EURUSD – Is this Breakout for Real?

EURUSD – Is this Breakout for Real?

Chart Of The Day

The euro blew through key resistance at 1.0800 level after a US official noted that Germany was using an unnaturally weak currency to compete in the world. This was the first time in decades that a US official used such interventionist language and the euro promptly verticalized as result.

Whether the pair can hold its gains remains to be seen, but the Trump administration appears to be serious about keeping the dollar competitive which means the upside pressure on the euro can continue for a while longer. The pair has massive resistance at the 1.0800-1.1100 level but is also at the same time vulnerable to a short squeeze. EZ data has been surprising to the upside while US data has missed its mark for the past month. If EUR/USD can clear the 1.0850 barrier -- 1.1000 could be in view.

USDCAD – Is this a Real Turn?

USDCAD – Is this a Real Turn?

Chart Of The Day

USDCAD – Is this a Real Turn?

In the last 24 hours we’ve seen a dramatic turnaround in USD/CAD. The currency pair bottomed and made its way to a high of 1.2965, now everyone is wondering whether we’ve seen a final bottom. Fundamentally after an extended uptrend, oil is due for a pullback to $45 a barrel and last week’s Canadian economic reports support a bottom in USD/CAD. Retail sales and consumer prices declined, putting pressure on the Bank of Canada to keep monetary policy easy.

Technically however, the outlook is trickier. Having bounced off the 61.8% Fibonacci retracement of the May to July rally, there’s no question that USD/CAD bottomed. However today’s move has taken the pair to 100-day SMA and 38.2% Fib of the same move. We would not be surprised to see a bit of a pullback before an attempt to break the 50-day SMA and 23.6% Fib of this year’s decline at 1.3000. As long as 1.2850 holds, we are confident that we will see 1.30.

Bulls-t Trades vs. Real Trades

Boris Schlossberg

What’s a real trade?

A real trade is any setup that you have tested, traded, written out and generally committed to as your core day trading strategy. Real trades have very specific entry, exit and risk control rules. Real trades have a whole series of defined scenarios when you will NOT trade them. Real trades deserve real size -- generally risking no more than 0.5%-1% of capital on any given idea.

All other trades are bulls-t trades.

Bulls-t trades aren’t necessarily bad -- in fact some bulls-t trades can be brilliant -- but all bulls-t trades must be traded only at 0.01 lot size with a maximum hard stop of 50 pips (swing traders could widen the stop to 200 pips)

Here is the thing. It doesn’t matter how disciplined you are. It doesn’t matter if you are a Marine who takes ice cold showers every day and wakes up every morning to 100 pushups and 200 sit ups. When it comes to trading you will never, ever follow your system 100% of the time. It’s our human nature to explore, to experiment, to veer off the given path. That’s how all progress is made. In fact you would be a horrible trader if you just followed your system blindly, because the market environment would eventually change and make mincemeat out of your strategy.

So trying something new is good. Its to be commended. It may in fact lead you to developing a great new strategy. But for now it’s just a hunch, or an impulse borne of boredom or simply a chase of breakout price action on the chart. In short it’s a bulls-t trade and you must always treat it as such.

The reason most traders lose money is not because they don’t have good setups or because they can’t analyse markets or because they don’t have discipline. The reason most traders lose money is because they treat their bulls-t trades like real trades and inevitably blow up 50% of their capital on one ill-conceived idea that mushrooms into a margin call. This is the post-mortem signature of every failed account I have ever seen in my two decades of trading.

How to Win At DayTrading

You may not believe me. You may in fact think that I am full of sh-t. I really don’t care, but allow me to leave you with the following chart. This is what happened to my account when I finally got serious and started treating all my non strategy trades as bulls-t never letting my impulse for exploration sabotage my drive for profit.

Screenshot 2016-07-26 20.39.03

AUD/USD – Is the Breakout For Real?

AUD/USD – Is the Breakout For Real?

Chart Of The Day

The Aussie took out the 7700 in the wake of better than forecast employment data, but as we noted earlier,”Although the headline numbers looked upbeat, the underlying data was far less bullish than it would appear. All of the gains were actually in part time jobs and full time employment actually shed -8.8K positions. Furthermore the trend growth data which is designed to smooth the noisy month to month results is showing a deceleration in growth to 2.2% in March from 2.6% in December of last year. Lastly the the trend monthly hours worked in all jobs series decreased by 1.8 million hours (0.11%) to 1,643.7 million hours.

