FX MARKET CONDITIONS AND TRADING PSYCHOLOGY By Scott Pickering

Another difficult week in FX is over.

When deciding what to write about this week in my opening section, it was a toss-up between: –

  1. THERESA MAY – the final days, but what / who is next?
  2. NIGEL FARAGE the EUROPEAN UNION PARLIAMENT and BREXIT
  3. THE EUROZONE (ITALY, SPAIN, GERMANY & THE EUROPEAN PARLIAMENTARY ELECTIONS)
  4. TRUMP and the TARIFFS
  5. CHINA and the TARIFFS
  6. IRAN WAR THREAT and OIL
  7. FX MARKET TRADING CONDITIONS
  8. TRADING PSYCHOLOGY in today’s FX market

I could write a little about them all, but the blog would run to 30-35 pages, which would be way too long.

There is so much written at the moment about Theresa May, Nigel Farage and what right-wing populist parties will do to the European Union Parliament in Strasbourg.

There are a growing number of articles about ITALY raising the middle finger to EU budget controls. SPAIN being in political deadlock following the recent general election and GERMAN industrial production and confidence on the wane. Then just to add a bit more uncertainty, we have European Parliament elections where it is widely predicted that far right of centre parties are going to do very well. This has the makings of a future blog title!

TRUMP is never off the front page, CHINA fighting back to TRUMP’s tariffs, with options such as weaponizing the YUAN or selling U.S. Treasuries also being an easy option to find news on.

A potential conflict in the Straits of Hormuz with IRAN, SAUDI ARABIA, YEMEN and the U.S. is not as flavorful at the moment as one may expect given the personalities involved… need I say more?

It leaves me with:

FX MARKET CONDITIONS and TRADING PSYCHOLOGY

First, I have encroached upon the current market conditions a few times here and there this year already. What I have not done, and I will fix it this time is add a little about Trading Psychology into the mix, primarily because in my opinion this is something that effects ALL traders and is more often than not ignored. It is really relevant given current trading conditions.

I want to say that since TRUMP became President, trading any market has become much different than say it was pre his signing in ceremony. But to be fair, the markets evolve, regardless of who is in the White House, they evolve just as the inter-connectivity of world markets and the access to markets evolve.

There is no doubt in my mind that there is and has been a TRUMP effect.

TRUMP is an intervening President. That is different to what I have experienced in the past. He is a bully and his Twitter rants are in a bullying style based on little hard facts, but they come from a person with a very powerful position and however twisted the rant the markets take heed. This is a different and unique style, it affectsthe markets and with TRUMP not being managed or controlled his twitter rants have gotten worse over time reaching subjects he is simply just not equipped to comment on effectively but comment he still does regardless of the facts, never mind the impact.

Truth and facts are two factors TRUMP does not attach any value to when tweeting. His profile is that of a bully why would truth be required?

This year, as TRUMP ramps up the quantity of tweets, there has been to some extent a change in reaction by the markets to the content of his tweets. The market reactions are now not as volatile.

What this progression has created in my opinion is surprisingly enough, increased uncertainty. TRUMP is never clear; he sells you his opinion, he loves confusion and clarity is not a trait he possesses; detailing facts in his list of priorities ranks very, very low down the pecking order.

The Markets, in particular the FX market, as a future pricing market does literally not know whether it’s coming or going. TRUMPS tweets about what “the FED should do or should not do” being a classic example.

At the outset of this blog I listed a number of geopolitical events that are hanging over the markets. TRUMP has an opinion and an outspoken one on everything, he is a self-proclaimed expert on everything. He has tweeted this fact about his knowledge of the U.S. economy versus that of the board of the Federal Reserve. He is the major contributing factor to global uncertainty.

So, let me bullet point how I see the FX market at the moment.

  • TRENDS ARE POOR
  • VOLATILITY IS LOW
  • YOU CANNOT STICK AROUND IN TRADES TOO LONG
  • IT’S A GRAB ‘N GO MARKET

All the old school factors still apply though in my opinion:

  • FIND A TRADE STYLE THAT SUITS YOUR PERSONALITY AND TRADE IT
  • RESEARCH YOUR TRADE CRITERIA – TEST IT
  • GET A TRADE PLAN TOGETHER and TRADE YOUR PLAN = PLAN YOUR TRADES AND TRADE YOUR PLAN

It’s not all negative, remember the markets are cyclical. We just need to work through this period of uncertainty exacerbated by TRUMP and then volatility will be back.

What I will say though in these times is: –

If you are able to keep your head above water and add to your broker balance in this period, give yourself a good old pat on the back… you deserve it. I know of several traders who have blown up accounts through over-trading and frankly just not keeping their head in the right place.

