My FX Journal - 80% Fundamental 20% Technical

[Brumby]

I was right in my judgement of it being dovish. Can't help but feel that I could have made more, at least didn't lose. Going to be some opportunity to get back in so not all is lost. Keeping my motivation up working hard to get the process and knowing myself better and the learning curve steady. Who knows maybe one day you can call me a trader.

I believe you are doing all the right things. Just keep up the good work and effort and you will be successful. I have no doubt about it. You just need more experience trading the different conditions. Today's BOE was a good learning experience for me too. The spike and reversal was really quick. A significant part of that move was not tradeable except in hindsight.

 

[FXX]

I believe you are doing all the right things. Just keep up the good work and effort and you will be successful. I have no doubt about it. You just need more experience trading the different conditions. Today's BOE was a good learning experience for me too. The spike and reversal was really quick. A significant part of that move was not tradeable except in hindsight.

Thanks for the feedback.

 

[FXX]

Short GBPAUD@ 1.69911 to 1.6930 for 60 pips profit

 

[Brumby]

Short GBPAUD@ 1.69911 to 1.6930 for 60 pips profit

:clap:

 

[Nowler]

Trade lesson number one is anything can happen and why we have "protective stop". Lesson number two is if the trade is a little better than a gamble, why is your risk initially set at 2 %? If your main reason is to engage and learn than the objective is to learn at minimal risk.

I have had previously pointed out to you that you are taking on too much risk per trade which you have pushed back.


As previously pointed out, all sentiments have a shelf life. Sentiments must be reflected in the price action regardless of what you think or what others say. If the do not reconcile then something else is going on.

I was trading the NZDUSD in the past several sessions, and it was obvious two way trading was coming in. This means the negative sentiment was dissipating and the negative news were beginning to be priced in at those levels. It would need fresh news to move valuation one way or the other.

The most basic question you need to address is what was your overall trade plan and the trade rationale behind that trade plan?

I also traded the NZDUSD prior to the release of the employment data. My thought process and trade rationale was the following.
1)Valuation is at equilibrium because prices were ranging with supply and demand coming in at those ranges
2)Is the market looking for a reason to buy or to sell?
3)The employment data would be a reason for such a catalyst.
4)Although prices are ranging, I was still leaning to a 60/40 that the market was looking for a reason to sell.
So on that basis, I opened a short position prior to the employment data. Obviously I was wrong and was immediately stopped out on the news release

There were 4 or 5 employment data points on that day and I had a hard time figuring out why the market reacted so positively. As it turned out, the unemployment print was 4.5 % vs 4.6%. However that is not immediately important. A trading rule is not the news but how the market reacts to the news that is important. In other words the market was looking for a reason to buy. The price spike could be a combination of positive data or short covering but the important determinant is what happens after the initial spike.


That is the reason why I emphasize to you previously you need to focus on developing your trade process. A trade process means you need to have a trade plan and a trade rationale. What was the rationale to expect the spike to stop and return to initial levels? A trade plan forces you to stop spontaneous trade actions and to think through the whole trade rationale. I previously shared that there are three things to justify a trade (taken from Forexlive) :
1)Is it broken?
2)Has something happened?; or
3)Has something changed?

Clearly the employment data has changed the trade dynamics. Why are you still focussed on business as usual?

After the employment data, my main focus was on how prices were trading to determine if the data was short covering or actually had some legs to it. After 30 mins, the price action suggested to me that demand was coming in and a long trade opportunity became available to scalp some pips before the sentiment dissipates. My thought at that time is that the fundamentals have not changed with the advent of a labour government and its policies. The slight deviation in unemployment is not a game changer and so a long window has limited shelf life.
However I was not prepared to short because the ongoing price action did not suggest that was the direction to take.


