Foreign Exchange Elementals & News: The Good, The Bad and The Ugly

Outline Your Rules
There’s a lot of info on trading and I mean a lot. As traders we will use various tools like charts, stories, Basics and Technical Indicators to name only a few. But what are the best ones to use? In a world full of opinion and theory, it can often be tricky to pick what road to take when speculating in the Currency exchange markets.

As I have stated many times during the past, the key to consistent ends in the market is being ok with the set of rules that you as an individual stand by that respect the key dynamics of price movement like trend, demand and supply. Occasionally you’ll be right and on others you’ll be wrong ; so long as you attempt to keep your losses little and permit your winners to run, you’ll always end up on the right side of the track in the end.

“Easier said than done,” I hear you exclaim and you’d be right! It takes discipline, education and zeal to make trading work, but with the right perspective and approach, any one can make it occur. It is my job as an instructor to help scholars outline their rules and secrets to attempt to make their trading rule-based, calm and straightforward. We focus on price action and permit the market itself to lead our research and trading calls, only selecting the high chance, low risk opportunities that the market provides us with.

A Multitude Of Info
We also accept that there’s a plethora of basic info and business stories being released each and each day but we do not fall into the booby trap of basing our trading choices on this info. And there’s a reason why. Think back to when you first considered trading the Currency exchange markets.

Remember how you learned of the leverage you might trade with and the pliability of a 24-hour market? Do you also remember how you discovered the currency market was clearer than the stock exchange seeing as there had been no such thing as insider trading? Everybody receives the same commercial info at the same time , permitting a much fairer chance to trade the news and Fundamentals…or so it appeared.

If your experiences of trading are anything like mine ( and let’s accept it we all go thru just about similar things at the beginning of our trading careers ), then you shortly learned the market has a practice of doing exactly what the news and Elementals recommended it might do one day, only to utterly ignore this info on another day and do the entire opposite! Extraordinarily frustrating indeed, so to be consistent there’s a need to disregard the outcomes which could occur and target what’s essentially going down.

After a period of years working to develop my private style of trading, I have taken the journey of concentrating on the technicals to make my choices and permitting price action to steer me in the markets and the explanation why boils down to a particularly straightforward logic. Price itself is the sole fair thing I’ll depend on. The market functions as a discount mechanism where the serious money factors the basic info and anticipated reports into the existing price, beforehand.

The existing price is a consequence of all the info from history, from now, and what’s anticipated in the future. All I should know is where price is in the instant and if it is inexpensive, then I’m an interested buyer ; if it is dear, then I’m an interested seller. Whether or not the elementals line up with the market’s price action, I continue to can’t gauge an entry or an exit from this info alone. I need something more and this is where the use of charts and objective technical research comes into it’s own.

We will never get the news and Basics to line up completely with the market’s reaction everytime, so that the solution is to relax, stick to the plan and take the guess work out of it. Let us take a look at some up to date examples of market action and basics .

The Good
Here is an example of some latest price action on AUDUSD:

This currency pair has been in an enormous uptrend for a bit now, supported by Australia’s stable economic position and also by the rising cost of Gold. The state also made a shock rate of interest hike on Tuesday, October 6th, which further supported this uptrend. So here we have an example of where the Basics supported the market’s price action.

It’s also vital to note the origin of the most recent rally in the currency pair started when it tested a key area of demand on Fri. , October 2nd. This was before the rate jump, at an area where a number of XLT scholars took this pair long ahead, well before the news and without any understanding of the impending rate hike.

The Bad
Now let’s have a look at EURUSD. From Sep 22nd the pair sold off sharply, supported by numerous bad commercial info from the area including low CPI figures, low patron confidence and low work stats. Even a German election did not help till the market hit an area of demand and rubbed out its losses round the same period.

A hard one to call for sure ; much easier to just go with the trend till you have got a reason to modify methods, like when we hit an area where the pair is inexpensive and the chance is that it’ll rise. Or put simply, a point at which demand is objectively bigger than supply. No sort of reports of fundamental criteria might have predicted a turn as pointy as this. The best plan is to just trust the cost.

The Ugly
And then we have my domestic currency the Pound. I won’t actually bracket this as anything except a mess now. Everyone knows the UK is well over-leveraged, much in debt and fresh figures have shown further declines in the present account, Producing PMI and our economic experts remain as gloomy as ever.

It appears that housing costs have risen a little but no one is getting too worked up about that either and the GBPUSD price action is a real reflection of this. It is ugly to say the least : Stuck in a range between support and resistance with mixed signs and small follow thru. Trust me, at the time of writing this article, there are much better things to trade.

All we’re able to do as GBPUSD traders is to attend patiently, set pragmatic targets and target the price action…for now the market is just sitting on its hands and almost all of the time it pays as an independent trader to do precisely the same when things are this ugly!

In Summary
In summation, the point I’m making is that we will be able to never completely translate the rlementals and reports and how these contributors will affect cost. Naturally, each piece of reports released should have a ready-made impact on the market depending on its nature, but so frequently the result’s the exact opposite and why should we be surprised?

How can any trader in the world today objectively translate basics and stories if they do not know precisely what every other trader or establishment is doing at the same time? This is an insurmountable problem. Rather, it might be very much simpler to permit the market itself to show you delicate clues as to where it’s probable to turn ; gather your proof, take the trade, place your stop and let things be.

In fact, the sole fair thing in any market is the price, so trade that and that alone. The rest is just about opinion and if the market doesn’t share similar opinion as yours, then you might be in a whole world of hurt. Something to consider for the future hopefully.

Until next time,
Eric Livingstone