How To Work Smarter, Not Harder, As A Trader
I trust you all had an
enjoyable and relaxing weekend, after last weeks movement in the FX
market it was nice to step back and digest the moves and approach it this week
with a fresh perspective, however, the volatility stopped there, equity markets
remain very subdued. If you have not read Larry Connor’s piece from Saturday I
urge you to. I come across this type of scenario every day in the form of
emails. “If it is quiet, why not just find something else?” That nagging
question drives me nuts, I am tired of hearing it. The old adage of the
“Protestant work ethic” has no place in the trading arena. “Work smart, not
hard” is a better phrase to live by. Look at it this way, if you are a
black-jack player and the deck is not rich you do not keep throwing down $100
hands, you scale back until the deck is more conducive. Unlike black-jack
however, a trader does not even have to play a small hand, he/she can simply
abstain until better opportunities reveal themselves. Trading is a marathon,
not a sprint.
Perhaps it was the low volume/participation due
to the long weekend, but the movement in FX on Friday was not only wild, but
somewhat odd given the news and events that transpired. However, like all
markets, logic and reason sometimes have little predictive value. The dollar
broke to 52 week lows on the heels of the trade deficit numbers and was dealt
another blow when consumer confidence came in lower than expected. Initially it
was hard for me to contain my smile as the GBP,
EUR and AUD
all broke to new highs, and I was long all three of them. It was not long
however, before the inevitable “dead cat” bounce turned into more of a moon-shot
back up in the dollar. It is at this point that you need to set aside your
analysis and read the market for what it is at the time. In this instance it
was obvious that something else was going on that I would not have dreamt of
only moments ago. The dollar came roaring back through what was support, 85,
and never looked back. I cut half my position on the bounce up, and cut the
rest at break-even, which at the time did not think would be breached.
Looking back, the move higher in the dollar in
Friday simply resets the clock so to speak. The path of least resistance is
down for the dollar, perhaps Friday’s bounce will offer some nice pull-back long
entries in the likes of EUR, GBP and AUD.
FX Observations For Tuesday:
EUR: after
last nights move to the upside, look for consolidation with support at 1.2815-30
GBP: very
extended, aggressive traders may look to short in here for a trade
AUD:
up-trend remains intact with slight pause
A break of Friday’s low in the dollar will
re-ignite the upside moves in the above mentioned pairs.
As always, I welcome your comments and questions.
Dave