There are two problems that are missing in your comments.
(1)I think there is an emotional component in your 2nd and 3rd trade. Typically the reasons are non acceptance of what the market just handed out and/or revenge trading. The end result is that you just add on mistake after mistake. This is actually a common problem that you need to address if you want to have a lasting trading career. It is not simply about not wanting to repeat the mistake, It requires a mechanism that you must put in place to prevent your emotional behaviour overriding sound judgment.
(2)A reason why you want to keep risk per trade at 1 % or lower is to guard yourself against irrational behaviour under moments of stress in trading. If your risk per trade was kept at 1 %, then your collective loss would be 3 % and not 6 %. I guarantee you that there will be other frustrating and stressful moments where you will act outside your normal boundaries. The safety nets are built to protect your account during abnormal moments and they will present themselves as night follows day.


I don't believe the main issue is whether one can predict the outcome of data releases or is it necessary.

Thanks for the help.

There's nothing in there that I would disagree with.
There was definitely an emotional element in what I did and I realise that I am leaving myself wide open to a hammering. I will work on it... as you said, I should have a component to my trading which safeguards me from such things

 

[Brumby]

I was right in my judgement of it being dovish. Can't help but feel that I could have made more,

It is a good question. Could we have done better? I normally conduct a post review of this type of event to make some determination. I will share my post trade analysis since our trading approach and methodology is very similar.

I will first set out the research background as the determination is predicated upon certain assumptions going in.

The majority analyst consensus is there will be a rate hike coming off the BOE. The market in effect had priced in a 90 % probability as we got near to the event.
We also know that there are two key data points in the news release that are critical to how the market will react. The easier piece is the vote split but the forward guidance would be more problematic in terms of timeliness and language construct. This means there will be two trade decisions, one coming off the vote split and the other following shortly thereafter the forward guidance.

Since the market is expecting a rate hike, we had formed a view that there will be a price pop and an opportunity to sell into that fact. The forward guidance was more of an unknown in terms of dovish or hawkish nature.

If our view plays out in line with market expectation, the question then becomes how do we execute the trade strategy. I would first outline what we are faced with. Market events like this are primarily institutional plays. That means we are competing based on informational flow. The institutions have real time terminals like Bloombergs and Elkons. They have analysts who would call out their interpretation of the forward guidance to the traders as it comes through the wire. We are a one man band with delayed feed and acting as analyst and then trader. As I witnessed, that pop and drop of more than 100 pips was probably in less than 10 secs. No matter how nimble we are, we will always be behind the information cycle and hence price moves. Although we can take a small slice of that initial move, any bigger slice will require a different trading approach.

What do I mean? Basically we have concluded going in is to take a "sell the fact" approach. We already have a trade strategy and that leaves trade execution. In other words, plan the trade and trade the plan if we have conviction. It means setting a sell limit order at the recent price resistance to trigger us in during the price pop. It might be possible that it does not reach the price point that we set. Additionally there is the risk that the forward guidance is hawkish which would mean prices will just blow through resistance. We know that is very unlikely because there are no economic data pointing to such a scenario as a reality. In other words, the odds are not there.

Once we have done the analysis and formulated a plan, it can be quite frustrating to watch on the sidelines. The choice is whether to be reactive or proactive. That is a trade decision to consider if you want to do better.

Alternatively is to trade the second leg of the move which did developed during the US session.

 

[Brumby]

FXX,

Are you planning to trade UK services PMI and NFP/Canadian employment today?

My initial thoughts.

If strong PMI print, buy GBPJPY
If weak PMI print, sell GBPUSD or GBPCAD

If weak NFP and strong Canadian employment then sell USDCAD
If weak NFP and weak Canadian employment, stand aside

If strong NFP, Buy USDJPY or sell EURUSD/GBPUSD/AUDUSD

I actually don't expect significant deviation on the data and might not trade if that is the case.

Your thoughts?

 

[FXX]

FXX,

Are you planning to trade UK services PMI and NFP/Canadian employment today?

My initial thoughts.

