Short The EUR USD? Betting On Trump

Since the big 2014 decline in the EUR/USD that took the pair from 1.39928 on the 8^th of May down to 1.04617 by March 13, 2015 things have looked dicey for the pair. There was the rally back to highs in the 1.25 range by Feb 2018 but it has been a progressive downward slide since then.
Will the EUR/USD take out its January 2017 low. Well, it is headed in that direction. Not even the Corona virus made any difference.
The chaps at eFXdata think the price is going to 1.02, and possibly lower. They outline their analysis on why in their article, EUR/USD: Six Reasons To Be Bearish EUR/USD – BofA.

EUR/USD continues to lose ground and has fallen below the 1.08 level. What is the outlook for the pair in the coming months? Here is their view, courtesy of eFXdata: Bank of America Global Research discusses EUR/USD outlook and outlines 6 key reasons for staying structurally bearish on the pair over the coming months targeting a move towards 1.02.    Read full post here …

thumbnail courtesy of efxdata.com

The move of this pair has steadily mirrored the declining fortunes of the EU and the fluctuations in the US as establishment forces try to take out Trump.

Note how EUR/USD rally of 2017 started during the Trump Transition after winning the election, and then ended with highs during early February 2018. So what happened in February 2018?
Attorney General William Barr appointed U.S. Attorney John Durham to investigate the origins of the FBI investigation, “Crossfire Hurricane”. That is, to get to the bottom of the Russia Hoax. Durham’s reputation speaks for itself. He was assigned by Special Prosecutor by Janet Reno in the Whitey Bulger Case. Eric Holder assigned Durham to investigate the waterboarding of detainees post 9/11.


Image Credit: www.metatrader4.com

Meaning, the unchecked fun and games anti-Trump forces were engaging in with impunity are now going to stop. And indeed, in short order the investigation turned criminal so for active players in the Russia Hoax there is now a chance they may go to jail.

Serious stuff. Serious enough to change behavior, and it seems to have done so.

Since Durham’s appointment the EUR/USD has steadily come off that high and slid ever downwards. This would seem to be a grudging acknowledgement of the two core realities of the two entities.
For the EU, it is the structural reality that it is not a democratic entity and is run top down by a cadre of elites who rule by dictate over their member states, and respond to almost every challenge by passing ever more restrictive laws, raising taxes, and printing money. This is negative to economic growth and prosperity.

For the US, it is the reality that Trump is a force for US economic prosperity. This is shown by the actions he took from before taking Office. His administration rolled back regulation, made a big tax cut, extricated the US from restrictive external treaties, created tax incentives like Opportunity Zones, and more. This is positive to economic prosperity. The Corona virus created an epic whipsaw in price however the long-term trend remains steadily down.

Image Credit: www.metatrader4.com


There are still questions, like how well the opening up of the US economy goes that may have an influence if it doesn’t go well. However, the fates of the EU and US seem pretty well baked into their respective structures and are likely to play out accordingly.

Will the Eurozone become a safe haven for capital in a monetary crisis? Not likely.

The Power Of The Moving Average For Profitable Trades

The humble moving average is often mocked as a beginner’s tool for traders and something that is woefully insufficient for uncovering profitable trades. I beg to differ.

I have always thought the moving average is way undervalued as a tool. When you think about it, it takes the price data from a series of time intervals, no matter how varied, and gives you the overall direction of the trend. This is incredibly valuable.

Another way of stating the value of this is, it takes price action that may be putting you on an emotional roller coaster, causing high levels of stress, and reduces it down to a simple line that is sloping upwards, downwards, or is flat. This is not a trivial thing, and once appreciated can put you in a strong position to becoming a profitable trader.

One person that really understands this is Rolf at Tradeciety. He has written a great article titled The Best Moving Average Strategies that walks through a video he made that details ways he used various moving averages to make profitable trades. Take a look:

In this video we are mostly focusing on the 50, the 100, the 200 and I will show you how to use them in your trading. I use a simple moving average. It doesn’t really matter and the differences between the SMA, the EMA, are very, very small. The most important thing is that you always keep the same moving average. So don’t use the simple moving average the one day, then the next day you use the exponential moving average. Choose one and then stick to it. Read full post here …

thumbnail courtesy of tradeciety.com

Where many traders go wrong with using a moving average is setting the indicator too short term. The 20 MA is a popular setting, however no matter what time frame you are using, it is too noisy and gives little tradable information back to you.

On the other hand the 200 MA is much smoother and gives a clearer picture of the overall trend. Due to the fact that the 200 period moving average contains more data, it is generally accepted as what indicates the long term trend. With this broader picture that gives the price action you are looking at more context, you are able to make better decisions on trade entry and exit.

