- THE FIRST SHOT:
As mentioned in the last “DRIVE THRU”, I did not participate much at all in last week’s trading.
I know to a lot of traders, my decision not to trade much, appeared strange and weird, considering that with so much economic data on the agenda the opportunity for volatility and the possible moves as a result, would seem appealing to most traders. I get that approach, and, understand that point of view. However, my decision was on the back of the fact that the market at the moment as far as I am concerned, is news driven. News driven to the point that FUNDAMENTALS, CORRELATIONS and to some extent even TECHNICALS appear not to matter at times. My blog title “IS TRUMP THE 2018 VERSION OF ELLIOT CARVER” will reveal all later in the blog.
Below is my list, from last week’s “DRIVE THRU” of geopolitical issues that were hanging over the markets. These factors were influential in my decision to wind back my trading last week.
I have commented in BRACKETS below each bullet point with my updated comments.
- ITALIAN ELECTIONS – COALITION PARTNERS UNCERTAINTY
(Over 50% of Italian voters voted for extreme parties associated with EURO SKEPTICISM) - GERMANY – SPD PARTY VOTES ON COALITION DEAL with CDU
(SPD voting agreed coalition deal) - BREXIT – EU & UK IN GAME OF “HIGH STAKES CHICKEN”
(EU bite back with Donald Tusk basically giving the UK the same trade deal as Canada) - TRUMP – KICKING OFF A GLOBAL TRADE WAR
(Still on-going) - JEROME POWELL – FED RATE HIKES in 2018
(Prior FED doves like Lael Brainard now turning hawkish. Rate hikes 3 or 4 in total look to be penciled in. At March FED meeting the first 2 could be inked in) - US 10YR YIELDS if BREAK THROUGH 3% sets up 4.5%
(Initially settled down and pulled back. NFP wage growth only pulled back 0.1% on yesterday’s NFP print. Markets very interested in U.S. inflation) - BOJ – CHANGE IN MONETARY POLICY RE QQE in 2019?
(Kuroda very dovish still from last week’s BOJ Press Conference)
With all of the above plus the huge list of economic data it all looked like it was going to be a chop fest and provided that the range limits held, it would be a chop fest within ranges. From my point of view this is what happened, and my trading psyche does NOT enjoy this type of trading. I do not mind ranges but the mad chop which is what we saw last week is just not my bag.
I suggested to “newbie” traders to sit it out last week. As mentioned already, some of the moves were fast and furious with no real direction and a basic disregard for sentiment. It would have been very easy to have your account blow up in your face if you did not trade with proper POSITION SIZING and TRADE MANAGEMENT principles in place. Chasing markets is NEVER a good strategy. The temptations last week were there for all to see. It was so easy to see how you could have been caught in the chop.
It is often said; “Sometimes your best trades are the ones that you do NOT take”
- MARKET OVERVIEW – MY THOUGHTS:
IS TRUMP THE 2018 VERSION OF ELLIOT CARVER?
and
HOW DO I TRADE AROUND TRUMP?
There was a movie documentary released a few years ago titled “Who the f**k is Arthur Fogel?”. Prior to watching the movie, I had no idea. Arthur Fogel is Canadian and CEO of the touring area of Live Nation Entertainment. He was the brains behind the funding of the “U2 360” tour, which was possibly one of best looking innovative stage sets and most complicated touring schedules ever put together. The guy has managed the biggest grossing tours in the music industry.
So….
I can understand you saying, “Who the f**k is Elliot Carver?”
He was the media baddie from the “Tomorrow Never Dies” Bond movie. His goal was to dominate world news by creating the news for the world to read. Is TRUMP the 2018 version of Elliot Carver?
Let me just confirm, I am NOT saying TRUMP has teams of security guards with AK-47’s going around killing off Mi6 agents. Having said that, I know he has huge armed security teams at his beck and call. Good Lord, there are more similarities than I originally thought! However, as far as I know, he is still a goodie and not a baddie!
Moving on, before I write something that I shouldn’t …
I think it would be fair to say that TRUMP likes to control the narrative. He does not need to buy a TV station, as CNN in the U.S. has already taken the bait on the TRUMP headlines, it basically should be renamed TRUMP TV as its entire news outflow is dedicated 100% to TRUMP.