If strong PMI print, buy GBPJPY
If weak PMI print, sell GBPUSD or GBPCAD

If weak NFP and strong Canadian employment then sell USDCAD
If weak NFP and weak Canadian employment, stand aside

If strong NFP, Buy USDJPY or sell EURUSD/GBPUSD/AUDUSD

I actually don't expect significant deviation on the data and might not trade if that is the case.

Your thoughts?

Thoughts on the pound is regardless of the number of pmi, apart from a major deviation of expectations, I think yesterdays sentiment will continue so any opportunity to sell again will be taken.

Any bullish notes on CAD data and ill be selling GBPCAD and any dovish notes on CAD will depend on NFP for me (for nothing else but the lack of an alternative currency with current hawkish sentiment).

The fed are focused on inflation promoting data points and to a lesser extent employment and I don't think NFP is going to be a major mover today outside the initial reaction. If the NFP data is good I will be selling GBPUSD and if bad then I am currently without a hawkish opponent unless CAD performs.

 

[FXX]

It is a good question. Could we have done better? I normally conduct a post review of this type of event to make some determination. I will share my post trade analysis since our trading approach and methodology is very similar.

I will first set out the research background as the determination is predicated upon certain assumptions going in.

The majority analyst consensus is there will be a rate hike coming off the BOE. The market in effect had priced in a 90 % probability as we got near to the event.
We also know that there are two key data points in the news release that are critical to how the market will react. The easier piece is the vote split but the forward guidance would be more problematic in terms of timeliness and language construct. This means there will be two trade decisions, one coming off the vote split and the other following shortly thereafter the forward guidance.

Since the market is expecting a rate hike, we had formed a view that there will be a price pop and an opportunity to sell into that fact. The forward guidance was more of an unknown in terms of dovish or hawkish nature.

If our view plays out in line with market expectation, the question then becomes how do we execute the trade strategy. I would first outline what we are faced with. Market events like this are primarily institutional plays. That means we are competing based on informational flow. The institutions have real time terminals like Bloombergs and Elkons. They have analysts who would call out their interpretation of the forward guidance to the traders as it comes through the wire. We are a one man band with delayed feed and acting as analyst and then trader. As I witnessed, that pop and drop of more than 100 pips was probably in less than 10 secs. No matter how nimble we are, we will always be behind the information cycle and hence price moves. Although we can take a small slice of that initial move, any bigger slice will require a different trading approach.

What do I mean? Basically we have concluded going in is to take a "sell the fact" approach. We already have a trade strategy and that leaves trade execution. In other words, plan the trade and trade the plan if we have conviction. It means setting a sell limit order at the recent price resistance to trigger us in during the price pop. It might be possible that it does not reach the price point that we set. Additionally there is the risk that the forward guidance is hawkish which would mean prices will just blow through resistance. We know that is very unlikely because there are no economic data pointing to such a scenario as a reality. In other words, the odds are not there.

Once we have done the analysis and formulated a plan, it can be quite frustrating to watch on the sidelines. The choice is whether to be reactive or proactive. That is a trade decision to consider if you want to do better.

Alternatively is to trade the second leg of the move which did developed during the US session.

that sounds like a good process and not something I picked up on with the guys that informed me on the right path for success. Everything you say resonates with me and thinking about it I stalled on the technical side where I really should have thought about levels where it could reverse or orders to capture the move I expected. I think by employing a wait and see the data to digest it policy I just didn't bother with looking at the technical levels which, if I did, would have sparked some ideas for sure. Thanks for this nugget it is going to be applied to my trading going forward.

 

[FXX]

I am thinking risk off sentiment is about to hit the market. This Saudi Arabia situation could trigger problems. Figured last weeks sterling selloff coupled with yen strength might be a good choice. Seeing some banks saying they think the $ is topping out. Any sign such as the market selling on tier 1 and 2 data that is as expected or positive, for me, this is time for a multi session swing. Still pondering how I want to trade it. Do I wait for the main catalyst or do I rest on the fact that it's unlikely the $ is going to have legs without significant data breaches.

