Greetings, Alex here. I am more than halfway through the School of Pipsology and am still in the process of learning FX. I am loving every minute of it!. My hat’s off to the writer of the courses! I enjoy your sense of humor very much! Thank’s so much to all who contributed to developing the courses!
I find myself stumped regarding a demo trade I made prior to the Fed’s rate hike announcement. I shorted the EUR/USD expecting the dollar to rise in response to the rate hike. I do have a good understanding of Macro Economics. I am at a loss however for an understanding why the Euro rose against the dollar after the Fed’s announcement of raising the interest rates. I’ve been monitoring the Euro throughout the day and other than an approximate 27 pip move north (5 minute chart) at around 8:30 am NY time, it pretty much ranged the rest of the day up until the announcement. I looked at price action after the news from Euro came out prior to the US Market opening and if anything it caused more of a sell-off. I understand the 27 pip move up after the US inflation numbers came out. Not much of a move but still a move in the direction expected. With the expected Fed announcement of a rate hike, I was expecting the dollar to rise against the Euro but the opposite happened. I realize that this can and does happen but typically there is a sound fundamental reason why it does. I am unable to find one this time. I don’t think the shock from the Alabama election is the reason. That news was old by the time the Fed’s announcement came out.To my way of thinking that should have already been priced in by the time of the Fed’s announcement. So I am at loss. Any feedback is much appreciated.
Hi Alex
I also have similar thoughts to you. In fact, right across the board USD went in the opposite direction. My expectations would be that interest rate hike indicates US Fed believes economy is improving, so USD should be stronger.
But, I have the idea that “professional” traders and Institutions already priced in the interest rate increase over the past couple of months. Eg they already went SHORT. Subsequently when the interest rate changed, they took their profits off the table, at the expense of “retail” traders, who like you and me, think the price will continue to move in the direction we expected. But instead our SHORT positions are simply creating liquidity in the market for the large players to profit.
This the price moves in the opposite direction.
My thoughts, but I would also be interested in other opinions too
Luke
Everyone knew the rate hike was on the way - it was already priced in.
In the UK, the Bank doubled interest rates recently, and the pound weakened on the news.
Trying to compete with institutional traders (and that’s what you were doing) on the basis of fundamentals is unwise. They’re always better researched and prepared and more responsive than a retail trader can ever be. Compete with them on technical analysis instead: you can do things they can’t, and have leverage and trade-management facilities available that they effecitvely don’t. You might find an edge, that way. You never will on fundamentals.
At the moment, what we’re missing is a very long, rambling, semi-coherent response from a guy called Martin_K, including some terminological inexactitude and a couple of factual errors … but he’ll doubtless be along within a few hours.
Thanks Luke. I thought the same thing so I checked the monthly chart and the Euro dropped in both September and October setting back to back bear candles for a total loss of about 274 pips followed by the month of November in which the bulls took it all back forming a nice engulfing pattern. Nice and academic so the bulls thought but they failed to push through previous resistance and the bears have been having their way so far this month.
So if the big guys already priced it in, they had to in September and October because prior to that it has all been a trip north for the Euro with the bull’s having a feast given the exception of the month of February.
As I learn more I realize that one has to look at the bigger picture first and then chunk down from there. Now that the Euro Zone has passed its initial bout with Brexit indigestion, things are looking brighter for the Euro in 2018. I think it’s going to be a trend continuation with minor pull backs throughout. With Trumpanomics calling for a weaker dollar, today’s move may have been carried out by the Fed itself to keep the dollar in check. Who knows. I love this game!
Thanks Charlie. I am not trying to beat the big guys. I am feeding off of their crumbs supplementing my pension. Up to date I have done very well trading the news in equities and options using both the technicals and fundamentals which to me was like watching paint dry so I decided to diversify into the FX where all the action is and action there is! I am only paper trading FX right now and will continue to do so until I find the Holy Grail…just kidding…until I can see my way through more clearly and this site is absolutely awesome in helping FX newbies like me.
