The Best of Boris in 2014

Boris Schlossberg

Predicting the future is a tough business, which is why trading is much more a function of trade management rather than proper analysis. Once you begin to appreciate that fact, being right becomes a lot less important while being not wrong becomes crucial to your success.

Why Analysis Provides Little Value in Trading
MAY 30TH, 2014

Trading despite all of the complex strategies that we employ is actually extremely simple and only boils down to three bets. You can bet on continuity. You can bet on mean reversion. You can bet on volatility. That’s it. Everything else we do is just decoration. That’s why traders obsession with strategies is laughably absurd. 90% of the success of your strategy will have nothing to do with its rules and everything to do with the market environment.

All Trading Strategies Are Worthless Without This One Thing
May 2nd 2014

Last night I saw Barbara Corcoran on the show who I admire very much for her hustle and no bs attitude and it reminded me of a recent interview she gave to Business Insider (Video here) in which she describes what separates the 40K a year salesperson from the 8M one.
Its not hard work.
Its not intelligence.
Its not personality.
Its the ability to take rejection and move on and try again.

What Separates an 8M Trader from a 40K one
APRIL 11TH, 2014

Whether it be diets or trade strategies how many times are we pitched the ridiculous notion that we can achieve success instantly with no effort or investment of time? Lose 10 pounds in 2 weeks on the bull-t, bull-t Miami diet! Earn 1000 pips in a month on my bull-t, bull-t new indicator that will catch every 5 minute turn in the euro!

It’s all nonsense yet we fall prey to it all the time because we want easy, quick solutions to all of life’s problems. But of course in real life bull-t diets and bull-t trading systems do not work. Is it any wonder that most people lose money in the market and almost no one can lose weight?

How many of you would be willing to trade a system for 150 days straight without any discernable profit? Yet in these low volatility markets that is indeed what must done. We all want instant gratification, especially when it comes to trading which appears to be such an instantaneous business. But in truth gratification in trading as well as in dieting is a grind achieved one small pip and one slow pound at a time.

Why Everybody Loses Money and Nobody Can Lose Weight
JUNE 6TH, 2014

Investment is essentially the art of buying assets. The simplest and surest way to make money as an investor is to simply diversify your portfolio and dollar cost average into your positions over a very long period of time (decades). Investing works because real assets tend to appreciate as economy grows and wealth becomes a simple function of compounding that economic growth.

Speculation on the other hand has nothing to do with investing. It is the art of trading sentiment and by its very nature is bidirectional in form. Speculation also tends to revolve around assets that are price bounded such as commodities and currencies. The simplest, sharpest way to understand the difference between speculation and investing is to consider the chart of the Dow versus the chart of the GBP/USD going back to 1980. Since that time the Dow has appreciated by a factor of 16 (from 1000 to 16,000). Meanwhile sterling has basically range traded from approximately 1.0000 to 2.0000. Unless we face and end of the world scenario currencies and commodities will always range trade and will therefore be instruments for trading sentiment rather than investable assets.

Hidden Leverage That Will Kill Every Day Trader
MARCH 21ST, 2014

EUR/GBP Headed for Fresh 2014 Lows?

EUR/GBP Headed for Fresh 2014 Lows?

Chart Of The Day

Fundamentals

The decline in the euro today drove EUR/GBP to its 2014 low and tomorrow’s Bank of England minutes will determine whether this low which has been tested on 3 occasions will finally be broken. No Eurozone economic reports are scheduled for release so the focus will be on the market’s appetite for sterling. The minutes are the most important event risk for sterling this month because the mixed messages from policymakers have left investors confused on how serious the central bank is about raising interest rates in late 2014, early 2015. BoE Governor Carney first suggested that rates could rise sooner but he later admitted that the comments were aimed at resetting market expectations because they believed that investors were underpricing the possibility of tightening. Over the past month, we have seen deterioration in trade activity, decline in retail sales and drop in the PMI index, making investors worried about a less hawkish bias. When the minutes from the June meeting was released, sterling fell aggressively because it did not contain an explanation for Carney’s hawkishness. The tone was balanced with no policymakers dissenting from the decision to keep monetary policy steady. With speculative positions still at extreme levels, a neutral policy stance would be negative for sterling and likely to carve out a bottom for EUR/GBP. However if there is any official suggestion that rates could rise sooner as some policymakers have suggested since June, GBP could easily recover all of its losses and drop to fresh year to date lows versus the euro.