None of these data points were unabashedly bullish and Aussie actually sold of a bit in the aftermath of the release, but the unit found a very strong bid in European trade climbing more than 70 points in a few hours. The net takeaway from today’s AU employment report is that despite the deceleration in job growth trend the RBA will remain stationary for the foreseeable future protecting Aussie’s 2% yield and which will in turn attract more carry trade flows into the pair.”

Tonight the market could get a confirmation of stabilizing forces in Asia when China reports its GDP and IP figures. If the numbers are generally in line, the Aussie could get a further boost and move towards the 7750 level indicating that the breakout is indeed for real.

USD/JPY Is the Bounce for Real?

USD/JPY Is the Bounce for Real?

Chart Of The Day

This has been the third time that USD/JPY has tested the 111.00 figure and the third time that is has bounced off that level. Is three times the charm for the pair? It certainly appears that way as even the risk aversion flows from yesterday’s terrorist attacks could not drive it much lower.

For the past week USD/JPY has suffered from the lingering aftereffects of the surprisingly dovish FOMC meeting last week. But last night Fed officials were considerably more hawkish suggesting that rate hike may happen as soon as April. The net result has been an improvement in US yields with 10 year benchmark rallying to 1.90% level. For now that area remains stiff resistance but if the 10 year can push towards the 2.00% mark then USD/JPY could move to 115.00 in the near future.

In the meantime the market will get Durable Goods and Initial jobless claims tomorrow and if the data proves supportive it could help send the pair towards the 112.00 mark as the week comes to a close.

EUR/USD – Is This Breakout for Real?

EUR/USD – Is This Breakout for Real?

Chart Of The Day

The EUR/USD rose more than 3% today in one of the biggest short squeezes in years as Mario Draghi under delivered and the pair which was grossly oversold popped more than 300 points higher. There is no doubt that today’s carnage caused a lot of pain to late EUR/USD shorts but the key question is whether the pair has set a long term bottom.

We don’t think so. The underlying dynamics that send the euro plunging remain in place. The ECB will continue to exert its downward pressure on short term rates as it maintains the aggressive QE program in the face of disinlaftionary pressure that still persist in the region.

Meanwhile the Fed despite the hick ups in US economic data will likely hike rate in December and the spread between USTs and Bunds is unlikely to narrow much providing a natural boost to the dollar. Only a delay in the Fed hike and a decline in the benchmark 10 year rates towards the 2% mark could upend the dollar trade and push the EUR/USD pair higher. Meanwhile the 1.1000-1.1100 level looks to cap the move for now.

USD/CAD – Is this Reversal Real?

USD/CAD – Is this Reversal Real?

Chart Of The Day

USD/CAD – Is the Reversal Real?

After rising strongly in the last 2 weeks of September, USD/CAD reversed fast and hard last week. The sell-off in the currency gained traction today and if this week’s Canadian economic reports are weak, we could see USD/CAD test 1.30. The change in trend was driven by a combination of weaker U.S. data and a rebound in oil prices. Canada’s trade balance and IVEY PMI numbers are scheduled for release tomorrow followed by the employment report on Friday. However we believe that USD/CAD will find support at 1.30 because economists are looking for a larger trade deficit and weaker manufacturing activity. Oil prices rebounded in late August but remain very low compared to June and July.

Technically, 1.30 is a psychologically significant support level. There’s no major support from current levels until that point but 1.30 is extremely important. If USD/CAD breaks below 1.2950, the August lows, it should be smooth sailing to 1.2860. On the upside if support is found at 1.30, resistance for USD/CAD becomes 1.31.

Real Traders Know…

Boris Schlossberg

One of the traders in my room said to me the other day, “I have this indicator I made, but I can’t use it yet -- it’s a still messy.” To which my response was -- it’s supposed to be messy, get in in there! That’s what trading is all about.

In the land of retail forex, chuck full of bogus and useless advice, the art of trading is presented as a simple act -- as easy as taking a selfie and posting it on Twitter. The broker ads show smartly dressed urbanites glancing at a pop up on their Iphone then pressing one button before smugly getting into their just pulled up Uber ride as they bank thousands of pips in between their daily appointments.

For those of us who risk real money every day, the reality of trading is quite different.

Real traders know that you haven’t really traded until you hit a sell button instead of a buy. Worse yet -- until you’ve sold a million instead of 100,000 and now watch in shock as a weeks worth of profits disappears in a matter of seconds.