In the movie business this piece above is called a brilliant Segway into my next subject to comment on…. TRADING PSYCHOLOGY.

I am only going to scratch the surface here, I could write pages and pages….

Let me give you a quote from Brian Tracy a world-renowned guru in the field of Personal Development.

“CLARITY ACCOUNTS FOR PROBABLY 80% OF SUCCESS & HAPPINESS”

This is so true applied to trading as well – Research a PLAN and trade your PLAN. This is so bloody simple. Research should enable clarity. The successful traders in the FX market have plans and in my opinion the rest are nothing more than budding gamblers. Guess what… most traders do NOT have a PLAN; too lazy?

Traders who have clear, written goals, accomplish far more in a shorter period of time than people without them could ever imagine. Only by discovering your innate strengths, by developing them, exploiting them as far as you can, can you ever fully realize the greatest amount of satisfaction and enjoyment in everything that you do.

I am a believer in Personal Development.

As far as I am concerned this belief is a hand in glove relationship with Forex Trading, never mind the benefits to life in general.

To trade effectively; in addition to your trade plan, you need to have the following traits / qualities.

These are my critical success factors to being a successful trader: –

  • YOU MUST HAVE A POSITIVE MINDSET
  • YOU MUST HAVE THE ABILITY TO SHOW GRATITUDE
  • YOU MUST BE ABLE TO VISUALISE
  • DO NOT PROCRASTINATE
  • DO NOT TRADE WITH A POVERTY MINDSET
  • YOU MUST BE ENTRPRENEURIAL
  • YOU MUST BE CREATIVE & INTUITIVE
  • YOU MUST HAVE THE ABILITY OF HAVING SELF DISCIPLINE
  • YOU MUST ALWAYS BE ABLE TO FORGIVE YOURSELF FOR BAD JUDGEMENTS ON TRADES – THIS ALLOWS YOU TO MOVE ON – PARK THE PAST WHERE IT BELONGS… VISUALISE

Demonstrating the above in my mind gives you a huge trading edge.

Remember, trading is lonely… it’s damn hard… it’s not easy.

You are on your own, no one tells you what to do.

It is you versus the market.

It is NOT a friendly place most of the time.

Having the mental capacity to trade on through adversity is a tough ask but if you can do it you will be a winner.

To me this is all nothing more than common sense, but if you can see the end result (visualize) and work your PLAN to get there free from procrastination and a poverty mindset you are in the elite upper 10% of all retail FX traders, maybe the upper 5% of retail FX traders.

 

FOREX REVIEW:

 

1. FX – FORWARDS, BACKWARDS & SIDEWAYS:

1.1. THIS WEEK’S ECONOMIC DATA:
NOTE: Only the items that interest me are listed here.

 

1.2. BIAS CHART – USD MAJORS SUPPORT and RESISTANCE:

 

1.3. USD INDEX (DXY) OVERVIEW – MY THOUGHTS:

The Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart.

1.4. USD MAJORS – TRADING CHARTS and MY THOUGHTS:

1.4.1. EUR/USD:

The DAILY chart below shows a number of key points to note.

  1. We are still (by the skin of our teeth) in a pattern of lower highs and lower lows (SHORT PURPLE TREND LINES).
  2. In a down sloping bearish channel.
  3. Five bearish candles on the bounce. This is NOT A BULLISH CHART… please note.
  4. 1165 is a key horizontal previous support level. We basically closed the week at this level.

FUNDAMENTAL news from the EUROZONE is poor and looking forward despite a possible 6 month break from TRUMP on placing a 25% auto tariff on European imports into the U.S. there are a number of big news events that will keep Brussels more than occupied. ITALY (Economics), SPAIN (parliamentary stalemate following elections), GERMANY (industrial production slowing and confidence moving lower) and EUROPEAN PARLIAMENT ELECTIONS (predicting a shift to the far right).

Auto Tariffs, being imposed, would have been the cherry on top of the cake.

My BIAS remains short. There are so many traders out there on twitter everyday claiming a bottom. … yet inside the range we trade and lower and lower we go.

Yes, a break above 1.1265 changes my thoughts a little, not totally, but until that happens, I do not understand these bottom pickers. All they get are smelly fingers!

 


1.4.2. GBP/USD:

Longer-term I am still bullish this pair and believe that once a BREXIT deal is signed off, we should see the cable move higher. This will of course have a similar effect with GBP crosses. However, in the past two weeks we had a fall of about 500 pips in the GBP/USD.

It has been a nasty move lower, but with great opportunities later…

The big question is where is the bottom?

