Mon Feb 19 @ 19:30 AUD Reserve Bank of Australia Meeting's Minutes
Wed Feb 21 @ 14:00 USD Federal Open Market Committee FOMC Minutes
Thu Feb 22 @ 4:30 GBP Gross Domestic Product
Thu Feb 22 @ 18:30 JPY National Consumer Price Index
Fri Feb 23 @ 2:00 EUR Gross Domestic Product
Fri Feb 23 @ 5:00 EUR Consumer Price Index
Fri Feb 23 8:30 CAD Consumer Price Index
This Week's News Analysis:
Last week's volatility was low-medium. Expected volatility this week is low-medium. Watching the majors.
Focus will be on the AUD, USD, GBP, JPY, EUR, & CAD.
Look for increasing volatility in AUD JPY, USD JPY, GBP JPY, EUR JPY, CAD JPY, & GBP NZD.
On 11/8/17 we posted a blog "SNAP Being Snapped Up?" about the potential for SNAP CHAT stock with ticker symbol SNAP to move higher based upon the following observations:
These observations let to the analysis that SNAP was being quietly accumulated by Smart Money interests. Smart Money buys at the low when the news is negative and no one is paying attention.
Today a news release about SNAP caught our eye and we found the price had gone parabolic.
Mon Feb 5 @ 22:30 AUD Reserve Bank of Australia Interest Rate Decision
Wed Feb 7 @ 16:00 NZD Reserve Bank of New Zealand Interest Rate Decision
Thur Feb 8 @ 7:00 GBP Bank of England Interest Rate Decision
Fri Feb 9 @ 8:30 CAD Net Change in Employment
This Week's News Analysis:
Last week's volatility was low-medium. Expected volatility this week is low-medium. Watching the majors.
Focus will be on the GBP. Brexit is back in the news.
Look for increasing volatility in AUD JPY, GBP JPY, CAD JPY, & GBP NZD.
E Commerce giant Alibaba is getting into the Cryptocurrency mining business. Their mining platform "P2P Nodes" will loan out space in it's cloud for clients to mine cryptocurrencies.
Shell Oil has entered the world of blockchains as they engaged the services of a company called Applied Blockchain to develop a blockchain based energy commodity trading platform. Block chain technology will help the energy industry by streamlining processes and create value in their core businesses and help them develop new business models.
The price of Bitcoin has dropped below $11,000 as the Smart Money "Retail Flush" continues. The strongholders are dumping the price of Bitcoin and the overall scenario is picture perfect for them to set up their buy campaign.
The lower the price drops in rotations the more attractive the opportunity becomes. Smart Money buy low and sell high. They have already sold into the $25,000 high print and they are now reloading their positions. Expect the price to move in rotations on the way down so Smart Money can buy in stages and accumulate their position quietly and then drive the price back up as Retail investors look on.
George Soros of Quantum Fund fame exercised a warrant to buy $100 million in Overstock.com stock. The funds will be used in Overstock's ecommerce platform and in blockchain ventures that the company is involved in. This represents a major commitment to blockchain technology and will provide a tremendous boost to blockchain exposure in the media. Soros joins other high profile blockchain supporters like the Winklevoss twins who made a $100 million bet on Bitcoin and Peter Thiel, whose venture capital Founders Fund invested tens of millions of dollars into Bitcoin.
Bitcoin is hovering around $14,000 as the Holidays come rolling in. The timing could not have been better for Smart Money to start up their cash machine. Now that the futures markets are online the Bitcoin Bonanza is turning into more of a two way market. The sell side is ramping up against the Bitcoin Bonanza Buyers.
In a simple case of what goes up must come down the price of Bitcoin is correcting and there may be more downside in the near future. Big B has already lost a significant percentage of it's value and it will be interesting to see the path that price moves in the coming weeks. Are the algos on or is this just a blip on the radar screen? Only time will tell but one thing is for sure-Bitcoin will definitely be the topic of conversation at many Holiday parties this year.