Real Traders know that you haven’t really traded until you find yourself on the wrong side of a news release and watch as prices verticalize against you executing your stops 50 or even 100 points away from their intended origin.

Real Traders know, that at any given day, the ISP, the broker platform, the fiber optic cable between NY and London can all go down -- sometimes all at once -- leaving your orders floating in cyberspace for no one to execute.

Real Traders know that the SNB lift of the peg is not a “once in trillion event”, but pretty much what happens in FX every 5 years or so as the “world as we know it is about to end.”

Real Traders know that despite more computing power than is needed to run our nuclear defense capabilities, markets at their core are very human enterprises and therefore are messy by definition as they are subject to all the whims of sentiment.

That why I loved this other email I got this week that told me our service sucked because,”All I wanted was some precise and well analyzed trades with very high levels of accuracy and not guessing or speculations, which change all the time.”

Good luck.

Real Traders know that “guessing” and “speculation” is what we actually do for a living as traders.

Which is why Real Traders in my room make money every day. They are not afraid of getting messy. They are not afraid to “guess”. They are not afraid to lose. More importantly they are always open to finding new ways to play the Great Game.

See the VT Strategy Revealed in Live Market Action

Meanwhile all the amateurs continue to believe that all you need is “precise well analyzed trades with high levels of accuracy”. Haha.

How To Run Your Trading Like a Real Business

Boris Schlossberg

In my life I’ve always wanted to do only two things -- trade and run a food business. To this day whenever I find myself in a Walter Mittyesque reverie I imagine running a restaurant or a food store (Montreal bagels in New York is my favorite fantasy) -- but running a startup investment firm pretty much sucks up all my time so I put the idea aside for the time being.

Still, whenever I get a chance to talk to a store owner or a restaurateur I inevitably pump them for any information I can. Having spent most of my ill advised youth working front and back of the house I am well familiar with the arcana of the restaurant business.

Sometimes however I’ll strike up a conversation with a more modest establishment -- like the guy who sells me coffee from the cart every day. My coffee guy is one the nicest and hardest working businessmen I know. I don’t even have to say a word -- in a typical New York fashion he starts preparing my order when I am halfway down the block.

With Easter and Passover falling around the same time this year, New York has been a ghost town this week as almost everyone in my neighborhood has taken their kids to Florida or Colorado. So business was a bit slow and we had a chance to chat. Of course we got into a discussion of daily volume, peak flow and a million other things that would bore normal people to death.

However, the more I talked to my coffee guy the more I realized that what he and I do for a living is really not that different. Here was a businessman who worked hard every day, tried to execute as close to perfection as possible, but who also understood that his success was often dependent on forces outside of his control. He didn’t whine or cry when business was slow. He certainly didn’t throw temper tantrums and try to destroy his inventory and assets in a fit of rage, or suddenly decide to offer everything below cost in hopes of improving his business. He remained calm and disciplined in the face of adversity and was perfectly willing to accept the fact that some days, some weeks and even some months were not going to be profitable.

It always amazes me how disciplined most of us are when we run a physical business, yet how emotional and hysterical we become when we start trading a forex account. How many of us treat trading as a business? How many view each trade as a simple business transaction rather than as symbol of our intelligence, masculinity or self worth? Imagine if you were selling coffee -- would you really give a sh-t if you spilled a few cups? Yet we spent inordinate amount time obsessing over every trade. Its just a business transaction. Its not a reflection of our omnipotence or lack thereof.

Looking at trading as business really helps to put it in perspective. You understand that there are planned costs ( spread, stops ) and unplanned costs (slippage, wrong execution etc). After all, anyone who runs a restaurant business understands that spoilage is part of the game, so why do we get so pissed when our orders are executed imperfectly? Its just business. In fact talking to my coffee guy I realized that not only should we look at our trading as just another small business but we should consider each trading strategy as a separate storefront that sells a different product. If you owned multiple stores would you expect each one to work perfectly all the time? Of course not. By treating each algo as a retail “box” we can hopefully stop obsessing over every pip and focus on running our trading like a real business.

Like to trade the EUR/USD? So do we!

At BKForex, a large part of our trading is short term and the EUR/USD is one our favorite currency pairs to trade.

The EUR/USD is the world’s most actively traded currency pair and for many forex traders, this activity provides opportunity.

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