Weekly trading plan: 10th to 14th July

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How to trade the news: understand what is news.

Sumiko Tan is an executive editor of Singapore’s mainstream newspaper the Straits Times. Picture credit: Straits Times July 8th

What is news? These days since Trump has been elected POTUS, there’s been lots of scrutiny on news. “Alternative facts” is endorsed by the White House. “Fake news” is a growing concern even Facebook and Google are thinking of ways of how to sieve out fake news because of the potential damage it causes in light of the explosion of social media.

Thene there’s nonsense news. Like the above. Which is basically a subtle advert to buy a book.

Trading websites like DailyFX, Bloomberg, are becoming more tabloidish than reliable news. And this is no surprise. Because news is a great business. Great business moguls like Rupert Murdoch make billions on selling sensational news.

Selling news is lucrative. Particularly for trading news. If you read through Bloomberg and DailyFX carefully, each article is skilfully engineered to hang a carrot to encourage speculation, feed greed and fear, and the most important point is thid:  news don’t make you money. The market does. A more controversial statement would be that “the market makes the news”. But perhaps we can talk about that over wine for a light hearted debate.

News is important. It gives traders informatiom. But we need to be aware of the many hands news has passed through, editors like Sumiko Tan, who considers it top news that she has a book of her life journey. Add on ingredients to excite and entice, And you’ve got the news you get.
Nobody bothers to read through the boring articles on economic news, or the facts. They want the analysts’ take on it. Shortcuts.  They want trade calls, recommendations. But they forget the fine print. And the fact these writers are paid to write articles. And exciting, ambiguous articles attract attention and stir emotions. And then come the subscriptions for “privileged access”.

By the way. DailyFx was and still is  associated with FXCM. Which was recently involved in a major scandal. It was sold to IG after the major disaster.
So why trade news?

Your choice. But be aware. The news doesn’t really have your interests at heart. Well? At least not anymore. News have more interest in what’s in your pockets.

Disclaimer. I’m not associated with any news maker or brokerages. I don’t want to be anyway. 

How to beat the NFP: My thoughts

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Ok. Let’s kind of sumnarize the major USD events so far. FOMC minutes did not reveal anything spectacular. There are plans for 3 more hikes over the rest of the year, so thats one hike in 2 months. Let’s look at some key factors that the FOMC take into consideration.

inflation

Are we seeing a start of a down trend away from the desired 2%?

nfp

Rather mixed, but the NFP has always been the centre of speculative trading

unemployment

Unemployment is clearly going down. And that is quite a good indicator of an improving economy

The next forecast for the NFP, depending on which news source you use, is projected to be above 170.

Usually, at the moment of NFP release, both the numbers and the unemployment numbers are taken in context. And it is usually within those few minutes of frantic speculation that the price of the US will go crazy, or not. (Who knows what the market does?)

So it looks pretty good for tomorrows NFP. And currently the USD seems to be moving upwards in anticipation. So, anyone want to put a buy order on the USD today?

Remember last week’s NFP for the EUR?

nfpeur.JPG

looks like a middle finger doesn’t it..dont know at who tho. Retails? Institutions? Everyone?

To sort of illustrate my point, go through the past daily charts of the main USD pairs. And without looking at the dates. See if you how many you can identify as those are the NFP dates. Some are obvious. But most of the time, I find that I cant. In other words, over the long term, this single event may have little impact on the overal market, but compiled NFP numbers, and further affirmation by the Fed, may be the true market movers.

To me, the NFP release is a very bad time to place your bets. The spreads go wild, your stops get wiped out, your emotions are hanging by the thread as you try to double your account in 5 mins, looking at the min charts.

What is your edge against the pros who are all well prepared for the NFP, who may even have pre-access to the numbers? (Watch Trading Places) How about the hackers who have already hacked into the NFP numbers and sold them to financial institutions?

Then there is you. Trying to make a quick bet in a crazy, deadly environment that will make you make huge mistakes.

Now, there are ways to trade the NFP. I know that. There are ways to trade through the EIC. There are ways to trade through the elections. Through interest rate announcements. Through media conferences.

To me, these are not sound trading strategies. They tend to build up alot of anticipation, greed, and fear, and you have to bet really big to profit well from the sudden movements: which can also move against you very quickly.

I don’t trade through the NFP, but I do take note of it. I see if there is anticipatory action prior to the NFP, and I like to see divergence before I enter a small position to fade the crowd, without a stop loss. And I my timeframe can go from 1 hour to 4 hours, and may hold the position until the next week.

I don’t aim to double my money in 2 minutes. That’s gambling. And my job is certainly not gambling.

I’m trading smart, trading casual.

Be careful of the wolves out there. Watch your back, and always, seek your edge against the market, even if it means going for supper instead of looking at a boring screen of numbers.

How will the 38 Oxley Road saga affect the SGD?

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Image credit: The Straits Times

Before we start a little discussion about this topic, let’s have a look at how the SGD has been performing against the benchmark USD for since the public revelations by Ms Lee Wei Ling.

sgd

Image credit OANDA. Vertical yellow line showing date of release of news.

Ok. Truth be told on that day, when she put that attention grabbing picture questioning the values of the PM, I didn’t bother reading it. But everyone seemed so interested in the “dirty linen”, people started liking people’s Facebook profiles whom they didn’t give 2 cents over before this, and it wasn’t before long memes started sprouting all over, including one very ingenious call for anti-pink dotters to stand up against the enemies of the victim who happens to favour pink T shirts on TV.