Technical analysis is used to measure/quantify activity and price movement in your charts and give you a basis to begin forming a potential trade idea. You need to use additional information before you enter a trade. By itself technical analysis has no reliable predictive quality.
“I will go short when this move retraces 50%” is not based upon anything other than a gut feeling or your opinion. There is no scientific evidence or data to back up your gut feeling. Backtesting can help you with probabilities but there is no 100% certainty in this game. The only certainty is that you are always operating in a condition of uncertainty.
You need additional information before you decide to trade. You need to put the probabilities in your favor. In the best case scenario you use repeatable patterns and conditions that you have seen over and over and only trade when these conditions are present and stay out of the market all other times.
You have to factor predatory algorithms into your analysis. Price is not moving on pure supply and demand, it is being skewed by the orders being pumped in by algos. If you completely ignore the presence of algos you will be frustrated. They will be stopping you out, driving price against your position frequently, and moving without you when they make the big moves. That is what they are programmed to do and they are very effective.
No one cannot predict when an event will happen, for example an earthquake or tsunami. You need a crystal ball to do that. But you can predict with 100% certainty how people will react and what their likely behaviors will be. As an example if you are in a movie theater and the fire alarm is pulled everyone will run for the nearest exit because that is what they were told to do. Once they see others running for the exit (even though they don’t see fire or smell smoke) they will follow the crowd out the door. The same is true with trading. Learn when the crowd is going to do something and start to trade against them with the Big Boys. That is how the Big Boys make their profits everyday. They do the same thing day in and day out, in a slightly different way to keep traders guessing.
If you want to become a net profitable trader start paying attention to algorithmic price movement. All modern financial markets are driven by algorithms. You don't need to become a computer programmer but you do need to know enough to understand how they drive price. The algos do the same thing over and over everyday in a slightly different way to keep everyone guessing. They vary the movement of price and the momentum slightly so no one can game them. Your job as a trader is to capture a percentage or portion of this algorithmic movement consistently while limiting risk.
You can develop tools from your live trading experience to find Smart Money's intended targets and then put together a trading system using important news, trader sentiment, historical price movement, current volatility, etc. to figure out what is really going on in your price chart. Notice how historical price is just one of the important factors in analyzing your charts, not the only factor. Using technical analysis alone to predict future price movement is futile. Additionally, you cannot trade based solely on simple technical analysis techniques such as "support and resistance", "moving average crossovers", even "supply and demand" in isolation. There is not enough information in those methods to put the probabilities in your favor. Without higher level order flow information (the kind that Smart Money has because they have all of the market's orders on their books) they are mostly breakeven strategies. That is why most traders are struggling to be net profitable. Using a "good risk to reward ratio" such as 1 to 2 or 1 to 3 can help skew your results in your favor but that also presents drawbacks with today's mean reverting algorithms. If you look carefully in your charts you will see price chopping along in small ranges then medium ranges than larger ranges with price always moving back to the mean or a percentage of a standard deviation to sweep the less informed out of the market before price moves on.
What you should be doing is trading Smart Money algorithmic order flow. You are a surfer, in a rough sea with waves trying to wash you out. How you negotiate the waves determines your profitability. There is profitability in these markets. In order to profit you need to do take certain actions and avoid certain actions and this can only be accomplished by developing your skill by experience.
The only way to profit in trading is to learn the basic concepts of how Smart Money is moving price with algorithms according to their business model. Once you understand the mechanics of how and why the winners are winning you can start to develop a system for yourself to enter and exit the order flow in a way where you are not fighting the winners. You need to "go with the flow."
Everyone gets the same information when they start trading Forex:
Good risk/reward ratio. The bigger this is the less likely you will profit because you will be in the market long enough to be constantly stopped out by the mean reverting algorithms. You should get out with a reasonable profit before the mean reverting algo's drive the price the other way and tag you out while stripping you of your profit. This requires advanced skill and an understanding of market structure and order flow rotations.
