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FXX

Experienced member
1,140 195
Congrats.

Did you managed to short GBPUSD? The spike up and reversal of 100 pips was probably between 1-2 sec.
I wasn't too keen on trading the spike because i wanted to digest the data first and 2 seconds is beyond my pay grade :)
 

Brumby

Established member
593 137
I wasn't too keen on trading the spike because i wanted to digest the data first and 2 seconds is beyond my pay grade :)
I agree. It was difficult given how quickly the reversal went. What matters is you caught some pips.
 

FXX

Experienced member
1,140 195
I agree. It was difficult given how quickly the reversal went. What matters is you caught some pips.
I was right in my judgement of it being dovish. Can't help but feel that I could have made more, at least didn't lose. Going to be some opportunity to get back in so not all is lost. Keeping my motivation up working hard to get the process and knowing myself better and the learning curve steady. Who knows maybe one day you can call me a trader.
 

Brumby

Established member
593 137
I was right in my judgement of it being dovish. Can't help but feel that I could have made more, at least didn't lose. Going to be some opportunity to get back in so not all is lost. Keeping my motivation up working hard to get the process and knowing myself better and the learning curve steady. Who knows maybe one day you can call me a trader.
I believe you are doing all the right things. Just keep up the good work and effort and you will be successful. I have no doubt about it. You just need more experience trading the different conditions. Today's BOE was a good learning experience for me too. The spike and reversal was really quick. A significant part of that move was not tradeable except in hindsight.
 

FXX

Experienced member
1,140 195
I believe you are doing all the right things. Just keep up the good work and effort and you will be successful. I have no doubt about it. You just need more experience trading the different conditions. Today's BOE was a good learning experience for me too. The spike and reversal was really quick. A significant part of that move was not tradeable except in hindsight.
Thanks for the feedback. (y)
 

Nowler

Established member
905 74
Trade lesson number one is anything can happen and why we have "protective stop". Lesson number two is if the trade is a little better than a gamble, why is your risk initially set at 2 %? If your main reason is to engage and learn than the objective is to learn at minimal risk.

I have had previously pointed out to you that you are taking on too much risk per trade which you have pushed back.


As previously pointed out, all sentiments have a shelf life. Sentiments must be reflected in the price action regardless of what you think or what others say. If the do not reconcile then something else is going on.

I was trading the NZDUSD in the past several sessions, and it was obvious two way trading was coming in. This means the negative sentiment was dissipating and the negative news were beginning to be priced in at those levels. It would need fresh news to move valuation one way or the other.

The most basic question you need to address is what was your overall trade plan and the trade rationale behind that trade plan?

I also traded the NZDUSD prior to the release of the employment data. My thought process and trade rationale was the following.
1)Valuation is at equilibrium because prices were ranging with supply and demand coming in at those ranges
2)Is the market looking for a reason to buy or to sell?
3)The employment data would be a reason for such a catalyst.
4)Although prices are ranging, I was still leaning to a 60/40 that the market was looking for a reason to sell.
So on that basis, I opened a short position prior to the employment data. Obviously I was wrong and was immediately stopped out on the news release

There were 4 or 5 employment data points on that day and I had a hard time figuring out why the market reacted so positively. As it turned out, the unemployment print was 4.5 % vs 4.6%. However that is not immediately important. A trading rule is not the news but how the market reacts to the news that is important. In other words the market was looking for a reason to buy. The price spike could be a combination of positive data or short covering but the important determinant is what happens after the initial spike.


That is the reason why I emphasize to you previously you need to focus on developing your trade process. A trade process means you need to have a trade plan and a trade rationale. What was the rationale to expect the spike to stop and return to initial levels? A trade plan forces you to stop spontaneous trade actions and to think through the whole trade rationale. I previously shared that there are three things to justify a trade (taken from Forexlive) :
1)Is it broken?
2)Has something happened?; or
3)Has something changed?

Clearly the employment data has changed the trade dynamics. Why are you still focussed on business as usual?

After the employment data, my main focus was on how prices were trading to determine if the data was short covering or actually had some legs to it. After 30 mins, the price action suggested to me that demand was coming in and a long trade opportunity became available to scalp some pips before the sentiment dissipates. My thought at that time is that the fundamentals have not changed with the advent of a labour government and its policies. The slight deviation in unemployment is not a game changer and so a long window has limited shelf life.
However I was not prepared to short because the ongoing price action did not suggest that was the direction to take.


