COT Report Analysis - a thread on market sentiment

Trading Discussion News and Economy
521

Stops are an interesting point.

To me there are 3 types of stops.

The first one is as per FE’s example - I call a doomsday stop. This is a fixed-pip stop and it represents max loss you are prepared to allow in a doomsday scenario. Imagine your computer has just gone on fire, it is starting to burn your house, with your mobile inside and your car keys are in the house. You were long GBP and the fireman is just after telling you the GBP is taking a massive hit (he is a part time trader).

Doomsday is useful in a case of illness or accident. Some retail traders rely on a margin call as their doomsday stop, this is not practical on a larger a/c.

Second stop is a wide stop, it can simply be your exit, thought out and representing at what point you consider your trade premise to be wrong. If you have traded on fundamentals then where do you see price moving to should the fundamental picture change. An example is currently the GBP, there is a leading trader who has bought high, the higher price was based on the belief that interest rates would increase this year, that fundamental picture has changed, at that point a stop would be engaged, i.e. an exit.

Then there is the tighter TA stop, below last low or whatever. Example, this morning pre news I went long on GBP, expectation that the news would not be a disaster, stop was just below the Asian low - i.e. the point where price would breach should the news be bad. Then bring the stop on up to entry at 75, expectation that there may be a little USD selling in the coming NY session, if not then the stop takes me out at B/e

There are thousands of posts on babypips on this subject, everyone with their own ideas.

522

Hi guys,

peterma,
thanks a lot on your opinion and helping us again with sharing your thoughts!

USD,
ok guys, we have seen only positive USD data but no USD movement on it. It was already strange. Now we see movement vs. USD on all currencies. Is it the correction we were waiting for? It is not a report catalyst, either just sentiment shift in the short-term I guess, or some geopolitical news that I do not know at this point.

MT4,
guys I need help for MT4. I do not use it often for charts but now I have to. The problem is I click on using candlestick charts but it just shows line charts. I had this problem earlier too, but now I do not have any candlestick charts at all. Even if the setting shows that I look at the candlestick view… Opinion?

Thanks

523

Hey FE.
Sorry man, I don’t use mt4. I can’t help you. I’m sure someone on babypips knows.

Hope you get back on and running soon!

Mike

524

Hey guys!
Well, if I were you all, I would think about getting some USD. Like soon! It just looks like the correction has ended. Man…if I were at home right now I would be throwing much more position size on them.
Checking the 4 hr charts now. It’s definitely turned the bend.
See, they must have a correction in order to rally some more. And we’re talking about the last 2 days of nothing but going up.

Good luck.

Mike

525

FE, did you try right click on the chart, down to properties, click on ‘Common’ tab, top right box you can choose line, bar or candlestick.

I don’t trade with mt4 but it’s an excellent analysis tool, I use two of them, one on US time, and one on GMT.

526

Mike, funnily enough a correction today on the CRB as well.

527

Hi peterma,

yes I always use the option that you say. But it never works. I have always candlestick option on but it just does not change it. Funny, sometimes for some currencies it works but mostly it does not.

I do not know still if in Jackson Hole there are news coming out because USD is losing against comms.

Have a nice evening everyone

528

Hi FE,

USD,
Yes, it’s strange. But I see gold price keeps dropping, so I’m still bullish on USD.

MT4,
Hm, I’ve never seen this problem before. Can you post a screenshot?

529

MT4 chart problem.jpg700×228 21.8 KB

Hi guys,

I wanted to say thank you a lot that you try to help me. I made a print screen of the problem. A few times it does work but very rarely.

Thanks

530

Hi FE,

Ah, try zooming in. Hotkey is numerical keypad “+”.

531

Man that was easy… But why do they make it like that? I mean how should I know that it is completely zoomed out… Thanks!

532

Hey guys, here we go.

NZD: +5 -0 2
CAD: +4 -0 3
CHF: +3 -0 4
AUD: +3 -1 3
EUR: +3 -2 2
USD: +2 -5 0
JPY: +0 -6 1
GBP: +0 -6 1

Wow. Well Comms took it alright. With a +11. (15 = max)

Here’s the tug of war.

