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Mr-Markets_Sit-back_FXPIG

Sit back and consider what you are looking at!

When wrapped up in a “trading bubble” it is easy to forget that there is a uniqueness to trading foreign exchange in that is the one asset class that sits on top of all others in its total encapsulation of real economies, real people and real events.

When we see the U.S. gained 200k new jobs or 33k jobs were lost it means that in (a net) 200k homes someone had the great news that they had at last found employment or 33k fathers had to tell their family that times were going to be tough for a while.  

Perspective is important when dealing in financial products and this can bring another dimension to our trading strategy.  Medium to long term traders who look at charts from four hours upwards should build a fundamental analysis consideration into their strategy with a minimum that they are aware of the more significant data releases and then building an expectation of what to expect.

Balance in a trading strategy can be the difference between a successful trading “career” and becoming a 90/90/90.  Fibonacci, stochastics and SMA’s can be tough masters when you are alone but armed with a fundamental understanding these indicators come to life!

Where will it all end?

Instinct is a no longer considered useful when trading foreign exchange. In a presentation I made to a room of 200 traders recently, not a single hand was raised when I asked if anyone would feel confident, just watching the price action without charts or news services, to trade.

AI, Robots and EA’s are now considered the only way to trade. I have always believed that there are certain talents required to be a trader that are to be found in most walks of life. It appears that technology is turning the market into “Geek City”.  A maths degree is a vastly different thing to an aptitude for maths. To be able to build an also takes more than a little expertise that is nothing to do with the fundamental understanding of price action and building a trading strategy.

How long will it take for AI to take over the market completely and liquidity becomes so high that prices barely move, and we see a quasi-fixing of every currency since bid/offer or buy/sell order is perfectly matched. This is both goldilocks and nightmare scenario for central banks. On the one hand no speculation against their currency driving inflation up. But on the other hand, no ability to use monetary policy to set a level that suits the economic cycle.

Bitcoin? Pah!

First, I must declare; I own one bitcoin! Genius? No, I bought it at £1,800 so I have a profit, but I am not considering retirement just yet. I expect most of us have read the story of the two pizzas for 10k bitcoins. If not it’s here.

At dinner last evening I sat back and listened to a conversation about Cryptocurrencies in general and Bitcoin in particular. The group were convinced it is a bubble that will burst leaving a lot of people out of pocket. Are they right? Maybe. But consider the future. It is not like any other bubble like; Tulipmania or the South Sea or the Mississippi, this is a genuine alternative and the reaction of Governments and Central banks is interesting. If you don’t understand it ban it. If you can’t bank it, then regulate it to death. If you can't regulate it to death, then produce a rival and that is where the problem for the authorities comes. It is impossible to produce a rival when the purpose of that rival is to circumvent every safety valve you have put in place.

Control of money supply, anti-money laundering regulation and FX earnings are all under threat and still Bitcoin rises reaching another new high above $6K on Friday.

Sit back and consider what you are looking at!

When wrapped up in a “trading bubble” it is easy to forget that there is a uniqueness to trading foreign exchange in that is the one asset class that sits on top of all others in its total encapsulation of real economies, real people and real events.

When we see the U.S. gained 200k new jobs or 33k jobs were lost it means that in (a net) 200k homes someone had the great news that they had at last found employment or 33k fathers had to tell their family that times were going to be tough for a while.  

Perspective is important when dealing in financial products and this can bring another dimension to our trading strategy.  Medium to long term traders who look at charts from four hours upwards should build a fundamental analysis consideration into their strategy with a minimum that they are aware of the more significant data releases and then building an expectation of what to expect.

Balance in a trading strategy can be the difference between a successful trading “career” and becoming a 90/90/90.  Fibonacci, stochastics and SMA’s can be tough masters when you are alone but armed with a fundamental understanding these indicators come to life!

Where will it all end?

Instinct is a no longer considered useful when trading foreign exchange. In a presentation I made to a room of 200 traders recently, not a single hand was raised when I asked if anyone would feel confident, just watching the price action without charts or news services, to trade.

AI, Robots and EA’s are now considered the only way to trade. I have always believed that there are certain talents required to be a trader that are to be found in most walks of life. It appears that technology is turning the market into “Geek City”.  A maths degree is a vastly different thing to an aptitude for maths. To be able to build an also takes more than a little expertise that is nothing to do with the fundamental understanding of price action and building a trading strategy.

How long will it take for AI to take over the market completely and liquidity becomes so high that prices barely move, and we see a quasi-fixing of every currency since bid/offer or buy/sell order is perfectly matched. This is both goldilocks and nightmare scenario for central banks. On the one hand no speculation against their currency driving inflation up. But on the other hand, no ability to use monetary policy to set a level that suits the economic cycle.

Bitcoin? Pah!

First, I must declare; I own one bitcoin! Genius? No, I bought it at £1,800 so I have a profit, but I am not considering retirement just yet. I expect most of us have read the story of the two pizzas for 10k bitcoins. If not it’s here.

At dinner last evening I sat back and listened to a conversation about Cryptocurrencies in general and Bitcoin in particular. The group were convinced it is a bubble that will burst leaving a lot of people out of pocket. Are they right? Maybe. But consider the future. It is not like any other bubble like; Tulipmania or the South Sea or the Mississippi, this is a genuine alternative and the reaction of Governments and Central banks is interesting. If you don’t understand it ban it. If you can’t bank it, then regulate it to death. If you can't regulate it to death, then produce a rival and that is where the problem for the authorities comes. It is impossible to produce a rival when the purpose of that rival is to circumvent every safety valve you have put in place.

Control of money supply, anti-money laundering regulation and FX earnings are all under threat and still Bitcoin rises reaching another new high above $6K on Friday.

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