Thursday, December 17, 2009

In Holiday mode

Well, there is not much to say about the markets at this point, still the same old range without any clue for direction. (I just took a quick long at 1096 ES FYI).

As you guys know I have been very active trading FX using EURUSD and I have to admit I am a bit ashamed I have not been able to profit from this move lower here. What a move this has been, 3.5 months worth of gains wiped out within a matter of 1.5 weeks. staggering to be honest.

I wanted to address a question that was brought up last week in regards to FX. When it comes to FX, those markets behave very different from standard equity markets - yes they all follow technical patterns just like any market but the moves can be much more drastic and swift - due to the high leverage in FX (even if you trade small sized lots) one HAS to respect stops - as you can clearly see form the above chart - once a currency has setup for a strong move or breakout there is no stopping it. On the above chart its especially visible - there is no chance to get in on the short side unless you have a much wider stop which is quite difficult to manage.

For me personally, being new to FX, on the above chart it has been VERY difficult to get a short position as I am used to tighter stops and EURUSD has given traders like me no chance to get in and profit from the down move. Its a matter of style and my style does not fit well with the above chart.

Now whats very interesting is the weakness in EURUSD and no effect on the market - if and when the dollar makes a turn and retraces or resumes the primary trend (if that is still the trend) we can expect equity markets to move higher. Seeing such a large decoupling is a bit worrying and can be a preset to a much larger correction in equities - however due to seasonality its quite difficult to commit too a larger short exposure during this month - at least for me it is.

As I will be getting ready for XMAS I may not be around much for the rest of the year so if I do not see you before ....

Happy Holidays for everyone

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