  Higher, Lower, Even(10 pips or below)

NZD: +4 -0 1
CAD: +4 -0 1
CHF: +0 -0 3
AUD: +3 -0 2
EUR: +0 -2 1
USD: +0 -3 0
JPY: +0 -3 0
GBP: +0 -3 0

See Rookie…NZD was up against USD, GBP, EUR, JPY. That makes the +4. They were down against no one. Even against CHF. Hence the +4 -0 1. (daily candle today)
Now I will just add up the Comms. Look up there, we have +4, +4 +3 equals a +11. And they were down against no one, so that equals a 0. The sum is a +11. Majors same way. +0, and - 11. It’s always the complete opposite. (+11 on one side and -11 on the other). Basically the Comms have it today +11.

Hope you can understand this a little bit more. Let me know.

Ok, guys. Got to run. Late.

Will be chatting in the a.m. (p.m. for some)

Mike

533

I was having the same think about going long gbp/nzd. I actually like it a lot and could look into it today or next week.

As for the stop loss remark, I’m not sure I follow. I didn’t tell Mike at any point to put a 250-pip stop loss. He said he made 250 pips on the trade he took, so I suggested he puts a stop loss at break even and let his profits run.
The other time I discussed stop losses when I discussed the three trades I took. I said it was 250 pips combined just to tell you guys how much I’m risking on the three trades. But of course it was based on resistance. The entire trade was based on reaching a monthly resistance. But I do not recall saying putting a 250 stop loss just for the sake of it.

It also brings me to a point to make clear; when I try to trade reversals or long pull-backs, I start with a very small position and add to it afterwards. So I only took a loss of $200 on the three trades combined, because I traded 0.1 lots on each one. Its only when the reversal or pullback is confirmed that I add more meaningful units. That way if the trade doesn’t work (usually the case) I don’t lose much. And if it worked I milk it as much as possible

534

Morning guys…

[B]FE…[/B] you’re funny FE!:18: I do manage to sleep 7 hours a day. It’s just that Ive been thinking about it all for a while and I had to write it up here on this thread. And these days especially I’m getting quite active about trading. I’m really getting into all this. I can’t help it, the market the thrill , the challenges just don’t seem to end anywhere and keep me coming back for more thirst for knowledge. I agree with what you have said about pounds strenght - main trade partners being US, Germany and France they seem to balance each other out doing okay generally. I am still somewhat bullish on GBP we’ll have to see where specs are positioning themselves with this weeks COT data and decide from there - for confirmation.

About the EA thing I think you might have misunderstood my point. What I meant was I wanted to hold trades longer - more pips. Thats the reason why I’m doing all this. And I looked at guys who rely solely on systems one or two indicators who have no clue whats happening behind the price movement but still manages to pull in pips. I want to see the result of our work. By being patient and confident in my bias. Nevertheless thanks for bringing up several systems FE… i will take a look at them but its just out of curiousity. I do prefer to trade manually and the way we approach trading. I have little interest in EAs, to be blunt I’m on the same boat with you. I think they’re waste of time and money.

[B]Mike…[/B] Thanks man ! I appreciate that ! I’m not smart Mike I’m just sharing what I read and add a bit of my opinion on top. If somebodys ought to be smart in this game that should go to Peterma and FE theyre quite good at all this fundamentals - its just that they don’t accept any of those remarks. It’s funny how you brought up your dream to be a macro economist. I’ve always had a thing for economy , how all that function has always been a fascination of mine especially investing and trading. I have long followed Jim Rogers have seen many of his interviews and just admired how he approached investing he’s a true fundamentalist. I wish you’d have more time to read and study the books that you have acquired on macro economy. That gave me some inspiration maybe I should get myself few books on economy. I just love that man! probably should hit the bookstores soon.