With this in mind you can use multiple moving averages together. The most popular combination, even at the institutional level is the 50 MA coupled with the 200 MA. The signals produced by these two are known as the Golden Cross (a bull signal where the 50 MA crosses to 200 to the upside) and the Death Cross (a bear signal where the 50 MA crosses the 200 to the downside).

In the context of trending markets, each represents a decisive turn in the market from one direction to another.

Image Source:Metatrader4.com

So if you haven’t done so already, familiarize yourself with moving averages and how to use them. For all instruments and in different conditions they can be an endless source of profitable trades.

What Does It Take To Trade Full Time?

This is the dream for every retail trader. Mastering trading to the point that you consistently pull money out of the market, having mastered your emotions and developed a mindset that puts you on the right side of trading odds.

Achieving this (and it is an achievement) now allows for a lifestyle that gives you independence. Location independence, do it from anywhere you want. And financial independence, slowly but surely build your accounts to where they contain enough money that no matter what happens, you’re going to be fine regardless of anyone else.

This interview by Etienne Crete with Raghee Horner gives a great insight into how to make this happen:

Full-Time Forex Trader’s Way Of Doing Things
Full-Time Forex Trader’s Way Of Doing Things In episode 243 of the Desire To Trade Podcast, I interview full-time trader Raghee Horner to discuss her way of doing things in trading. Her entrepreneurial spirit and dedication is part of what allowed her to see a lot of success in her trading career. Read full post …

thumbnail courtesy of desiretotrade.com

An interesting part of Raghee’s approach is her adherence to probabilities. And this is a big part of what makes it possible for a person to become a professional, and make trading your primary source of income.

You through trial and error find your trading style and uncover your edge. Once you have your edge, you have your statistical advantage. To implement your edge you develop specific trade entries and trade exits. Then it comes down to the discipline to trade your system and nothing else, it comes down to numbers. For every 100 trades, a certain number will be losses, and a certain number will be winners. The losses are limited by money management, however winners can run a long time, easily paying off losses and booking nice profits.

This is very similar to baseball. If you haven’t seen the movie Moneyball, I highly recommend it.

Batters have their on base percentage, and their slugging percentage. Out of every 1,000 pitches, they reliably connect bat with ball a certain percentage. Their pay is based on this percentage. They don’t know which individual pitch is going to be a single, a double, or a home run. They just know statistically, their talent and training will produce this percentage of hits over a thousand pitches.
This is what makes baseball so compelling, and produces unforgettable moments. Like Scott Hattenerg’s home run that broke the consecutive winning game record, after the Oakland A’s had been up 11-0, but frittered away their lead to 11-11.

Hatteberg had an elbow injury and was past his prime. No batter knows what pitch is coming next, but ready to bat as the ball comes in over the plate, talent and training take over and a home run happens. All in a split second.

This home run of Hatteberg’s was one of a number he reliably produced every thousand pitches thrown at him. This particular one though happened when it really, really mattered.

Hopefully you can see the relationship this has to trading. If Hatteberg, or any professional player, lost their discipline and started swinging at anything with sloppy technique, they would quickly lose their position on the team. It is their discipline and their ability to operate at the highest level that make their statistics meaningful. They mean the team can rely on them for a certain amount of run production every season.

Likewise with trading. If you lose discipline and enter trades just anywhere with whatever position size takes your fancy, your account will be $0.00 in a very short space of time. If on the other hand, you are disciplined with your trade entry and exits and rigorously adhere to your predetermined position sizing, your account will grow.

There will be losses, equivalent to strikeouts, but over time you will connect with a trade entry that results in a long, profitable (home run) trade. These trades are always going to be there, you just never know which trade entry (pitch) will be the one that turns into a big winning trade.

This is a crucial mindset to have, and it takes courage because you are constantly fighting emotions and staring into the unknown. If you want the life of a professional trader though, it is the world you must live in.

EUR Pairs Find Support After Corona Panic

If you’ve been trading Euro pairs recently you would have noticed a few of them are starting to settle down a bit and and consolidating around what seems to be a long term support level.

Rolf at Tradeciety has given a pretty nice breakdown of the pairs doing this. His analysis is as follows:

EUR Forex Pairs Trading Into Long-Term Support
During today’s market scan, a few EURO pairs popped up on the radar as the price seems to have (at least for now) found support at long-term key price levels. For all the Forex pairs discussed in this article, we will also consult the Trend Rider indicator to obtain additional momentum and trend information.   See full post here …

It’s always interesting to see similar activity playing out over different currency pairs. The trick is to try and understand what is the fundamental driver affecting the base pair that is probably the cause of this activity.

