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Jay Norris
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Jay Norris is a 20-year CBOT floor veteran, author of the Best Seller "The Secret to Trading Forex, Futures, and ETFs: Risk Tolerance Threshold Theory", "Mastering the Currency Market", McGraw-Hill, 2009, and "Mastering Trade Selection and Management", McGraw-Hill,... More
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The Secret to Trading Forex, Futures, and ETF's: Risk Tolerance Threshold
  • Have Current Keynesian Policies Changed How Markets Move?  4 comments
    Sep 14, 2012 6:04 PM

    While the appropriate philosophy is essential for our success as analysts and traders, it isn't something that gets much press. In our case, and that of most professionals, the philosophy would better be called an anti-philosophy. We aren't so interested in reason, values, or causes - hallmarks of a philosophical framework -- as we are in staying on the right side of the market. The "right side" of the market being defined as neither long nor short, but profitable. This is nothing new to traders and merchants from time untold. The old saying "it is not for us to reason why, but to do or die" has always been apropos for business people of all stripes.

    However If there was anything new under the sun for markets it would be that the time gap between the release of real economic date, and how long it takes traders to interpret the effectiveness of government agencies reactions to that data, has virtually disappeared. For example with the U.S. stock market in a full blown bear market in early 2009, the U.S. President signed the American Recovery & Reinvestment Act of 2009 -- See Figure 1. It wasn't until 3-weeks later that the market bottomed. Back then astute investors and traders might have an idea a bottom was near, and wait for a shift in direction and momentum to confirm before entering long positions. Today three weeks would be seen as an eternity for traders to make up their collective mindset and start buying in earnest.

    (click to enlarge)
    Figure 1.

    Underlying market shifts occur much quicker today, and it is undoubtedly because traders pay heed to the influence that central bankers exert on international markets. On September 5th of this year the Australian employment figures came out much worse than expected, at -8.8 versus 5.2 expected. The initial knee jerk reaction was lower prices, which makes sense given it was worse than expected and actually showed negative job growth for the Australian economy. Yet 15-minutes later the Australian Dollar had reversed course higher, and ended up putting in a significant swing low on that day- See Figure 2.

    (click to enlarge)
    Figure 2.

    Now this price reaction comes as no surprise to experienced traders, or anyone who spends time in live markets. Number 1, regardless if the move made sense in the face of the just released economic data, it was in-line with the wide spread belief among active traders that you don't fade central banker's wishes. And number 1a, it was in-line with the long-term price pattern which reflects the prevailing attitude "among active traders that you don't fade central banker's wishes".

    There is no better example of the influence central bankers hold over today's markets than price action in the currency and stock markets these past two weeks. European Central Bank boss Mario Draghi's press conference on September 6th propelled the price of his currency, and global stock indices sharply higher, as did Fed Chairman Bernanke's decision on Thursday to launch QE III. While the two men's actions are not surprising, the outcome they caused in the markets may have been if you were short anything denominated in Euros or correlated to global stock indices.

    Jay Norris is the author of the best selling The Secret to Trading: Risk Tolerance Threshold Theory

    To see Jay point out intraday trade set-ups and signals in live markets on the London / U.S. overlap register at Live Market Analysis

    Trading involves risk of loss and is not suitable for all investors!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • bosforex
    , contributor
    Comments (21) | Send Message
    Hi again Jay First thx for the entry points on gbp. HOWEVER, as is often the case with these big moves , they happen so quickly and are surrounded by so much mystery that no retracement is given when we most need it , leaving the trader dangling in the spike candle while the fed exposes thetruth. Im not saying there wont be retracement, im saying that unless you were willing to place neck on the block LONG euro at the bottom of the fed candle at 12870ish , it went as low as 60ish, or equivalent on gbp, or aussie for that matter, you could even have done gbpjpy, you simply failed to get the ride , the nice trip to glory.Theres alot to be said for position trading,otherwise youre left with butching the journey together piece by piece , leg by leg, and each leg along the way reconsidering the whole move and placing shorts at the major reverse bars with pins.
    Where are we now , looking for that reverse ? Why should it come at all with a Central input of 40bln . $ a month.?Should we really expect a euro at 12790, a gift from the gods to enter long
    or a gbp at 15880 as I believe u selected as a decent entry LONG, or resign ourselves as having been manipulated out of such glory, and to give in to trading at the current market price ; 13130 and 16215
    14 Sep 2012, 08:13 PM Reply Like
  • Jay Norris
    , contributor
    Comments (221) | Send Message
    Author’s reply » Hi Bosforex, That's trading...my guess is we look for a larger dip now because of the larger rally...
    15 Sep 2012, 09:42 AM Reply Like
  • bosforex
    , contributor
    Comments (21) | Send Message
    oohh, I just remind the experience in FEB., when the euro ran to 13480 without significant retracement, but will wait for reversal, at least we are at daily and weekly overbot,which cd lead us bk to oversold at 12730ish, action =equal and opposite reaction,but a continuation to 618 res on monthly leads us to 138 area.Last weeks QE or not QE, turns into this weeks Fade or not to Fade.
    15 Sep 2012, 12:17 PM Reply Like
  • bosforex
    , contributor
    Comments (21) | Send Message
    I must point out that your quote of Alfred Lord Tennysons famous poem : The Charge of The Light Brigade: Ours is not to reason why , Ours is but to do ( or ) die , your historical quote is wrong by one word . The actual poem read : Ours is but to do AND die.The commanding officer of the charge was later proved to have blundered the order to advance blindly into cannon fire.As Rudyard Kipling wrote later
    Thre were 30 mln. English who talked of Englands might,
    Thre were 20 broken troopers who lacked a bed fr the night,
    We think someone has blundered, and cdnt you tell them how ?
    You wrote we were heroes once sir, cdnt you tell them were starving now ?
    15 Sep 2012, 01:46 PM Reply Like
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