I’m in with EURUSD and NZDUSD , went short this morning /pm/ it sure looked like bears are riding euro and kiwi down on 1H and 4H charts respectively. The correction may have done for now, bulls can’t seem to pull these higher than fibs 38.2% for NZDUSD daily&4h as for EURUSD bulls are coming stronger at under 23.6% daily&4h they might just break through. We’ll see. Usually I would wait for a bearish candle form and go in after a close but as I was quite convinced about my bias I went in ahead from 4h chart. Didn’t want to be left out of the trend.

Thats the beauty of having a portfolio isnt it. When one isn’t doing well the rest that are doing well balance it all out. Much like mutual fund. That is the sole reason why I was fascinated about MGs thread. The concept.

There’s going to be few releases later during NY session for CAD CPI YoY , I know you’re already on with USDCAD Mike, once that turns out bearish I’m in if technicals align probably next week. I’m trying to run a portfolio now. Long term. I’m feeling a little comfortable now that I’m realizing the importance of bigger picture, fundamental factors.

I said ealier that I would until Yellen’s speech at Jackson hole symposium through saturday and will not place any trades this week. But I went in with USD against EUR and NZD, i could have waited. We’ll see.

Its getting long now. But I did some reading early this morning.

“After two strong days of rally, the US Dollar took a breather Thursday”

“Dollar Rally Cools Before Janet Yellen Takes the Stage at Jackson Hole”

“Data-wise, Markit’s manufacturing activity report for August was sharply better than expected and a series high, while existing home sales hit a 10-month high”

“The most reserved of the three speakers, John Williams said a Summer 2015 rate hike forecast was reasonable. A known hawk, Esther George (host of the Jackson Hole Symposium as the Kansas City Fed President) stepped it up by remarking that some measures suggested rates should already be higher.”

We sort of know Yellens position in this I just hope that she won’t be pessimistic about all this but show more optimism in her speech regards to these measures. That alone I hope should be enough to keep US rally going with pullbacks in between of course. And that will also keep me from falling under through the weekends with my two open trades.

See you around guys!

Update: NZD is climbing high against USD I’m afraid I will get closed soon if I don’t widen my SL… There’s something about opening trades on fridays. I widened my SL for both NZD and EUR my two ongoing trades its friday and I’m thinking of holding it through the weekends, I wouldn’t have been comfortable with such wide SLs if I weren’t as sure about my fundamental and sentiment bias. From technicals point of view looks like my entry was early given thats its friday profit taking day and prior Yellens speech. But I’m with USD, I think I will conitnue its rally. If there isn’t any obvious signal from COT specs positioning that we’ll shortly get later today and Yellens speech I will keep it going I know FE I seem to forget that COT data is few days old from time to time and ECB head will give a speech at Jackson hole symposium whats your view on that I’d like to hear from you [B]FE[/B] there’s a talk of stimulus plan if that goes ahead… I have to read more :eek:. May I ask how wide is your SLs are [B]Mike [/B]and [B]FE [/B] for your long term trades ? There’s something to be said about MGs method in this scenario. Though I’m not pro no SL, having tight SLs especially if the entry was early can do more harm than good especially if your entry was early and direction was right. I’ve done that many times when I had little or no clue about fundamentals in the past. I guess I’m trying to justify my action here widening my SL. Was it a wise decision ? I may have entered early but who would have known that pullback hasn’t done yet.

535

I wish I read your stats before I went in with NZD Mike. I went in a bit too early. I see how you added that up. Have you already locked in some profits or moved your SL to break even while there isn’t much change in sentiment now if things have already moved along your direction I don’t see any problem why you shouldn’t at least move it to break even if you’re protecting your position against big swings that are to come /retracements/. Its a tug of war really. Thats how market behaves I guess. There’s always two sides. One buying the other selling. Thus we see a pullback retracement. But there’s always a dominant one out of the two.

536

Here’s some scoop on ECB head’s positioning at upcoming Jacksons hole symposium if you’re in with EUR short…
Draghi Seen Holding Nerve on Economy as ECB Enacts Stimulus Plan - Bloomberg

Draghi Seen Holding Nerve on Economy as ECB Enacts Stimulus Plan

“Economists from Morgan Stanley to JP Morgan Chase & Co. say the European Central Bank president will avoid announcing new measures for now, even after euro-area growth stalled last quarter. Instead, officials will trust existing policies to stem mounting risks such as slowing inflation and escalating sanctions against Russia.”