Tight stop loss. Your stop loss is probably clustered behind shorter term swing points with hundreds of thousands of other tight stop losses waiting for the algorithms to tag you out just before the order flow changes and goes the other way. You will incur losses when you trade no matter what you do but you can learn to take the winning trades more often than the losers.
Confirmation. Waiting for confirmation let's Smart Money move the market where they want it to go and puts you in a worse position because you are trading near the middle of a move in a chop zone instead at the extreme where your risk to reward is much better and your likelihood of getting stopped out by a retracement against your position lessens the further price moves.
News trading. Lately news trading is more difficult than it was in the past but it can be done successfully if you are used to the volatility and you only take the trades that setup the way you want them to instead of blindly trading all news releases. The mean reverting algo's move one way 50 pips as a stop run and then turn and reverse and go in the real direction fast so those who were stopped out initially don't get back in and profit. The recent price action would have been counter to that real move so that the majority of traders who are trapped in poor trade locations are now under pressure and are slowly and methodically forced out of the market by a bull or bear trap.
Revenge trading. I "revenge trade" when I feel it is warranted. By revenge trade I mean initiating another entry into the market if I am stopped out quickly by a stop run if I got into the order flow a little early and I believe that the probability of success is still in my favor. The reason this is so important is that the algorithms that Smart Money uses extend further than you would expect. They see the orders on their books and they can generate additional profits by extending price movement whenever and wherever they want if that movement will result in additional profit as they push price through liquidity (stop orders). They also trigger orders that will put traders into the market on the wrong side of the order flow. That is why you see so many large pinbars in your charts. These pinbars are stopping traders out and initiating new traders into the order flow the wrong way at the same time. (That is why they call them "Smart Money").
Short time frames. You wouldn't believe what you can find out about Smart Money on lower time frames. They don't want you to observe their activities and start to learn what they tend to do so they mix up the movement so that price appears totally random and not worth tracking. Experienced traders know that Smart Money is using algorithms and basically do the same thing everyday in a slightly different manner to keep everyone guessing and believing that price is totally random. If you believe that price is totally random you don't feel so bad about always losing because it isn't your fault. Once you realize that price is manipulated you are accountable for what you do and you expect more of yourself. This is a huge shift in mindset that every trader needs to make in order to succeed.
You are now trading in a world where algorithms are driving the price of these currency pairs and moving price in a way that on the surface seems unpredictable and totally random. That is what Smart Money wants you to believe so that you have a passive indifference and you approach trading with a skepticism while still attempting to find a solution to your problem of net losing. Price is not random. Price is being driven to key target levels by big players who have devised a way to move price in a way that prevents most traders from profiting on a consistent basis. You can beat them at their own game.
In order to win this game you have to change:
The chart of SNAP or Snapchat looks like the stock is currently under accumulation. Chinese company 10Cent purchased a 12% interest in SNAP. The earnings reports for SNAP are negative and the Retail stock traders who bought SNAP the day of the IPO have probably sold it already and booked their losses. SNAP looks like the perfect candidate to
make a comeback or be purchased. Only time will tell what the future holds for SNAP. But in the doom and gloom there is a ray of light.
When you initiate a trade in Forex you are trading against Professional traders from banks, hedge funds, and liquidity providers known as market makers. These traders are part of large organizations which employ quantitative experts who write computer programs to automate their trading activities. As these programs enter orders into the market they are executed faster, more frequently, and more accurately than manual traders. This gives them an advantage because there is no human intervention to cause execution errors such as hitting Buy instead of Sell, closing a winning trade early, or letting a losing trade run. These algorithms can be backtested and adjusted by human traders as needed. In addition to reducing trading errors and increasing execution efficiency algo trading reduces transaction costs and improves pricing. Many algo's use mean reversion strategies where orders are gathered from high and low prices before the price moves back to the mean. The algo's can be programmed to weigh volume, average price, etc. or whatever metric is desired. This is how hedge funds reduce market risk in addition to hedging their trades.