So ok. What was my trading plan for Tuesday:

plan

That was all.

I don’t trade the SGD. The Smart Casual Trader does not trade the SGD. Why? Because I trade Smart: The SGD is controlled by the MAS and how they control the currency is something I don’t understand, nor trust. Also, the spreads on the SGD are lousy. And the SGD is somewhat pegged to a basket of currencies which is not known (at least, I’m not smart enough to know), and it’s smart not to trade pegged currencies.


So this brings back to the question: Will it have any effect on the SGD? Well, even if I were trading the SGD for whatever reason, I wouldn’t be too bothered, even if it could have led to the weird rise in the SGD in a single day as shown in the graph above. On hindsight we see that the USDSGD regained the loss and is kind of back to business as usual.

That’s because the Smart Casual Trader does not trade the news. Sure, there are strategies around that teach you how to trade through important announcements and news, but that’s not the Smart Casual way. Let me explain why:

  1. News is exaggerated to catch your attention. News is essentially click-bait. Journalists are encouraged to write in strong languages, webpages designed to catch and hold your attention, to induce fear, anger, euphoria, all emotions which have no place in Smart Casual Trading.
  2. By the time you read the news, think about how many hands it has passed through before reaching you: Think about insider information, bought information, hacked information, and let’s just put all that aside, and think about the journalist who first hears it while you were sleeping, drafts it, passes to the editor, and publishes it ASAP.  In fact, the usual practice is to have pre-written pieces ready to be published in the fight to be the first to get the news “right”.  You think the news cares about you? Think again.
  3.  Live conferences you say? Ok, then you’ll need to pay for a special service to feed you the live conference, you’ll need to compete against a bunch of huddled experts and analysts all ready to decipher the news (with their own biases), form your own decision, at the same time watch the market reacting to the news and fighting your own emotions and biases etc etc….

Ok after just writing the above I got bored of explaining why I don’t read the news nor rely on the news for trade decisions. I only rely on market action because that’s what gets me the money, not the news. It’s my actions and decisions on the market movements that gets me profit, not the news. And in my experience, the market pretty much reacts faster before you can even switch to the right channel to watch the news.

So back to the original question: Will the Oxley Road saga affect the SGD?

Sorry, don’t look at me. I profited through Brexit, the USD elections, the French Elections which I didn’t even know was happening, the recent shock GBP movements due to who knows what because I look at price action above all else. That’s my edge against everyone else who is trying to predict or interpret something from news, which has passed through many many dirty, biased hands, with the intent to make you worried, excited, and emotional.

I don’t trade the SGD and don’t care much about it as a Smart Casual Trader. So sorry. I have no opinion on this matter.

No comment. (And some people reaaaaaly need to keep their comments to themselves)

See you on my Facebook Page!

 

Weekly Trading Plan June 19th-23rd

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All info credit to DailyFx’s Economic calender and Trading Economics

Week 4 June 19-23

 

No major holidays

 

Monday

NZD milk prices

730am AUD somebody speaks in some panel somewher)e

 

Tuesday

9am CNY somebody speaks somewhere out there

930am AUD June rates minutes released

315pm USD someone speaks

330pm Carney speaks somewhere

445pm CHF another person speaks somewhere

 

Wednesday

236pm Kuroda speaks somewhere

 

Thursday

5am NZD rates (credit https://tradingeconomics.com/new-zealand/interest-rate)

 

  • The trade-weighted exchange rate has fallen by around 5 percent since February, partly in response to global developments and reduced interest rate differentials. This is encouraging and, if sustained, will help to rebalance the growth outlook towards the tradables sector. (But has risen quite strongly since then)
  • Developments since the February Monetary Policy Statement on balance are considered to be neutral for the stance of monetary policy.
  • Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.

 

 

Friday

2am MXN rates expected to raise again!

 

  • Recently raised again to its highest
  • Noted inflation about 6%

 

 

830am CAD CPI

My thoughts

That’s alot of people talking over the next week with only 2 interest rate announcements scheduled: NZD and MXN. Now NZD is interesting.  Ever since its previous statement, the NZD has rallied pretty strongly, which is exactly what the central bank doesn’t like. So where will the so called “smart money” be this week? Shorting the NZD? I don’t know. All I know is, I prefer not to short the NZD as it is expensive to pay the interest.

The great Mexican Peso, which I hardly trade, but is super to go long because of its now expected 7% interest rate. Well, I consider it a risky currency, although some traders I know absolutely love trading it short term. For me, the spreads are bad, and it’s expensive to buy, so even with a 7% interest, I don’t find it value for money. We shall see. Check out my post on how I trade like an “intelligent investor” Ala Warren Buffett to understand what I mean.

Other than that I don’t see anything interesting than people opening their mouths. Now analysts list these as high importance because they are looking for hints to predict stuff. But as a Smart Casual Trader, I know you cannot predict anything. So to me, I don’t really bother. Besides, by the time what they say is published, someone else would have already had an edge against you by having either inside information first, or having it heard first (remember, analysts are paid to listen and analyze such stuff and come to some kind of prediction or analysis to send to their bosses).

What edge do you have against them if you also depend on the same information. No, your edge is that you are not distracted, nor biased, by what you hear, but what you see in the market price action.

Happy trading!