“Draghi is relying on record-low interest rates and unprecedented liquidity to foster a recovery that has so far relied largely on growth in Germany.”

“Figures today showed the 18-nation currency bloc unexpectedly posted zero growth last quarter as its three biggest economies failed to expand. German gross domestic product fell 0.2 percent, more than forecast, and France stagnated for a second straight quarter” ----> this raises a question if pound will keep its strenght unless ECB implements more policy easing measures further rate cut ? Will that have positive or negative effect on euro ?

I just had quick look at ECBs interest rate database on 11 june 2014 the last update has been done with

  1. deposit facility /-0.10%/ 2. Fixed rate tenders /0.15%/
  2. variable rate tenders /-/ 4. Marginal lending facility /0.40%/

“The stimulus effect from the June package has yet to show up,”

“Consumer prices rose 0.4 percent in July from a year earlier” - lowest in 5 years less than a quarter of the ECB’s goal of just under 2 percent.

Still, “it clearly isn’t sensible to do more than has already been put in place,” said Peter Dixon, an economist at Commerzbank AG in London. “There will be pressure, that’s part of the game unfortunately. But Draghi will be able to resist.”

“The chance of the ECB doing more has gone up,” said Greg Fuzesi, an economist at JP Morgan in London. But that still raises the question of what form any additional policy easing would take. This remains hard to gauge.”

537

Hey Rookie!

Yeah, I had stop losses in place, some break even, but some profits. NZD gave me some profits. I got stopped out by AUD, NZD, EUR. I just have been constantly adjusting my portfolio. If I lost, I got back in. Geeeez. I feel bad, cause I said yesterday to you all “CORRECTION HAPPENING”. But, nope, not fully. So, now, an hour or so into London, I’m saying it again. Just not that loud. I got back in some now. I just put in for AUD, NZD, EUR. See, I (like Philip) start out small, 1k lots, and then I will add as it goes my way and while moving stop loss closer to price. So when I lose it’s not by a whole lot. I think that’s the best way to minimize risk.
I am making quite a bit with USD to JPY and CHF. Those 2 I’m glad about.
I do think that the USD correction that has been happening is a good thing. Especially before Friday came. I just keep thinking that in order for something to keep going higher it must take a breather and gather momentum that way. And I might get stopped out, but, like what happened this week, when the big jumps happen that gives me room to add more position and move stops. So, now it’s Friday, and I think it’s a good time for the USD to go out this week higher.
Don’t take me literally. You all know that we just really do not know what’s gonna happen. That is just what’s going through my mind as I think about the bigger picture. Doesn’t it seem like this game in played on a weekly basis? Psychologically speaking we have a break in the action on the weekends. So it’s like a run to Friday every week. Monday’s always start out slow, momentum builds from there. Wednesday’s always seem to be a turning point with big action happening, then on Friday we have the take profits happening (for the most part).
So given that mentality I think something is gonna happen today with the USD before the weekend.
As I just wrote that last sentence my AUD trade got stopped out. Yeah, it was -22 pips, but only $-2.28. And as I write this now I have to say the USD isn’t looking good for the come back, just yet. So, beware!

Got to pay attention to the market now.
I’ll be back.

Mike

538

2014-08-22_0443.jpg700×312 28.3 KB

That’s AUD/USD 1hr chart from the beginning of the week. It has climbed back up to the open of the week. But do you see the second to the last candle? It has the wick that dropped down to the open, then went back up some. So, we’re now just into London and have US session to go. Given the strength of the US compared to the AUD, I think it’s gonna go back down. It retraced 100% right? (I’m not big on fibs)

Well, I’m not in that pair now (stopped out a bit ago). But before I leave for work (half hour or so) I’m thinking of getting back in with a stop loss in place. (I can’t trade during the day so I have to make my decisions now).