With that information you can better understand what the next move is likely to be. In this case it turns out Christine Lagarde, the ECB President has given a speech yesterday indicating the ECB will be leaving interest rates unchanged. Eren Senzenger covers this in her article in Fxstreet below:

Lagarde speech: Euro area GDP could fall by between 5% and 12% this year

“Euro area facing a recession of unprecedented magnitude and speed in peacetime.”
“Measures to contain virus have largely halted activity.”
“Economic activity largely halted.”
“Surveys have plunged, suggesting sharp contraction in growth.”
“Scenarios suggest euro area GDP could fall by between 5% and 12% this year.”
“Recovery speed uncertain.” See full post here …

Source: https://www.fxstreet.com

Here is the ECB Governing Council presser where she delivers the news and a bit more.

Pretty dry stuff. As usual the ECB trying to put a happy face on a pretty dire situation. But for the time being it does mean central bank support for the EU economy.

Image Credit

Set It And Forget It With The Ray Dalio All Weather Portfolio

Trading is taking advantage of market moves, price moving from one level to another. Short term, swing trading, and position trading, in a single instrument. If you are inclined to the long term view, position trading, taking the next step is asset allocation. Steve Burns gives a good account of this in The Ray Dalio All Weather Portfolio.

Ray Dalio designed an asset allocation that is supposed to be able to weather any economic storm, manage risk exposure, and make steady returns over the long term. He calls it the All Weather Portfolio and it diversifies by holding multiple asset classes: bonds, commodities, and stocks. Tony Robbins first made this portfolio popular in his book ‘MONEY: Master the Game‘ where he interviews some of the greatest financial minds and money managers.

thumbnail courtesy of newtraderu.com
The All Weather Fund has a consistent track record of preserving capital and delivering yields year in and year out. A key part of this has been it allocating 40% of it’s capital to bonds. Well we are now in a world where many bonds have negative interest rates. This poses a problem for yield expectations, causing Dalio to expound, “You’d be pretty crazy to hold bonds right now.”

Going even further, he explains that bonds are debt instruments which pay fixed interest rates on assets with fixed cash face value and can see their value inflated away.
As he tells Yahoo Finance in Ray Dalio: Don’t Buy Government Bonds,

“This period, like the 1930-45 period, is a period in which I think you’d be pretty crazy to hold bonds. If you’re holding a bond that gives you no interest rate, or a negative interest rate, and they’re producing a lot of currency and you’re going to receive that, why would you hold that bond?”

Source: Yahoo Finance

Stormy waters lie in wait for financial markets in the coming decade. It will be interesting to see how the All Weather Fund fares without its mainstay instrument, government bonds.

Ed Seykota Gives 12 Price Action Trading Quotes

Ed Seykota was one of the traders profiled in Market Wizards. His actual interview was packed with trading wisdom, but it was notable his name kept coming up in the inerviews of other of the Market Wizards as well.

He was a big influence on other traders back then, and he still is today. His penetrating insight that "everybody gets what they want out of the markets" leaves you pondering and embarking on some self examination. What ARE you doing in the market. Why really are you trading? What need does it fill for you?

If you are having trouble breaking even, or staying profitable, the chances are good you are using trading for something other than making money. There is some emotional need it fills in you.
This is Ed Seykota's insight and his reputation for being brutally honest. Because if you are not serious about becoming a profitable trader, why on earth are you doing it?

Well ... Steve Burns of NewTraderU has put together 12 of Ed Seykota's rules for being a profitable trader. After you read them, write them out and review regularly.

When traders want advice on their trading what better place to go than someone who had both big and consistent returns over a very long period of time? “Mr. Seykota himself has put together a money management track record with returns of roughly +60% net of fees over the three-decade span of his trading career” 12 Price Action Trading Quotes by Ed Seykota

image courtesy of newtraderu.com
The favorite one of his quotes I have from the article is: “If you want to know everything about the market, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it’s coming in, it’ll never happen. The market is always right”. I like it because it reduces the complexity of the market to a simple, but very apt analogy.

We've all been to the beach and we've all experienced this with waves. If you have body surfed, you also know that not every wave is worth taking. In fact you try with some and it's no use ... they're not surfable. You have to wait for the right wave, that is cresting right where you are, and then you swim like mad and off you go ... surfing down the way, spray shooting out from under your chin.

It's the same with trends and trading. But it takes time to understand charts, get your emotions under control, and understand what the opportunities are when trends present themselves.

Ed distilled his trading wisdom in The Whipsaw Song. Have a listen.

Trading is a life long pursuit where we learn a lot about ourselves, and to the degree we can master ourselves and the practice of profitable trading, we'll also make money.
Thanks Ed.