Some well-known household names who are employed by CNN have their reputations on the line. The station to many, is no better than the gossip Daily Mail / TMZ stations that are available.
TRUMP has CNN working like a puppet for him and TRUMP has complete control of the strings CNN appear both hopeless and helpless. The more they knock him the more the TRUMP base hardens in support for the President. At his press conferences, the CNN reporter has NO chance of ever getting a question to the President as they are in his words only a FAKE NEWS organization. This adds fuel to fire and CNN cannot see that they are being played.
The media in the U.S. and around the world are just about understanding the power of direct media through TWITTER. The thoughts go straight to a connection there are then, its instant; no interpretation and no spin.
The issue to consider is therefore, is the data accurate?
If you control the narrative and you can call “FAKE NEWS” whenever you want and ignore the questions, then accuracy is not that important. It just has to be believable. As long as the TRUMP base believes the narrative there is no reason in the world why direct tweeting will ever stop.
TRUMP has defended his recent tweets on Tariffs, on the basis that he is keeping to his Presidential campaign promises. In all honesty, I have to give the guy thumbs up here, most politicians once in office couldn’t give a rat’s ass about the promises that they made.
For example, take the time to read about last weekend’s ITALIAN election. Read the bullet points from parties involved manifestos. Then ask yourself under a voting system based upon proportional representation, when you have either minority governments or coalitions involved, how many of the items in the manifestos actually become a reality. Very little, it all becomes beige, no real colour. This is a huge problem of proportional representation as the electoral systems, the vast majority of times delivers weak governments that take months to form. Look at the last German election. The vote was held on September 24th, 2017. The new government is still NOT in place. Germany is seen as an example of efficiency… God help the Italians.
The UK has a “first past the post” electoral system, over 95% of all elections held have a majority government on a main three-party system.
Back on track…
The U.S. has a basic two-party system with a President removed from voting. The system feeds the way that TRUMP operates and fair play to him he has exposed the failings of the U.S. system.
With regards to the recent news regarding Tariffs on Steel and Aluminum, TRUMP has a plan, being fair, there are good reasons for the strategy if the U.S. is getting a “bum” deal. The problem the markets have is dealing with TRUMP’s lack of tact and the total lack of the usual diplomacy one associates with these policy changes. It does however provide TRUMP with 100% control of the narrative, and, it is completely in keeping with character.
Everything in the U.S. plays into TRUMP’s hand. As a previous reality TV host, he knows how to manipulate and control. He has brought these skills to 1600 Pennsylvania Avenue and what you saw on the campaign trail is now what you see as the President of the U.S.
In my opinion, there are similarities to the fictional character “Elliot Carver”. In the way that TRUMP creates news, sensationalizes the news, grabs attention, creates shock and awe, the difference is that TRUMP then walks it back as moderates try to reason with him. Whereas, Elliot Carver was taking on James Bond… no chance of winning. TRUMP has taken on the U.S. media and has them tied up in knots.
There is a pattern every time to the way that TRUMP operates. It must be a nightmare to work with and the revolving doors of staff at the White House is testimony to that nightmare when you count the changes that have taken place.
Now we have the meeting with Kim Jong Un, prior to May on denuclearization of the Korean peninsula. This news, and it is huge, feeds to narrative. If TRUMP comes away from meetings with a deal for peace there will be no stopping the rhetoric.
It will be worldwide news domination, not just domestic. This will feed the power, encourage him vis-à-vis past behaviours being the correct choices and so the web will spin out even wider.
How should you trade with this as a backdrop?
Let me first say, my approach is evolving. The number of times, I read from experienced traders that they are not sure what to do, or cannot fathom out some of the moves, has NEVER been so high. I get this thought process.
How do I trade this…?
It’s not easy because it is basically chop every time that TRUMP opens his mouth to speak. The one factor that is more common than any other is that the DXY tends to weaken when TRUMP holds an audience. Having said that, this DOES NOT mean go short the USD every time TRUMP speaks. If only it was that simple.
