Crazy Forex Trading – You Must Be Crazy!

This Forex market is crazy. I’m crazy.

You’d “have to be crazy” not looking to pick off this pop in $USD this morning – even on a lark!

As my entry strategies have me placing several smaller orders over time, I will most certainly “roll the dice” ( he he…no I don’t roll the dice ever ) and look to not only add to a couple of existing positions – but open a couple new ones.

We’ve all got our long term ideas ( or maybe you don’t ) then our medium term, and then of course the beloved and most dangerous of them all the short term. Well! – this late in the ball game as far as $USD’s recent retracement goes….entry short here with some reasonably tight stops provides a pretty freakin low risk shot at it – as your risk is pretty well defined.

We’ll see how things play out on this one – as it’s been a grind, but that’s nothing new. We all know how that goes. Juuuuust around the time you’ve actually considered throwing in the towel. Bang! The next morning you’d have been a prophet if you’d just stuck to the plan!

Crazy. Crazy trading out there.

$USD is still flopping around at a very large area of overhead resistance.

Regardless of all other contributing factors, one can’t lose sight of the fact that Bernanke wants a weaker $USD – no matter what you’re seeing currently in the media with respect to tapering. I am very confident that in the not so distant future the Fed will STEP UP QE considerably.

This may sound somewhat counter intuitive, as the “rage these days” seems to be that of the complete opposite – but that’s the idea right? Move as many traders as you can to the wrong side of the fence  – then make your move? I don’t roll like that.

To view the $USD chart I had posted a day or two ago click here .

I’ve expected fireworks this week, and imagine tomorrow will be an interesting day…as well the rest of the week.

All eyes on $USD .

I’m still short USD from several days ago….and will remain that way, looking to add.

Hot Forex Tip – USD looks to be reversing as suggested.

I love habanero and over the years have developed an incredible ability to handle hot food.

If you haven’t googled / seen any of the videos at You Tube of these crazy kids taking the “habanero challenge” I strongly suggest that you do – as a number of them are absolutely hilarious.

Habanero is said to be the hottest ( or possibly the second hottest ) pepper on the planet, and demands “mucho respeto”.

Hot Forex Tip – USD looks to be reversing as suggested.

I’ll throw it out there as purely for the entertainment value, but if for whatever reason ( I can’t think of one ) USD doesn’t make a turn and continue lower in the next 48 hours – I will …oh yes I will take the Habanero Challenge.

Things are looking to get a little “spicy” here any time soon, and I’m confident that I can take the heat.

Straight to the point.

Safe haven currencies are “sold” when investors are feeling confident , and the environment looks “safe”. The big losers here have almost always been BOTH the USD as well the JPY with a little bit of CHF (swiss franc) thrown in there as well.

• Since the Swiss pegged the Franc to the EUR most CHF pairs range, and are generally ” no fun” to trade.
• USD as the world’s reserve currency “should” take in flows during times of fear and “risk aversion”, although at this point it remains to be seen.
• JPY has always benefit from “risk aversion” as Japan’s debt is for the most part held domestically providing relative security in times of  fear.
• The “Commodity currencies” such as AUD , NZD as well CAD will be “bought” when investors are feeling confident, and the environment looks “safe”.
• EUR as well GBP hang somewhere in the middle as they generally don’t fit into either category.

Since the massive interventions by Central Banks these “usual and general” correlations have suffered recently, as for many it has been very difficult to discern which is going up / down – why? And most importantly – what roles do they serve in the global currency puzzle.

Can you spot to next trend?

Can you put your finger on what “shift” in currency movement we will see in the coming year?

Solve the “Forex Puzzle” and win.

I thought it might be helpful to quickly post a weekly chart of $USD and give a quick explanation as to where I’m at.

Keep in mind that I am a fundamental trader at the root of it all – and that “weekly” charts don’t always provide the fast action  “tradeable signals” I know we all love. In the chart below the horizontal resistance line certainly cannot be denied, and what I see as being of larger importance – the “low” made only a few days ago.

This “low” breaks lower than the low back in May, and in turn suggests a change of trend – as the series of higher highs and higher lows is now broken. These last few days of upward action “should” create a lower high than the previous high (around 84.50 ish) as the sequence of zigs n zags now suggests a change in trend. USD is pushing right up to strong overhead resistance at the horizontal line.

I think you’ll need to click the chart in order to see it larger.

From a technical standpoint I feel it can’t be long before we see USD turn and head lower. From a fundamental point of view – it’s a given no?

We’ve seen U.S equities climb higher the past few days “along side” USD so……it remains to be seen if the proposed turn in USD also suggests lower stock prices – but you already know where I stand.

A mayan friend and I have throwing things around “forex wise”, and have come up with some pretty interesting stuff. Aside from a number of pretty straight forward “lunar” and “solar” alignments ( which “is” part of an actual “study” in human behavior as it’s seen in financial markets) we’ve come to the conclusion that “Thursdays” are the best days to enter the market.

Can you believe it? No kidding – I was equally stunned (as in the past  – I had actually considered making this a part of my actual trade plan), as “Chac” has it  figured as well – Thursday is the day.

Looking at this week ( not to mention countless weeks in the past ) here we are again. The JPY pairs have ranged flat as pancakes since exactly “last Thursday”, and USD has continued its “pathetic grind” higher yup – you guessed it…..right into Thursday.

If I had not placed a single entry ( all be it very small – as you all know I enter with several smaller orders over time ) I’d be in no worse shape at all ( short of the 3% I’ve more or less scalped these past 3 days) in that today ( and likely even better tomorrow) has the majority of forex pairs at more or less the same (or even better) levels of entry.