There are two problems that are missing in your comments.
(1)I think there is an emotional component in your 2nd and 3rd trade. Typically the reasons are non acceptance of what the market just handed out and/or revenge trading. The end result is that you just add on mistake after mistake. This is actually a common problem that you need to address if you want to have a lasting trading career. It is not simply about not wanting to repeat the mistake, It requires a mechanism that you must put in place to prevent your emotional behaviour overriding sound judgment.
(2)A reason why you want to keep risk per trade at 1 % or lower is to guard yourself against irrational behaviour under moments of stress in trading. If your risk per trade was kept at 1 %, then your collective loss would be 3 % and not 6 %. I guarantee you that there will be other frustrating and stressful moments where you will act outside your normal boundaries. The safety nets are built to protect your account during abnormal moments and they will present themselves as night follows day.


I don't believe the main issue is whether one can predict the outcome of data releases or is it necessary.
Thanks for the help.

There's nothing in there that I would disagree with.
There was definitely an emotional element in what I did and I realise that I am leaving myself wide open to a hammering. I will work on it... as you said, I should have a component to my trading which safeguards me from such things
 

Brumby

Established member
593 137
I was right in my judgement of it being dovish. Can't help but feel that I could have made more,
It is a good question. Could we have done better? I normally conduct a post review of this type of event to make some determination. I will share my post trade analysis since our trading approach and methodology is very similar.

I will first set out the research background as the determination is predicated upon certain assumptions going in.

The majority analyst consensus is there will be a rate hike coming off the BOE. The market in effect had priced in a 90 % probability as we got near to the event.
We also know that there are two key data points in the news release that are critical to how the market will react. The easier piece is the vote split but the forward guidance would be more problematic in terms of timeliness and language construct. This means there will be two trade decisions, one coming off the vote split and the other following shortly thereafter the forward guidance.

Since the market is expecting a rate hike, we had formed a view that there will be a price pop and an opportunity to sell into that fact. The forward guidance was more of an unknown in terms of dovish or hawkish nature.

If our view plays out in line with market expectation, the question then becomes how do we execute the trade strategy. I would first outline what we are faced with. Market events like this are primarily institutional plays. That means we are competing based on informational flow. The institutions have real time terminals like Bloombergs and Elkons. They have analysts who would call out their interpretation of the forward guidance to the traders as it comes through the wire. We are a one man band with delayed feed and acting as analyst and then trader. As I witnessed, that pop and drop of more than 100 pips was probably in less than 10 secs. No matter how nimble we are, we will always be behind the information cycle and hence price moves. Although we can take a small slice of that initial move, any bigger slice will require a different trading approach.

What do I mean? Basically we have concluded going in is to take a "sell the fact" approach. We already have a trade strategy and that leaves trade execution. In other words, plan the trade and trade the plan if we have conviction. It means setting a sell limit order at the recent price resistance to trigger us in during the price pop. It might be possible that it does not reach the price point that we set. Additionally there is the risk that the forward guidance is hawkish which would mean prices will just blow through resistance. We know that is very unlikely because there are no economic data pointing to such a scenario as a reality. In other words, the odds are not there.

Once we have done the analysis and formulated a plan, it can be quite frustrating to watch on the sidelines. The choice is whether to be reactive or proactive. That is a trade decision to consider if you want to do better.

Alternatively is to trade the second leg of the move which did developed during the US session.
 
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Brumby

Established member
593 137
FXX,

Are you planning to trade UK services PMI and NFP/Canadian employment today?

My initial thoughts.

If strong PMI print, buy GBPJPY
If weak PMI print, sell GBPUSD or GBPCAD

If weak NFP and strong Canadian employment then sell USDCAD
If weak NFP and weak Canadian employment, stand aside

If strong NFP, Buy USDJPY or sell EURUSD/GBPUSD/AUDUSD

I actually don't expect significant deviation on the data and might not trade if that is the case.

Your thoughts?
 