The algo's are particularly effective on the down side as sell orders are triggered in a cascading domino effect. Price generally moves up in a slow stair step fashion and when it is time to fall under it's own weight it falls rapidly and some traders can only trade the bull moves and not the bear moves. Our brains are hard wired for excitement and we like to work in crowds of excited participants, not alone when fear is the order of the day. That is one of the reasons that Smart Money has such an easy time letting prices fall under their own weight and they buy as the price is falling through the floor. There is no one else buying as the price falls, most are selling furiously as fear grips them and they want to get out before the bottom. Of course the price always seems to mysteriously bottom out and reverse and move higher again.
Ignoring algorithmic movement in modern financial markets will cost your dearly. Traditional technical analysis needs to be carefully employed while considering how modern algos move price in a never ending mean reverting dance. The algos are programmed by humans and humans tend to do the same things over and over, especially if it works effectively. Observing the algorithmic movement will help you negotiate the order flow if you consider where and when traders are being trapped into bad trade locations based upon general market conditions, fundamentals, news, and market structure.
Trader's success checklist:
On You Tube there are three opinions about trading:
I am in the #3 camp. Trading is not easy nor is it impossible. Somewhere in between there is doable. I haven't heard any intelligent argument as to why you cannot profit trading against Smart Money and their algorithms. If you approach trading by learning how money is made and lost and then learn how algorithms move price you can succeed in this cat and mouse money grab. You do have to bring your A game, however because you are trading with well capitalized Professionals with unlimited resources.
Trading is a mind game. The charts are real, the money is real, but the charts are not where the battle is fought. The battle is fought in your head. In order to succeed you have to reprogram your mind, understand risk and uncertainty and accept it (along with accepting losses as part of trading), and condition yourself to the mental rigors of trading.
When you enter an order on your trading platform you are being transferred to someone else's playing field as a guest. There are rules you have to play by. You have to pay an admittance fee. How you participate in the game (nothing else) determines your results.
Your approach to trading is important. You need to be aware of how winners and losers operate. You have to have realistic expectations. You need to know your own strengths and weaknesses and develop a trading style and system which fits you. You need to understand how to manage risk. You need to find a professional trading platform and a reliable broker. Once you have all of this in place you need to develop a trading system that you can count on.
Most trading gurus and educators sell basic trading information and simple Retail trading strategies in one form or another. Applying this widely known information will put you in with everyone else who are struggling to profit. You need to learn basic trading information but that is not where your power lies. Your power lies in knowing what everyone else is doing and going down a different path. You need to find a trading edge that on balance produces a reasonable profit for the time and effort you put in and can be repeated. And they do exist. When you find a trading edge you are on your way.
Your focus as a trader should be to find out how you are being baited into entering the market the wrong way and start to look for an alternative way to trade. This is a function of your trading psychology and not your strategy. While you are tweaking your strategy and sipping your latte Smart Money is setting up a stop run to trap you on an 8 hour chart. You are zapped out of the market in short order without understanding why. If you don't know why you are losing you will never be able to figure out how to win.
Focusing on technical analysis and wasting time studying "patterns" and trying to find them in your charts and waiting days and weeks for them to unfold is a waste of time. Most traders trade the common patterns and waste alot of screen time measuring the legs of the patterns and fighting the order flow looking for the big one which for some reason never seems to show up to give them the huge winning trade they hear so much about which erases the months of losing trades. The rest trade current price and focus on where the current price is and where it may be going without properly assessing general market conditions, Smart Money participation, order flow, liquidity, etc. They are only concerned with where price is and where it may go next. Not the path price took to get to where it is or the path it may go to get to the next target.
Traders who trade price will never be consistently profitable. Like a chess player you have to think 3-5 moves ahead so you can anticipate what is coming and craft a plan for yourself to enter and exit the order flow while managing your risk of loss. There is no system that works on a gut feeling or where price looks like is may go next. If only trading was that easy.