If you’ve got the patience for it, and the discipline….Thursday is the day. Cuz you don’t mess with the math – when it comes to the Maya.

I’ve popped in and out a  couple times in the past 3 days for 3% – but have continued to re enter immediately as I still look for USD to roll over here. The long JPY’s vs EUR as well CAD are flat…and I’m eyeing USD/JPY short here too.

If you are looking to trade forex “short term” – you’d better get out your binoculars (as well your microscope) short of taking a bit of advice from a pro.

The short term time frames are extremely difficult to trade. So difficult in fact that I don’t personally believe anything under a 1H time frame offers a new comer any real chance of survival.

Here’s why:

• Depending on the pair, short term volatility will ” far more often than not” stop you out of your trade almost immediately until you completely understand the given pair. For example try trading GBP/JPY with anything less than a full 100 pip stop, and even then – watch you don’t get stopped out. If you don’t know the given pairs “average daily range” or have an idea of how far it can “zig n zag” trust me – your trade platforms “default stop value of -25 pips” will get hit every single time.
• If your entry isn’t absolutely placed at an exact “high or low” of the given time frame ( so in a sense – you’ll need to trade with a laser pointer ) you again –  will almost immediately see the trade go against you.
• If you are not trading EXTREMELY SMALL – and I mean so small that -100 pip stop means nothing to you…you will again be completely stopped out before you’ve even seen the trade develop or  – even find out if you where close to being right.

It takes an extremely accurate entry as well as “relatively wide stops” in order to survive the smaller time frames. The allure of sitting at the computer for an hour a day trading a 1 min time frame with any kind of leverage – and making ” a killing” is an absolute pipe dream, as the price action is purely “just noise” and offers no tradable patterns that will consistantly produce winners.

Imagine staring at your television at home when the cable/signal is down and try “trading snow”.

Small orders over time at areas of support and resistance, and wide stops “should” go a long way in keeping you in the game.

Ok…..you’re all going to say “Common that’s crazy!” “This Kong guy is crazy!” “It just can’t be!” “That’s nuts!”

Ok..ok……fair enough, but I’ve got to get this off my chest.

The Australian Dollar has been beat down hard over the past few months yes….and I have been reluctant to “jump on board” with any real passion as I’ve come to learn  – you really can’t chase things once they’ve fallen too far.

I’ve had some great “small time/ intra day” type trades involving AUD but that was more or less based on simple principals of “risk being sold” in general – and not so much  “specifically” about AUD itself.

Well wouldn’t you know it…and it is still a bit of a hunch but…….as markets would have it (looking to confuse the largest number of people, for the largest amount of time) juuuuuuust as “global risk / China fears” headlines start blasting to the masses.

AUD is set to bounce.

This will be the first time in my entire career as my mid to long term analysis has clearly suggested “risk off” –  that I will actually consider trading a move upward in AUD.

Unreal.

Please keep in mind – a move higher here in AUD will be considered a counter move to the well established downtrend in place. I imagine the correlation of U.S dollar and U.S equities will now “reverse” as USD falls – I imagine equity players will get their bounce.

Watch out for Kangaroos – bounce, bounce, bounce.

There have been three separate occasions in my life where I almost wound up in China. Two of which on my own accord, and the third a simple ” dart throw at the map” after nearly seven years in Costa Rica. I am fascinated by nearly “all things Chinese”. As of late a number of “pyramid complexes” hidden under dense undergrowth and forest …..said to possibly rival those of Giza. Interesting to say the least.

The Chinese economy has been barrelling forward for several years now at annual rates of GDP that would make your head spin, and has contributed around  1/3 of global GDP over the past year alone. That’s what I call a major contributor no?

The simple fact of the matter is – any slowing in China will obviously have an impact. A massive impact.

As we’ve seen via the Australian Dollar (AUD) smash down over the past few months – this should come as no surprise, coupled with IMF / World Bank global growth projections ( not looking great ), the continued “mess” in Europe ( which I can assure you – has not even come close to being repaired) the big picture “macro” has seen five solid years of liquidity injections / stick saves / emergency meetings / blah blah the list goes on out of the U.S – and still…….no “real recovery”.

China’s “cooling” at this point is an unfortunate “circumstance” timing wise ( as it’s just a normal part of the business cycle for the Chinese – domestically speaking) as it now comes at a time when a number of other global factors – don’t look good.

I hate the way China is portrayed in Western media as being the “cause” of downturns, or that their “very responsible”  monetary policy is viewed as the “root of all evil”. That’s a mighty big ship they are turning over there, and doing a pretty good job of it I’d say. Dare we even consider comparing?

They’re gonna “crank back growth” to 7.4% from projections of 8.2%! Not a bad problem to have no?

China is looking to cool the jets yes – and as suggested earlier…regardless of the short term squiggles – we are clearly on the other side of the mountain now.

More “specifically” tomorrow gang.

I’m sure I speak for many in saying how good it feels that the weekend is finally here.

That was a wild one to say the least, and there is a pile of stuff to go over / review  over the next couple of days in preparation for what will likely be another week of  “nuttiness” to follow. So much so in fact – that I’ve got little to contribute here as of this evening short of digging in and getting started with the weekend reading.

Without question I want to dig into this “China business” as well pull in some loose ends with respect to Australia and proposed rate cuts on the horizon, and of course check in on Japan. Currently there are several “macro factors” up in the air, and it’s imparative to get things lined up properly across the board – as the good ol U.S of A has also thrown it’s own monkey wrench into the mix.

For now – a simple recharge of the batteries should do a gorilla good.

I also want to thank every single one of you for the comments and support that have “rolled in” over the past 24 hours – I greatly appreciate it!

Have a good weekend everyone.