Slow Trader

Tag: currency market

  • Forex trading and USA holiday

    Good morning Forex day traders, 8 am Monday 19th February 2018.

    Our first trade of the day was missed. From the close of the bear bar at bar 1, an unassuming engulfed bar, I went for my first pot of tea of the day. I missed the second bear bar, bar 2, which provided a probable entry short of 8 pips.

    8 pips are our minimum entry in the GBP/USA currency market.

    The short went 12 pips below our planned exit, down to Friday’s low and to the significant number of 14000. That, of course, means 1.4 dollars to the pound.

    Trades today will in all likelihood be light being a USA holiday. A trading range day is expected, but occasionally on such holidays, a trend can form.

    Our missed entry looks good on paper, but in reality, I would have not made the short. The spread at the time was double, which is typical for a no-news Monday morning. As I don’t pay the entry spread, I always like to achieve a limit entry, the subsequent pullback at the close of bar 2, and at 2 pips spread, would have not worked.

    We wait patiently for the next opportunity.

  • The super tanker of markets

    Can we move the market? Possibly, certain markets. But we want to trade a market that has particularly high liquidity. In other words, the ability to buy and sell an asset easily and quickly.

    We trade major currency pairings for this reason. But how big is the currency pairing that we trade, and can we influence it a bit?

    If we consider the market we trade as the biggest super tanker – the one that is more than four football pitches set end to end – then to move this super tanker the retail trader is as if spitting (horrible habit) at the hull.

    Ah, but now we are a professional trader surely we have more influence at the level we trade. Yes, we do, we now don’t spit too often, we have graduated to a feather duster.

    To move our chosen currency pairing market, (particularly during the period of the Frankfurt, London and New York trade times where several trillion are traded daily) there are probably millions of spitters, many thousand feather duster types and everything in between right up to dozens of tug boats.

    The tugs, in this analogy, represent the financial institutions – banks, pension funds, big hedge funds and the like. A few tugs need to push or pull in the same direction to move the market.

    Our job is to determine, before hand, which way.

  • How big is the currency market?

    Just how big again is the currency market, the one that we, mainly, trade?

    Glad you asked. Lets take a brief look.

    As we know the currency market trades 3 to 5 (could be more) trillion every day. But what does that look like…

    As a thought, if everyone on the planet liquidated their assets, that is cashed-in all their worldly possessions (a foolish notion I know, because when a certain amount of people cashed-in, the remaining processions would quickly become worthless – but play along)

    And processions were taken at current value, property etc., and all debt was repaid, then the cash value on the planet would be in the region of 247 trillion. So we can see that 5 trillion on the currency market, on a good day, is not unsubstantial.

    Indeed, every 10 to 16 trading weeks the entire monetary value of the planet is traded via currency markets.

    On a weak trading day we said that 3 trillion is traded daily. So what does that amount look like. In approximations, it’s a little more than the combined value of all domestic property in the UK.

    Thanks to Nick for the information.