One thing that I have learnt since looking into forex from September 2012 to the present day is that no amount of analysis works 100%, short or long-term.
People make a living out of trading as professionals so it is possible to use a number of tools to extract money from the markets but there are two disadvantages for the untrained retail trader:
reading charts leads you to believe that you see patterns that regularly
get disregarded, undermining your price analysis;
for longer-term trends you need deep pockets if you are correct in your
theory but do not time the market right. Studies show that money
managers who try timing the market for shorter term gains regularly
get it wrong. If they get it wrong, with all their tools and knowledge,
imagine the small traders…
Regarding no.2, I was right about my assessment of a TRY reversal…only ten weeks too early, so I got blown out of a carry trade that had accrued nearly £2000 in interest. You have to leverage up to work up that carry to something significant, so I managed my trade as best I could but in August the TRY pairs skyrocketed each day higher, setting constantly new all-time highs. I kept trimming my position but eventually got wiped out.
Eventually, this pair has reversed but I am done with timing the market. I made some money shorting it in the last few days, and intend to continue shorting… However, politics had a real impact in Turkey so I am watching what Erdogan says or does, as markets invested in Turkey also watch what he says or does.
I use NewsNow with the ‘Turkish Economy’ filter, so I get news updates each day from all available sources across many newspapers across the world, all to do with Turkish economic news. I also keep an eye on the central bank’s meeting updates. If a trend like the ten-year bull run in USD/TRY can truly reverse, it needs something more to feed it, not just a lack of Lira selling. I am looking to re-enter a carry trade but my confidence is not so strong, so I am taking positions for a few days rather than weeks, until I see that more momentum builds. This kind of decision-making is so subjective that it is truly impossible to always have full confidence in one’s ability, I believe.
Further to this, the lack of clear volume data for TRY pairs - even the TRY futures with CME have very thin data - only leaves you with things like the BIST (XU100) index (https://finance.yahoo.com/chart/XU100.IS), which is inversely correlated to USDTRY, to gauge trend strength, or more significantly the MSCI ETF for Turkey (https://finance.yahoo.com/chart/TUR) which is also inversely correlated to USDTRY and, more importantly, shows volume bars for buying/selling strength.
Speaking of the ETF, on 11th October it showed strong buying volume, which also meant a steep drop in USDTRY… I should not say ‘meant’ because it is never a certainty whether it is TRY price that drives stocks down/up or the other way round, in this case. However, with a lack of volume figures for TRY in the futures area, the equivalent MSCI ETF volumes - available all the way down to smaller time frames - do offer some kind of validation of trend either way for TRY trading.
What do you think?