First of all I want to say thanks to all who read my thread and give an especially big thank you to the many people who welcomed me back to FF a few weeks ago and who have been so generous with their compliments ever since.
What I try to do here is to break down the "what" of some of the major news events in order to get a deeper understanding of the "why". The idea then is to take the "what/why" and apply it to some trading because I firmly believe that a deeper understanding of the "what/why" will allow all of us (me included) to spot some of the major trends and make some major pips.
Let me give you 2 examples of what I mean and please, I am not doing this to "toot my own horn" or to make myself seem better or more knowledgable than any of the many fine analysists here on FF.
I always welcome any questions or differences of opinion. Don't be shy about having either and writing a reply. Active discussion can only help everyone.
Let me give you 2 examples of what I referred to as the "what/why". These are abbreviated because they have been extensively discussed in previous posts.
What: Fed retains its' inflation bias. Confirmed by Bernanke's testimony from 2 weeks ago.
Why: It's not just the core PCE number; lowering interest rates while the economy is in a stagflationary phase can lead to a very dangerous runaway inflationary period that would likely have a much longer lasting and profound affect on the economy then any recession that could result from an increase of rates during a stagflationary phase.
Apply the What/Why: The US economy is in a weak phase while other world economies are waxing. That is why the $ has weakened against every major currency despite the fact that it's apparent to the market that the Fed will not be cutting rates any time soon (confirmed by Fed Funds Futures trading). Expect a $1.37-38 EUR and $2.0-2.1 GBP in the next couple of months.
I know-the $'s stronger against the Yen-that is a function of the carry trade which is explained in the next example:
What: BoJ is on a course to slowly normalize their rate
Why: To better manage an expanding economy in order to prevent the same "bubble" that placed them in the 15 year recession/deflation situation they've been in (and are not yet completely out of).
Apply the What/Why: The carry trade is in order because the bank can only raise rates very slowly-if at all. Long up-trends in the JPY crosses lasting days and weeks (and maybe months) were (are) to be expected (a lot of it has already occured and more is likely to) as the GBP/JPY approaches 240 and USD/JPY approaches 120.
Please note that these trends are not 20 pip swing trades done off 5 minute charts. They are long term trends that can provide 100's of pips over the course of days and weeks. I've come to the conclusion that the reason why 90% of retail traders fail is that they are trading the very short term bleeps and blips that occur within the major trends. I'm also convinced that the best way to trade is to identify the major trends at the beginning and later to buy on the dips within these major trends. IMO, when the GBP/JPY is in a 1500 pip upturn, trying to scalp 40 pips off a temporary downturn is a losing proposition.
So I hope you'll keep returning to my thread for a long time to come. I have every intention of being here for a long time-God willing.
NFX
What I try to do here is to break down the "what" of some of the major news events in order to get a deeper understanding of the "why". The idea then is to take the "what/why" and apply it to some trading because I firmly believe that a deeper understanding of the "what/why" will allow all of us (me included) to spot some of the major trends and make some major pips.
Let me give you 2 examples of what I mean and please, I am not doing this to "toot my own horn" or to make myself seem better or more knowledgable than any of the many fine analysists here on FF.
I always welcome any questions or differences of opinion. Don't be shy about having either and writing a reply. Active discussion can only help everyone.
Let me give you 2 examples of what I referred to as the "what/why". These are abbreviated because they have been extensively discussed in previous posts.
What: Fed retains its' inflation bias. Confirmed by Bernanke's testimony from 2 weeks ago.
Why: It's not just the core PCE number; lowering interest rates while the economy is in a stagflationary phase can lead to a very dangerous runaway inflationary period that would likely have a much longer lasting and profound affect on the economy then any recession that could result from an increase of rates during a stagflationary phase.
Apply the What/Why: The US economy is in a weak phase while other world economies are waxing. That is why the $ has weakened against every major currency despite the fact that it's apparent to the market that the Fed will not be cutting rates any time soon (confirmed by Fed Funds Futures trading). Expect a $1.37-38 EUR and $2.0-2.1 GBP in the next couple of months.
I know-the $'s stronger against the Yen-that is a function of the carry trade which is explained in the next example:
What: BoJ is on a course to slowly normalize their rate
Why: To better manage an expanding economy in order to prevent the same "bubble" that placed them in the 15 year recession/deflation situation they've been in (and are not yet completely out of).
Apply the What/Why: The carry trade is in order because the bank can only raise rates very slowly-if at all. Long up-trends in the JPY crosses lasting days and weeks (and maybe months) were (are) to be expected (a lot of it has already occured and more is likely to) as the GBP/JPY approaches 240 and USD/JPY approaches 120.
Please note that these trends are not 20 pip swing trades done off 5 minute charts. They are long term trends that can provide 100's of pips over the course of days and weeks. I've come to the conclusion that the reason why 90% of retail traders fail is that they are trading the very short term bleeps and blips that occur within the major trends. I'm also convinced that the best way to trade is to identify the major trends at the beginning and later to buy on the dips within these major trends. IMO, when the GBP/JPY is in a 1500 pip upturn, trying to scalp 40 pips off a temporary downturn is a losing proposition.
So I hope you'll keep returning to my thread for a long time to come. I have every intention of being here for a long time-God willing.
NFX