Technicals

Taking a look at the weekly chart of EUR/GBP, the currency pair is clearly in a downtrend. If the 2014 low of 0.7889 is broken in a meaningful way, there is no support until the July 2012 low of 0.7756. A break above 0.8033 would be needed to negate the downtrend and put EUR/GBP in a better positioned for a trend reversal.

Will EUR/AUD Hit Fresh 2014 Lows?

Will EUR/AUD Hit Fresh 2014 Lows?

Chart Of The Day

Fundamentals

The recent outperformance of the Australian dollar and weakness of the euro drove EUR/AUD within 20 pips of its year to date low. AUD has proven to be surprisingly resilient in the face of geopolitical risks and was in fact Friday’s best performing currency. The currency found support from Australian Treasurer Joe Hockey’s comments. He expressed optimism about Australia, said he is confident that there will be stronger growth and attributed the rise in the currency to inflows and investor demand. He also felt that the government should not overreact to A$ strength which suggests that he does not support intervention. We will hear from more Australian policymakers in the coming week with RBA Governor Glenn Stevens and Debelle scheduled to speak – Stevens is much more concerned about the currency than Hockey and will most likely try to jawbone AUD lower. Meanwhile even with the euro’s recent decline, which was caused primarily by the earlier drop in U.S. yields, the currency has been surprisingly resilient. If one currency were to fall on these developments it should be euro because the Eurozone’s oil supplies is the most directly affected by the geopolitical tensions. However even with the latest pullback, the current account balance is above the 6-month average and euro is benefitting from risk aversion. Without a clear sign that the ECB is planning to ease, losses in the euro may be limited. In other words, while EUR/AUD could hit fresh 2014 lows, there is a greater chance that it will find support near 1.4360.

Technicals

Taking a look at the weekly chart of EUR/AUD, if the 2014 low of 1.4360 is broken, the next level of support for the currency pair will be 1.4230, the 38.2% Fibonacci retracement of the 2012 to 2014 rally. If EUR/AUD finds support above 1.4360, it should remain confined between 1.4360 and 1.4600. If 1.46 is broken, there is no major resistance until 1.4850.

EUR/USD Gunning for 2014 Lows

EUR/USD Gunning for 2014 Lows

Chart Of The Day

Fundamentals

The 1.35 level is very significant for the EUR/USD. Despite numerous attempts to test this level over the past 8 months, EUR/USD only closed below 1.35 on one occasion and that was on January 31st. If we look back all the way back to September, we see even more instances where the currency pair tested and failed to break 1.35 in a meaningful way. The only time that a sustained break occurred was after the European Central Bank surprised with a 25bp rate cut in November and while the sell-off extended to 1.33, less than 2 weeks later, EUR/USD was trading back above 1.35. So now that we are once again within 30 pips of this key level, many traders are wondering if 1.35 will hold. On a fundamental basis disappointing Eurozone data and a faster decline in European yields drove the sell-off in EUR/USD. The region’s trade surplus rose to 15.3B from 15.2B in May, which was less than expected and yesterday, the Eurozone ZEW survey dropped to its lowest level in 11 months. While Treasury yields declined today, the 1.6bp drop in 10-year yields paled in comparison to the 2.1bp drop in French yields, 2.7bp drop in Italian yields and 5bp decline in Spanish yields. However it is important to recognize that there are also fundamental reasons why the euro refuses to break 1.35. The Eurozone has a massive current account surplus, U.S. yields are still in a downtrend and the currency is benefitting from reserve diversification. Therefore without a significant rally in U.S. yields or a strong signal from the ECB that further easing is imminent a move below 1.35 could be fake-out instead of a breakout. Eventually 1.35 will give way but that may not happen until the fall when the Fed ends Quantitative Easing and shares its exit strategy.

Technicals

From a technical perspective, 1.35 is less significant than the February 3rd low of 1.3477. However taking a look at the chart, today’s decline has taken EUR/USD below trend line support. If the pair breaks its 2014 low of 1.3477, the next stop could be the November low of 1.3295. However if it holds 1.3450 (we’ll give it a bit of flexibility), it could be back into the 1.35 to 1.37 range for the pair.

EUR/JPY – Headed for 2014 Lows?