And to think I aced both Macro and Micro as well as Stat 1 and 2. I think I should ask for a refund. I was prepped as shark chum by an institution of higher learning
To be honest, if the players of the ECB, FED, BOJ, and many of the experts don’t have a clue, at least it appears that they don’t, I certainly don’t. We have been in unfamiliar waters since 08 and I still think they are trying to determine whether the light at the end of the tunnel is not an oncoming train. It’s been a long journey of tip toeing through the tulips for all zones since the bubble burst. In the end, who really knows except the members of Bilderberg Group and the gods of the great house across the pond which owns every central bank on this spinning rock except for the North Korean and Iranian banks. Oh, did I mention that a third country is in the process of removing their current central bank and are creating their own monetary system? It’s the RCB. The Rothschild Central Bank…ooops I meant the Russian Central Bank owned by the Rothschilds. Funny thing how the US is in a conflict with all three of those countries as we speak. No no, no conspiracy theory here. Just saying it seems odd to me.
I believe the strength of the current business cycle as well as past ones are due to high levels of plastic, borrowed and printed money. Their weaknesses are due to the lack of the number one element for any business to be healthy, sales of their products and services. It all comes down to perception. None of it is real but only perceived to be real. Sounds like Voodoo Economics to me dressed in drag. What’s your read on it?
Falstaff, I just realized that my long winded novella may have not answered your question. I re-read your question and if I am correct you were asking me for a logical reason for “a” business cycle and not “the” business cycle we are currently.in. If that be the case then my apology for misinterpreting your question.
I cannot think of a logical reason for a business cycle but I can think of a natural reason. They happen because of a natural law, the Law of Rhythm where all things have their ebbs and flows. However, in the world of business, I believe that many of the ebbs and flows are artificially created by way of, as I said in my novella, perception. What do you think a logical reason is for a business cycle?
You will not get the exact result in the demo account. Your problem is on the reference book knowledge related. In the books there are some basic principles. Those principles should follow but in the practical life you have to apply things in the way the situation demand. I might not express myself clearly. Now the situation is pounds are in lower position. So you should consider current situation always.
Ok rozmo, I am not surpirised by your answer, I have always been amazed that “Economics” could not answer that question, about a phenomenon which is clearly persistent and cyclical. If "Economics cannot answer that question, then “Economics” is lacking something.
The only convincing explanation I have ever found is here : -
I see some cynicism in your answers which is good and will stand you in good stead for trading - There is a 2 hour video on you tube by a fella called Anton Kreil [Edit - which contains the word “Anihilates” ] which is very important in understanding the answers to your question and although it will not guarantee you success as a trader (Only time, patience and practice can do that ) the writings of a guy called Wyckoff will put your feet on the right track.
Thanks Logan for your feedback. Yes, I agree that demo trading is not the same and yes, there is a huge difference between book knowledge which is a starting point and real life experience which in my opinion is the real teacher. In this particular situation, however, I am not too sure either helped and would be curious to know how many individual traders were on the wrong side of this trade.
Taking a position ahead of market-significant news suggests you think you know better than the firms with the biggest accounts, the best computers and the smartest staffs. Imagine explaining a business plan like that to an angel investor.
Tommor and Charlie if you don’t mind me asking a few questions, I would appreciate your feedback. What are you doing when analyzing the markets looking for a trade? Are you just watching what the big guys are doing and follow them? Are they always right? Or is it that you don’t ever trade big news events? Thanks in advance.
Effectively I am following what the big firms are doing as I just follow price. Whether they are right or wrong I have no way of knowing in real-time nor ahead of time nor even once all this price action is in the past. All I know is they have so much capital that they move prices and I follow the price.
Being a long-term trader my stops are not often affected by the volatility around a specific news release. In fact, as a trend-follower, its amazing how often good news arises out of uptrends and bad news arises out of downtrends, so its comparatively rare to be on the wrong side. The 2015 EUR/CHF crash is a classic example. But so were 1929 and 9-11. I never feel the need to open or close a trade ahead of news.