The way to succeed is to see what is unfolding on long term charts and scale down to lower time frames. The puzzle that needs to be solved is where to get into and out of the order flow repeatedly with a profit. Where is the ideal location to enter? Answer. Find out where there are already alot of trapped traders who will soon be taken out of the market by Smart Money. This is the ideal location to trade at, but very few traders have the knowledge, skill and mental conditioning to do it. This is not necessarily a price level. This could be a zone where orders have been accumulating for some time and where traders will eventually feel the heat when the price reverses and starts to move against them in a systematic squeeze.
If you take any simple trading idea, concept, "strategy", whatever you want to call what traders use to get into the market and really take a good look at it you will see that expectations are not in line with reality. Why would someone expect a simple crossover strategy to actually work and be profitable? If these strategies actually worked wouldn't everyone be using them? How long would you use something that doesn't work before you would look for something that does work and can be used repeatedly?
Every "strategy" which encompasses the use of chart studies, indicators, and other forms of technical analysis has a probability of success and using them will result over time in a certain percentage of wins and a certain percentage of losses. Although you can find a strategy that has a better than 50/50 success rate you still have many other factors to consider when you develop a trading system:
Always think outside the box and follow Smart Money and learn what they do. It will give you a tremendous advantage over the traders who trade price and the surface of the market and the common patterns. They are playing a game that they can't win.
An interesting article from http://money.visualcapitalist.com/
The Global War on Cash
The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.
There is a global push by lawmakers to eliminate the use of physical cash around the world. This movement is often referred to as “The War on Cash”, and there are three major players involved:
1. The Initiators
Governments, central banks.
The elimination of cash will make it easier to track all types of transactions – including those made by criminals.
2. The Enemy
Large denominations of bank notes make illegal transactions easier to perform, and increase anonymity.
3. The Crossfire
The coercive elimination of physical cash will have potential repercussions on the economy and social liberties.
Is Cash Still King? Cash has always been king – but starting in the late 1990s, the convenience of new technologies have helped make non-cash transactions to become more viable:
By 2015, there were 426 billion cashless transactions worldwide – a 50% increase from five years before.
Year# of cashless transactions2010285.2 billion 2015426.3 billion
And today, there are multiple ways to pay digitally, including:
The First Shots Fired
The success of these new technologies have prompted lawmakers to posit that all transactions should now be digital.
Here is their case for a cashless society:
Removing high denominations of bills from circulation makes it harder for terrorists, drug dealers, money launderers, and tax evaders.
But for this to be possible, they say that cash – especially large denomination bills – must be eliminated. After all, cash is still used for about 85% of all transactions worldwide.
A Declaration of War
Governments and central banks have moved swiftly in dozens of countries to start eliminating cash.
Some key examples of this? Australia, Singapore, Venezuela, the U.S., and the European Central Bank have all eliminated (or have proposed to eliminate) high denomination notes. Other countries like France, Sweden and Greece have targeted adding restrictions on the size of cash transactions, reducing the amount of ATMs in the countryside, or limiting the amount of cash that can be held outside of the banking system. Finally, some countries have taken things a full step further – South Korea aims to eliminate paper currency in its entirety by 2020.
But right now, the “War on Cash” can’t be mentioned without invoking images of day-long lineups in India. In November 2016, Indian Prime Minister Narendra Modi demonetized 500 and 1000 rupee notes, eliminating 86% of the country’s notes overnight. While Indians could theoretically exchange 500 and 1,000 rupee notes for higher denominations, it was only up to a limit of 4,000 rupees per person. Sums above that had to be routed through a bank account in a country where only 50% of Indians have such access.
The Hindu has reported that there have now been 112 reported deaths associated with the Indian demonetization. Some people have committed suicide, but most deaths come from elderly people waiting in bank queues for hours or days to exchange money.
Caught in the Crossfire
The shots fired by governments to fight its war on cash may have several unintended casualties:
Jeff Desjardins is a founder and editor of Visual Capitalist, a media website that creates and curates visual content on investing and business.