[B]2014.07.18. Weekly evaluation[/B]
Hi Traders,
My weekly evaluation is going to be a bit different than usually. I think the COT Report might also surprise us with some unexpecting results. I would however suggest for all of us: this week showed us how flexible we have to be in the forex market and always ready for a sentiment change, and for this reason the COT Report might not help us as much as usually as the picture was changing every day and does not help to define long term overview and picture.
It is hard to write this week for me as I took some of my largest forex losses this week. The week is not over and I have some promising trades at the moment on, however they are not closed so we have to see what happens.
I think it makes more sense to write about what I learned this week rather than about currencies as the game was basically safe havens vs. higher yielding currencies. These issues are very important. I was expecting a tough week full of reports which make it a bit difficult to trade sometimes. I did not get very well the NZD and GBP moves a couple of times and the bearish CAD Press Conference ended up with a bullish pip result… However more of the problem was the suddenly changing fundamentals: the Israeli-Gaza conflict was known to me, but I got to know too late the sanctions against Russia and the plane crash yesterday. These 3 events at the same time were just too much for my trades! I got stopped out in many trades and took losses.
What did I do then? I am very interested about all of your opinion as I never did something like this and it is questionable if it was the right move but thinking about it, I thought I have to take the risk. For my higher yielding currencies which were not stopped out I widened the stop loss and at night I also entered many JPY short trades. That was my thinking behind the plan: “Well the JPY strength is not because of the strong Japanese economy but only because of geopolitical risk. So if the geopolitical factors do get better than all these currency pairs will be stronger again. So I just go against JPY. And if I am wrong I will sit on my losses as carry trade is great against JPY and I will earn with it every day.” My basic plan was that the weak Japanese economy cannot hold on too long against higher yielding stronger currencies. I think the idea was great and happened exactly what I thought, the timing was bad though. I entered my trades a couple of hours ahead of the JPY peak, which means I was many hundreds of pips negative. I thought it would be great chance to enter even more JPY shorts however my risk would have been way too much. At the time of this writing the trades came back to a surplus and the plan worked out. The pitty is of course the many hundreds of pips left on the table. And of course who knows what the news brings, JPY rally again at any time. I will work now with tight stop losses to protect myself. Even if I close the trades, I think I can mostly get 50% of the maximum pips because of wrong entry, way too early against the flow (I think I can make 20-50 pops based on different currency pairs). JPY was only half of my problem but it got solved. The higher yielding currencies are still not doing great against other currencies than the JPY and especially my AUD short trades are not working at the moment.
So what do you think about my JPY short trades? Was it just too much risk to enter them and make wider stop losses on higher yielding currencies? I mean what I did is basically against everything I learned in forex but I had the overall view that a retracement has to come.
The COT Report comes out today; we have work to do, although as I wrote earlier the report might have some data which can be a bit tricky to interpret. On the other side, many of the risk off moves were happening in the second half of the week which means they will only be in the COT report next Friday! Keep this in mind!
Have a nice weekend and good trading today.