 

[FXX]

I have downgraded my Ransquawk to the lite version which gets me delayed audio and real-time text headlines with access to some research like the central banks hawks and doves cheat sheet. I have enabled the Xenith subscription again and have also signed up to tradingview.com for their brilliant charting services. Going forward i need to alter my approach to be less soft sentiment and more hard sentiment where it lasts several sessions or longer. I am spending too much time during the working day focusing on trading and don't want it to affect my work. So here is my new approach

The process is going to be similar with exception to trading soft sentiment which is driven by daily news. I will be looking to taking trades post data releases\speeches with unexpected data that can drive sentiment longer. The trading will be all swing trading and i expect to spend 2 hours every night working and keeping an eye on data releases and setting alerts when price hits trading zones.

My journal will change slightly also. I am going to change the content to include my analysis at the start of every week and any changes or trades during the week will be posted. If i have time (working from home or can spare some time at work then i will do the odd soft sentiment trade if its a no brainer and i am around at the right time.

 

[FXX]

Today i am going to spend time setting up tradingview (i am currently working from home) and Eikon which i have mostly setup.

 

[Brumby]

Today i am going to spend time setting up tradingview (i am currently working from home) and Eikon which i have mostly setup.

Given the lack of tier one data this week, you haven't missed anything so far. I am curious, generally how do you use trading view?

 

[FXX]

Given the lack of tier one data this week, you haven't missed anything so far. I am curious, generally how do you use trading view?

It is one of the best charting platforms I have used feature wise. You can overlay instruments and the tools available are super handy (i.e. economic release calendar indicator + alerts email or sms)

The main reasoning behind using it though is having a web based platform that i can access on any pc\device and all my work is saved on it. This is a tremendous aid since i am constantly between several different computers + my mobile.

 

[FXX]

example of the economic indicator on the chart

 

[FXX]

NZB statement yesterday has given an opportunity to sell NZD. The forward guidance brought forward a rate hike to Q2 2019 from Q3 2019. This boosted the NZD but really nothing has changed and they are still divergent with other central banks tightening. Looking at USD which is on a tightening cycle I believe it will further strengthen against the NZD going forward (unless USA fundamentals change). The 4 hour chart is at a nice level for an entry and i have a target sitting in the area of 0.6700

 

[Nowler]

example of the economic indicator on the chart

I have a similar thing on my brokers platform.
I've never really heard many other people talk about such an indicator but I think it's fantastic! Even if I don't trade the news, when working out where I think price is going to go I just throw my eye down to the bottom to see if there's any scheduled news likely to intersect with my trade duration.

Simple but very useful!

Another underrated thing is the extended cross hairs coming from the mouse cursor. I use it all the time

 

[FXX]

I have a similar thing on my brokers platform.
I've never really heard many other people talk about such an indicator but I think it's fantastic! Even if I don't trade the news, when working out where I think price is going to go I just throw my eye down to the bottom to see if there's any scheduled news likely to intersect with my trade duration.

Simple but very useful!

Another underrated thing is the extended cross hairs coming from the mouse cursor. I use it all the time

hows your progress going?

 

[Nowler]

hows your progress going?

Nothing much to report.
I just spent some time watching how the charts react pre, during and post economic releases. Gaining a familiarity with the craziness that ensues Running things through my head as it happens..

I was about to deposit another little bit onto the account yesterday. My thinking was that depositing even just a small bit more might help with my psychology. Bringing the account balance a little beyond what was ever in the account before might help me look at this account as less of a practice/exploratory account and therefore take it more seriously. I had to pop out then and never got around to it

I have come to the notion that spread betting accounts aren't the best types to be using when trading news. The widening spread kills me... it either takes me into a trade that I don't want to be in yet as price never actually reached there, or it takes me out of trades when I shouldn't really be. The widening spread sucks!

 

[FXX]

Risk off

market has risk off sentiment this morning. Waiting for yen to move