EUR/JPY – Headed for 2014 Lows?

Chart Of The Day

Fundamentals

Two weeks ago EUR/JPY broke a major moving average and trend line support, setting the stage for a deeper decline. The sell-off was triggered by the dovishness of the European Central Bank and then exacerbated by the decline in U.S. Treasury yields. However due to the recovery in the euro, we have seen very little follow through but from a fundamental perspective, EUR/JPY should be trading lower and current levels represent an attractive point for a short entry. Economic data from the Eurozone has been weak with France continuing to be the trouble spot for the region. Jobless claims rose by 24.8k to its highest level ever last month. This far exceeded the market’s 6k forecast. Consumer confidence improved in June but without an increase in jobs, it will be very difficult for the France to recover. The rebound in EUR/USD should also be nearing its peak with the currency pair closing in on the key 1.3677 resistance level. USD/JPY on the other hand, is being pressured by the decline in yields. Recent U.S. economic reports highlight the challenges faced by the Federal Reserve and help to explain why the central bank refuses to fuel expectations for tightening. As a result, in the near term U.S. yields will remain weak, providing no support to the dollar while the euro could trickle start to trend lower once again.

Technicals

From a technical perspective, all of the highs in EUR/JPY over the past 2 weeks have remained below moving average and trendline support, which is a sign that the breakdown remains intact. However in order for EUR/JPY to make a run for its 2014 low, it needs to break below 137.70. As long as it holds above this price point, consolidation is more likely.

BKSWING – 3 New Orders for June 2, 2014

Swing

There is no shortage of market moving data on the calendar this week and while we plan to trade many of key event risks, over the next 24 hours, the focus will be on the Australian dollar. The Chinese economy may be showing signs of bottoming, but domestic conditions in Australia have been worsening as evidenced by the sharp decline in building permits and overnight sell-off in iron ore prices. As a result the RBA could grow more dovish which would exacerbate the slide in AUD and take AUD/USD below 92 cents. We are positioning for a big move in AUD overnight through AUD/USD and AUD/NZD. Remember we still have our NZD short trade on so if 2 orders trigger, cancel the other since we don’t want to have more than 2 trades on the books.

Place the following pending orders:


1. Sell AUD/USD at 0.9179

Stop at 0.9239

Close 1/2 at 0.9149, move stop to breakeven

Close rest at 0.9055

2. Sell AUD/NZD at 1.0879

Stop at 1.0939

Close 1/2 at 1.0849, move stop to breakeven

Close rest at 1.0775

3. Buy AUD/NZD at 1.1027

Stop at 1.0967

Close 1/2 at 1.1057, move stop to breakeven

Close rest at 1.1175

Weekly Calendar Calls for March 17, 2014

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of March 17, 2014. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

The pdf file can be downloaded using this link PDF of Weekly Calendar Calls for Week of March 17, 2014

The excel file can be downloaded using this link Excel of Weekly Calendar Calls for Week of March 17, 2014

Weekly Calendar Calls for March 10, 2014

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of March 10, 2014. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

The pdf file can be downloaded using this link PDF of Weekly Calendar Calls for Week of March 10, 2014

The excel file can be downloaded using this link Excel of Weekly Calendar Calls for Week of March 10, 2014

Weekly Calendar Calls for March 2, 2014

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of March 2, 2014. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

The pdf file can be downloaded using this link PDF of Weekly Calendar Calls for Week of March 2, 2014

The excel file can be downloaded using this link Excel of Weekly Calendar Calls for Week of March 2, 2014

Weekly Calendar Calls for Feb 24, 2014

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of February 16, 2014. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

The pdf file can be downloaded using this link PDF of Weekly Calendar Calls for Week of Feb 24, 2014

The excel file can be downloaded using this link Excel of Weekly Calendar Calls for Week of Feb 24, 2014

Weekly Calendar Calls for Week of February 9, 2014

Weekly Calendar Calls

We have just posted our weekly news trading calendar for the week of February 9, 2014. You can download the pdf and excel file by clicking on the Read More Link. These are soft biases on economic data and not trades that we directly trade or track like BK Swing and News.

The pdf file can be downloaded using this link PDF of Weekly Calendar Calls for Week of Feb 9, 2014

The excel file can be downloaded using this link Excel of Weekly Calendar Calls for Week of Feb 9, 2014