My thoughts are that maybe we have to see 1.2650 again, which was a previous horizontal support. Beyond this the 88.6% Fibonacci level, which is one that the cable seems to like. It could be either of these levels before we start to see buyers stepping in.

The overriding issue in place here is the Theresa May leadership role, which is now over with her timetable for departure being announced when she tries to get version IV of the Tory Party Withdrawal agreement through Parliament. By all accounts its already dead in the water.

Cross-Party talks with the Labour Party achieved nothing. The press is so dis-interested in Theresa May, she has already been written off, they are focusing more on her replacement.

I am very surprised Cable is not even lower. I think the fact that parliament has voted that there is no BREXIT without a deal, this has to some extent supported cable and prevented a waterfall move down… maybe.

The bigger picture is a new Prime Minister / New Conservative Party Leader still has the same issues…

 

1.4.3. AUD/USD:

The BEAR FLAG pattern has completed, and we are now beyond the 161.8% Fibonacci extension of 0.6880. My thoughts are that we can still move lower with the 2019 low of 0.6740 being the next target.

Sentiment is certainly poor, and the RBA is expected to cut interest rates in June and August.

The U.S. / CHINA trade deal if signed off will affect the AUD the most.

Fundamentally, the AUD future is not looking rosy, plus we have a general election taking place this weekend just to add in a little bit of spice to the mix.

One must expect a bounce soon as we are well oversold across most FX charts regardless of time intervals. The DAILY SENTIMENT INDEX also has the AUD currency very, very oversold.  If we get a spike, will it just be a dead cat bounce, which I view as an opportunity to sell and get short.

We did however close the week at the lows. This is bearish. I think until we see a break back above 0.7000 the bears are in some level of control.

 

1.4.4. NZD/USD:

Sellers are selling into RIPS higher with this pair.

We are in a very respected bearish down sloping channel. The 2018 low of 0.6425 looks to be the next objective. Back above 0.6560 gives the bulls a chance to get involved, for now, it’s a very, very bearish outlook supported by the RBNZ.

I remain bearish the NZD.

 

1.4.5. USD/CAD:

1.3527 is capping any moves higher.

I am still in my “Not sure what to do” mode with this pair. OIL issues over IRAN and the Straits of Hormuz are not helping. The chances of a military incident are increasing and the fact that the IRANIAN regime and TRUMP are both extremes with regards rhetoric does not bode well looking ahead.

I write this knowing that TRUMP has said he does NOT want a military conflict. I have learned that what TRUMP says and what TRUMP does are two different things.

I am remaining sidelined this pair for now.

 

 

1.4.6. USD/CHF:

I want to be long this currency pair.

For that to happen I would expect the EUR/USD to dive lower. This would keep the inverse relationship in place. My problem is I want to enter long a little way back from the current prices. This would mean a EUR/USD spike higher in the short-term, which, I don’t want to see!

I am caught between a rock and a hard place. On the attached chart I show what I want to happen.

 

 

1.4.7. USD/JPY:

I am short this pair but disappointed with the fact it is not delivering a directional move. There are so many geopolitical potential incidents on the edge around the globe I am happy to be short as long as the pair remains sub 110.40.

I expect a dive lower to 108.40, then hopefully to 106.50. The longer this does not happen the greater the chances for another spiked move higher.

I am waiting patiently for my move lower!

 

 

 2. THE WEEKLY FX PREMIUM TRADING SUMMARY:

May 2019 so far:      +1,478 net profitable pips.
2019 year to date:    +7,690 net profitable pips.

The WEEKLY FX PREMIUM is my subscribed based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.

If you go to my website you will see more information about the WEEKLY FX PREMIUM, including the “SUBSCRIBE” tab at the top of my welcome page.

My website www.weeklyfxdrivethru.comhas full details of my trade projection for 2019 along with reasons why you should consider joining my other subscribers at the WEEKLY FX PREMIUM. You will this information under the “History and Performance “tab

Plus, my website also contains full details of the subscription options available. You will find this under the “Subscriptions” tab.

THE WEEKLY FX PREMIUM – 2019 PROMOTION:

I add below a copy of the 2019 FX PREMIUM PROMOTION.

I have not had a promotion this year yet and once this one completes that will be it for 2019.

This PROMOTION offers a great opportunity through to the end of the year for a really special subscription deal.

 

3. WEEKLY FX PREMIUM SUBSCRIBERS ONLY:

3.1: TRADING REVIEW:

3.2: LOOKING AHEAD – IDEAS FOR THE COMING WEEK:

3.3: FUNDAMENTAL: THOUGHTS AND VIEWS:

 

4. 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: #322 FREE NEWSLETTER
DATE: 19th May 2019

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