Firstly, being more of a swing to position trader, the first thing that I will say is to survive in this niche at the moment one has to be frugal vis-à-vis position sizing. My largest trades this year have been just 25%-33% of full size. In fact, for most of 2017 that was the case as well. The only exceptions have been my shorter-term duration FLASH and RADAR trade styles. Smaller position sizes give you the potential for larger stop losses for protection, without increasing your RISK exposure in $$$. Your potential losses in pips can be greater but losses in $$$ are still limited.
It is only if you trade big positions with the increased stop losses that you become un-glued. This is known as GAMBLING, not RISK MANAGEMENT.
At this juncture, let me state for the records once again to have trading longevity, you need to preserve your capital to the best of your ability. The only way that this can be done is through a TRADE PLAN with TRADE MANAGEMENT, MONEY MANAGEMENT and HEAD MANAGEMENT.
If you get your head around these principles, you have a good chance of survival.
Getting back on point…
Secondly, try not to be reactive but proactive with trades. My least successful trades are my reactive trades; FLASH and RADAR trades these are based on intra-day activity. If the markets are news driven and choppy it stands to reason these trades have the potential to be a mess.
Proactive trading is using pre-set entries via Fibonacci levels, using chart patterns that have probability outcomes. But you must trade smart. Smaller position sizes, be prepared for chop.
Thirdly, even with Fibonacci levels for targeted entries do not be afraid to take a profitable trade off the market earlier than planned. No-one has ever blown up their account for banking profits $$$.
Fourthly, you can remove loss making trades earlier as well. The one consistency with the FX market at the moment is that it is inconsistent! Correlations are off. The lunatics have to a large extent left the asylum. If you are not 100% happy take the loss. If you have positioned yourself properly with the trade your loss should be less than your TRADE PLAN guideline limits.
It is not easy at the moment. I am having a great month, a great start to the year with the PREMIUM SERVICE but I have a few longer-term trades that do not look so tidy at the moment.
I am sitting back and observing more than anything at the moment. As I have stated already sometimes your best trades are the ones that you do not take. As one of my trading mentors said to me “There is a Forex market every day, wait until prices come to you do not chase prices”
Back to TRUMP…
We have to acknowledge that fact that the political book is to a large extent being re-written. No matter where you are situated on this planet TRUMP’s words will affect your market, this is a fact.
You, me, all of us just have to be aware of increased RISKS and trade accordingly. Easier said than done sometimes but that’s the top and bottom of it.
- USD SUPPORT and RESISTANCE with my BIAS:
- THE PREMIUM SERVICE TRADING SUMMARY:
PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
(Incorporating the last 5 PREMIUM SERVICE TRADES)
You can get on board and join from as little as CAD$10 for 10 days and then CAD$150.00 per month, currency conversions for CAD$150 are roughly as follows: –
GBP £90 per month
EUR €100 per month
USD $120 per month
JPY 12,700 per month
AUD $150 per month
This represents a great value way to subscribe…
Go to my website www.weeklyfxdrivethru.com for more details under the TAB – “SUBSCRIBE HERE”.
- PREMIUM SERVICE SUBSCRIBERS:
(This section is for PREMIUM SUBSCRIBERS ONLY)
5.1. TRADING REVIEW:
5.2. SENTIMENT, FUNDAMENTAL & MACRO THOUGHTS:
5.3. THE WEEK AHEAD:
5.3.1. ECONOMIC DATA RELEASES THAT INTEREST ME:
5.3.2. MY KEY EVENTS ON THIS WEEK’S CALENDAR AND WHY:
5.3.3. HOW I WILL APPROACH and TRADE THE MARKET THIS WEEK:
5.3.4. MY “MACRO” TRADING PLAN FOR THE WEEK AHEAD:
5.4. CURRENT LIVE TRADES & LIMIT ORDERS:
5.4.1. CURRENT LIVE TRADES:
5.4.2. CURRENT LIMIT ORDER TRADES:
5.5. FX BROKER NEWS and MARKET FEEDBACK:
5.6. PREMIUM SERVICE UPDATES:
- THE FINAL SHOT:
Nothing more to add here, I have said enough except,
As usual…
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/
BLOG VERSION: #273 FREE NEWSLETTER
DATE: 10th March 2018