Mike

539

Hi rookie,

well today are no events in the morning session and I think it will be a good day to learn again. It is hard to jump in today in my opinion. I do see two forces today before Jackson Hole speeches: Traders take profit so USD loses value and traders price in the potential positive news from Yellen and USD gets strength. Actually the best would have been USD didn’t lose any value. In that case I think no matter what Yellen said it would have been difficult to give even more strength for USD but if Yellen was more bearish then USD would have suffered big time in the short-term.

About your trades. I am still thinking if I should open or not today. In the long-term I do believe that your trades will work out well but who knows how much it can first go against you. I think you either made a very good trade or you have to sit through a larger retracement before it comes back to current levels. What is interesting for me, you mentioned EUR and NZD but no AUD. AUD gained the most vs. USD. Of course AUD is the strongest of them at this time so I do not say to trade it but it worth to mention in these times if a currency makes almost 100 pips vs. USD. We do not see it very often.

Stop loss. Uhhh this is a very difficult part. I agree mostly with what you have written when you said stop loss makes more harm than gain. (Sorry for bad interpretation BTW Philip). Still, you have to know when your trade is invalid. The toughtest thing is to close losing trades. As far as your trade is confirmed it is ok to ride it but not too far. However spikes did so much harm to me in the past that sometimes I just wait for news event and make my stop losses after the event. In this case I can survive spikes but still do have a stop loss after the “spike danger” is over. If there is one thing in MGs thread I like until this point is his stop loss mentality. But this only works if someone is strong enough to pull the trigger and close losing trades. Most are not. Losing big time is bad, but still better than burning your account!

And to this point comes what you say about break even stop loss. You have to watch out with that one too. It is a tough question again. I have suffered a lot because of making too often profit saving actions with moving stop loss to break even. 100-200 pips movement is normal in long-term trade so that can always move against you. I lost many potential pips because price came back, hit stop loss at the break even point and soon after turned back to my direction. My analysis was good but tight stop loss left me out of the wins. So pay attention. I think it is a trade dependent. If you are not sure about the current trade where you are in (that would be the case for me at this moment with AUD) then it makes sense to have a tighter stop loss. If you say NZD and EUR goes lower no matter what then give room to your trades and try to avoid the possibility that a too tight stop loss takes you out of the trade.

Here I suggest you to look at the weekly and daily USDHUF chart. I am loosing big time. I still hold on to my trades and even added to my short positions. Why? My bias did not change. HUF is on 2.5 years high against some of the currencies and this high level cannot be sustained for a long-time. The Hungarian government has to pay back it’s foreign currency debt which costs them a lot more money if HUF is weak. So at some point they have to step in and push HUF down. This is my bias and I go with it. However one point to keep in mind: what I do here is very risky. I do not know what extreme level is managable for me. I have to think seriously hat is the maximum point where I can go. So year earlier there is a level on the chart with 250 value, if you see it. I think that is the last point where my trade idea would be valid. [I]Bottom line is to decide about S/L is your fundamental bias, how confident you are with your setup and when the time comes, do not delay and push your stop loss further on but close the damn trade and take a day off.[/I]

Good trading and good luck!

540

Hi Mike,

funny, I mentioned AUD and at the same time you posted about it :slight_smile:

Your post fits perfect what I have just written to rookie. So I give you something to think about in your work today! What you are doing currently cost me earlier also a lot of money!

The question is: if you got stopped out why are you back again? Oh, boy I did it more times and cost me so much money. If you set your stop loss correctly earlier then your trade idea became invalid and you are back in it! But why? On the other side if your stop loss was false then why did you put it there. If you are right and it goes down then you just pay spreads twice. It also costs money. (please do not come with MG theory on spreads! :slight_smile: I have my opinion on that. No matter what he says but spread does cost money). So I think you should decide earlier what to do. If you jumped back now then your earlier strategy was bad. If the earlier strategy was right then you should wait for some longer retracement before jumping back in! Either way at least 1 from the 2 decisions made is bad. The worse case scenario would be a longer retracement, making both decisions false!

Watch out! And I wish you as always good trading!