lot of it. This leads to the need for fresh meat all the time, and because of that - they need to lower the bar. It's kinda depressing and slimy at the same time as the markets need a constant "churn" of traders to feed it.

Once I began to understand how small the accounts were most of the time, the more I understood why the monthly renewal business model was not only futile, but also uneconomical for most people. For example, I was charging $75/month. That is $900/year, which is almost the entire amount of the average trader's account. See the problem there? Not to mention I did something really stupid and told people to go ahead and download the videos off of the site. At that point - they are only going to get examples of live markets and perhaps my newsletter. I just started to see what total bullshit it was. It's all about economics. If I had a student with a $50,000 account, then yes - the training is certainly worth it. If they have $1,000 in their account - it was expensive and I would hope they would leave after 30 days or so. (It's still 7.5% of their account balance, I can't change the math.)

I have never been one to try and tell you all how rich you were going to get trading FX. You aren't necessarily going to turn $1,000 into $1,000,000 in six months. But what I have been able to do is show people how to trade in a stress-free manner. (I hope.)

I truly enjoy what I do. However, I am not foolish or egotistical enough to think that what I did was truly unique. I also wasn't foolish enough to try and tell everyone I was a multi-millionaire that made a fortune trading and just wanted to "give back", while charging you a monthly fee. I know people want to believe that there is someone out there that is willing to tell you all the secrets that are going to make you rich for a handful of dollars. But the truth is that the person selling the system is well aware of the money they are making in membership fees. I never tried to bullshit you about the fact that I saw it as a business. It was. It still is. I mince no words, even though when I started trading quite a few people thought that I was crooked because I actually asked for money. I think they were shocked when they found out I freely admitted it was a business. I remember someone calling me "evil". I think that's a stretch. I am evil for so many other things that something involving Forex - give me a f**king break.

I will announce when the new site is available sometime in the next couple of months. In the mean time - do not join my private forum. I am not going to request to be taken out of the commercial forum because I am not positive that there won't be "extras" such as live webinars that I might charge a few bucks for in order to pay for the server or something. But the goal is to make it free, or almost completely free. We will see. The real challenge is paying for the video hosting as the last time I hosted on YouTube, a rival did the truly childish thing of claiming copyright violation. Kind of odd, considering they didn't invent anything - but I digress.

The members of Forex Fantasies will have their own part of the site that is private, and in that room we will continue to delve deep into trading ideas, etc. This much I do know, because I owe them that since they placed so much trust - and money - in my hands.

Truth is, I have a ton of ideas for this place.....we will see how it all pans out. In the meantime, there is a ton of testing and recording to do.

Anyway, that's it for now. I will let you know how it goes.

Reading through the thread I would say you do something fairly unique. Ok it's all watching price at support and resistance like anyone else but your methodology is so much clearer and you explain it in a down to earth and unegotistical manner. Looking forward to the free site, who wouldn't want such top quality material for free?

Well I have finally been convinced to completely remove all indicators from my charts, not even a moving average is on there.

Chris, what is your opinion of Heiken Ashi candles? I quite like them as they smooth out the noise and if used carefully I find they can get me into some good trades. It seems to me that watching the strong support and resistance levels for a nice HA reversal on daily charts could be the way to go for me personally. Do you think this would be detrimental to my trading or it doesn't matter because the important thing is the reversal at a key location?

Usdchf attached, how nice would a retrace and bounce down from 0.8550 near that trendline be? I'm also watching usdcad at 0.99 but it's not moving smoothly, eurgbp at 90 and chfjpy at 94.

Hugh -

Thanks for the kind words above. As for the candles, I actually haven't used them, so I don't really have an opinion. But I do like the fact that you are trying to find "smooth" pairs. This is an important step in the process. I have been reading a lot of articles about the EUR/USD being posted lately, and a lot of responses showing how many people are getting involved. For me, I have quietly been trading the USD/CHF. Why? Because it's much smoother or predictable. Why get bothered with all of the headline risk coming out of the EU? A lot of people seem to like drama though......so they debate the whole issue over and over, and get slapped around in their trading. Yo have discovered an important "secret" to trading - look for steady moves, not the popular ones.

Great, thanks for the feedback, nice to know I'm on the right lines. I think one thing I have to get used to is sitting on my hands without a trade for a while. Although I can actually see where I want to trade some pairs if the right things happen nothing is setting up within the next few days. It could even be a few weeks until something sets up right but I suppose one of these trades is shooting for anything from 200 to 2000 pips + so it pays to wait.

True, and you also have to think about this:

Any time you place a trade, there is going to be a statistical chance of it being a loss. Therefore, the less you trade, the better off you are gong to be - mainly because you are only taking higher value trades, and also that you are in places where you are willing to let a trade run. Perhaps you get a really good one that runs 800 pips - it makes up for a couple of 80 pip losses real quick.

Also, there is a cost to trading a lot - it's called the spread. If you trade frequently, you are doing nothing but putting pips into the pocket of your broker. It's always going to make more sense to make one good trade for 400 pips instead of 10 smaller ones for the same amount - the spread actually makes you aim for something like 425 or more to make the same as the first trade because of the spread involved.

Trading to me seems more of a thought process than a technical endeavor. I mean, don't get me wrong - I am a technical trader, but the real profits are made in the way you think about trading in my opinion.

"I also wasn't foolish enough to try and tell everyone I was a multi-millionaire that made a fortune trading and just wanted to "give back", while charging you a monthly fee."

thats james16's job.

Understood, thanks

NzdUsd has closed above 0.82 so could be continuing up but I think I'd prefer for it to move up a bit and then possibly retrace to 0.82 before I buy it.

Could be. But the trend is certainly up - so buying is the correct way to go. If you stick with the trend, you will begin to notice your entries can be a little more "sloppy", meaning you don't have to get it completely right to the pip.

hey cw, awesome news about the site! I still follow and appreciate your insight into the markets. good stuff! thanks.

thanks man......