FXX

Experienced member
1,140 195
FXX,

Are you planning to trade UK services PMI and NFP/Canadian employment today?

My initial thoughts.

If strong PMI print, buy GBPJPY
If weak PMI print, sell GBPUSD or GBPCAD

If weak NFP and strong Canadian employment then sell USDCAD
If weak NFP and weak Canadian employment, stand aside

If strong NFP, Buy USDJPY or sell EURUSD/GBPUSD/AUDUSD

I actually don't expect significant deviation on the data and might not trade if that is the case.

Your thoughts?
Thoughts on the pound is regardless of the number of pmi, apart from a major deviation of expectations, I think yesterdays sentiment will continue so any opportunity to sell again will be taken.

Any bullish notes on CAD data and ill be selling GBPCAD and any dovish notes on CAD will depend on NFP for me (for nothing else but the lack of an alternative currency with current hawkish sentiment).

The fed are focused on inflation promoting data points and to a lesser extent employment and I don't think NFP is going to be a major mover today outside the initial reaction. If the NFP data is good I will be selling GBPUSD and if bad then I am currently without a hawkish opponent unless CAD performs.
 

FXX

Experienced member
1,140 195
It is a good question. Could we have done better? I normally conduct a post review of this type of event to make some determination. I will share my post trade analysis since our trading approach and methodology is very similar.

I will first set out the research background as the determination is predicated upon certain assumptions going in.

The majority analyst consensus is there will be a rate hike coming off the BOE. The market in effect had priced in a 90 % probability as we got near to the event.
We also know that there are two key data points in the news release that are critical to how the market will react. The easier piece is the vote split but the forward guidance would be more problematic in terms of timeliness and language construct. This means there will be two trade decisions, one coming off the vote split and the other following shortly thereafter the forward guidance.

Since the market is expecting a rate hike, we had formed a view that there will be a price pop and an opportunity to sell into that fact. The forward guidance was more of an unknown in terms of dovish or hawkish nature.

If our view plays out in line with market expectation, the question then becomes how do we execute the trade strategy. I would first outline what we are faced with. Market events like this are primarily institutional plays. That means we are competing based on informational flow. The institutions have real time terminals like Bloombergs and Elkons. They have analysts who would call out their interpretation of the forward guidance to the traders as it comes through the wire. We are a one man band with delayed feed and acting as analyst and then trader. As I witnessed, that pop and drop of more than 100 pips was probably in less than 10 secs. No matter how nimble we are, we will always be behind the information cycle and hence price moves. Although we can take a small slice of that initial move, any bigger slice will require a different trading approach.

What do I mean? Basically we have concluded going in is to take a "sell the fact" approach. We already have a trade strategy and that leaves trade execution. In other words, plan the trade and trade the plan if we have conviction. It means setting a sell limit order at the recent price resistance to trigger us in during the price pop. It might be possible that it does not reach the price point that we set. Additionally there is the risk that the forward guidance is hawkish which would mean prices will just blow through resistance. We know that is very unlikely because there are no economic data pointing to such a scenario as a reality. In other words, the odds are not there.

Once we have done the analysis and formulated a plan, it can be quite frustrating to watch on the sidelines. The choice is whether to be reactive or proactive. That is a trade decision to consider if you want to do better.

Alternatively is to trade the second leg of the move which did developed during the US session.
that sounds like a good process and not something I picked up on with the guys that informed me on the right path for success. Everything you say resonates with me and thinking about it I stalled on the technical side where I really should have thought about levels where it could reverse or orders to capture the move I expected. I think by employing a wait and see the data to digest it policy I just didn't bother with looking at the technical levels which, if I did, would have sparked some ideas for sure. Thanks for this nugget it is going to be applied to my trading going forward.
 

FXX

Experienced member
1,140 195
I am thinking risk off sentiment is about to hit the market. This Saudi Arabia situation could trigger problems. Figured last weeks sterling selloff coupled with yen strength might be a good choice. Seeing some banks saying they think the $ is topping out. Any sign such as the market selling on tier 1 and 2 data that is as expected or positive, for me, this is time for a multi session swing. Still pondering how I want to trade it. Do I wait for the main catalyst or do I rest on the fact that it's unlikely the $ is going to have legs without significant data breaches.
 

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