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Seamus McKenna
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Seamus McKenna is founder and Chief Executive of Omicron Forex, a dedicated in-depth resource for Foreign Exchange traders everywhere. He has a technical background and many years of experience in trading using quantitative, fundamental and technical analysis. Private retail traders, especially... More
My company:
Omicron Forex
My blog:
Omicron Forex
My book:
The Omicron Forex Trading Manual
  • There Goes Gold - QE Is On The Way Out

    As expected yesterday, in my piece pointing to an example of an upcoming high probability trade, a short in spot gold, the precious metal took a tumble overnight, which brought it down through the localised support the price action had developed at 1308.00 US dollars per troy ounce.

    There is now a growing and well justified expectation that the US Federal Reserve will soon initiate the so-called tapering of its bond buying program, or Quantitative Easing (QE), which will have the effect of strengthening the greenback and weakening gold, as gold will no longer be needed to play the part of a hedge against a depreciating USD.

    Ironically, this is in spite of the apparent decision of the leader of the Federal Reserve, Mr. Bernanke, to make no comment at all regarding QE after the most recent FOMC meeting. Words spoken before led to a bout of volatility, which is exactly what Mr. Bernanke wants to avoid.

    But he does not need to say anything. US economic indicators, from Purchasing Managers Index (PMI) - up to 55.4% for July, an increase of a very significant 4.5 percentage points from June's figure, through US Gross Domestic Product (NYSE:GDP) - increased 1.7% in the second quarter of 2013 as against the 1.0% growth which was the consensus of economists, to employment - an increase of 200,000 jobs in July according to ADP, which presages today's US Non Farm Payrolls report, all do the talking for him.

    That other stalwart of those who wish to profit from a rising USD, the Australian dollar (AUDUSD pair being traded) also headed further in the right direction overnight (European time).

    Aug 02 3:37 AM | Link | Comment!
  • Time To Take Responsibility For Your Own Trading Success

    It is all too easy to fall into the trap of thinking that trading profitably, whether in equities, indexes, futures, Foreign Exchange, options or any other instruments cannot be difficult. After all, you might think, prices can only go up or down and, so long as you can predict the direction correctly more times than you get it wrong, you will be OK.

    It does not work like that. For one thing, no matter how carefully you choose you broker (and it is important to choose him carefully), there are costs involved in trading, whether you win or lose. For this reason a simple majority of winning trades is not enough. For another thing, there is a deep psychological aspect to trading, which really must be experienced to be appreciated. And then you have to deal with the reality that successful trading means being profitable all the time, month in and month out. This requires constant care and attention, and a deep self-awareness.

    To trade succesfully, you must understand your motivation. Do you see your buying and selling activity as a business, which will pay your mortgage and all other expenses reliably into the future? Or do you see it as a game, where the thrill of the chase and the adrenaline rush of a big win are more important even than the amounts of money involved. Or do you fall into some intermediate position in the spectrum between these extremes?

    One thing is for sure, there are no quick fixes. There is no magic bullet. There is no robot that can come even close to fulfilling the requirements of consistent, replicable, profitable trading. You must strive from the start to gain a deep understanding of all aspects of trading, and then you must carefully apply what you have learned, on a continuous basis. This means knowing and understanding the part played by the fundamental events that move tradable instruments, it means being familiar with the Technical Analysis of charts if for no other reason than that all, or nearly all, of the traders with whom you will be competing pay close attention to this subject.

    And it means being in a position to use Algorithmic Trading software routines to assist you in placing and managing trades so that they are placed efficiently and managed effectively to lock in profits and preserve your equity. In short, there is no honour in attempting to trade without giving yourself every conceivable advantage. Remember that once you lose your equity, or even a substantial proportion of it, you are out of trading. The psychological mountain that must be climbed to come back from a position where you have lost half your stake makes the North Face of the Eiger look like a garden path.

    Self-awareness, mentioned above, is about knowing for yourself what must be done at any given time. This could, for example, mean being out of the market altogether for extended periods. Well-structured teaching is necessary to lead you along the way and to suggest actions (or inaction) from time to time, but the goal has to be the to gain the ability to leave the comfort of this particular nest and learn to make these decisions for yourself, without hesitation.

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

    Jul 22 5:20 AM | Link | Comment!
  • The Enigma That Is China

    (click to enlarge)

    China is an enigma. A government that can never get voted out because the country is not a democracy, an economy that is forging ahead, making many new Billionaires in the process, a population that is growing so fast that the authorities feel it necessary to impose a "one-child" policy, which constrains couples at reproductive age to only have one offspring in their lives, and a fiscal and monetary relationship with that other global powerhouse, the United States of America, that must be described as ambivalent at best.

    A lot of this last is due to the manipulation of the Chinese currency, the Renminbi or Yuan, by the purchase of US dollars, when required, to maintain an exchange rate that competitors for global exports in the US, and the US government, regard as artificially in favour of the Chinese unit.

    When he visited Ireland prior to taking up his position as Chinese president, Xi Jinping was quoted as saying that if the Chinese economy could not maintain its growth, then the people who have flocked into the great cities of that great nation would have to go back to their villages. This is a chilling thought, as it that were to happen they could not all be supported with food and other essentials, and the result would be catastrophic.

    While there are now many very wealthy people in China, there are still many who subsist at a much lower level of economic wellbeing. While Gross Domestic Product (NYSE:GDP) in absolute terms may have outstripped that of many Western nations in Europe and the Americas, average GDP per capita, or per head of population, is still only a fraction of what it is in the developed world.

    Australia depends on Chinese industry for the consumption of much of the minerals it produces, particularly iron ore. This has led to something of a two tier economy in Australia, where mining has been very robust resulting in an appreciation of the Aussie dollar, which in turn puts pressure on other areas of the economy because the cost of living is now very high, due to exactly that appreciation. And China has its own Iron Ore sources, which provide about 75% of its needs, leaving something in the region of 25% to come from other countries of which the leader is Australia. Now, if China decides it needs to use less Iron Ore, which suppliers will it start to reduce orders from first? Almost certainly not its own. This leaves mineral producers in Australia, and the Australian economy, in a possibly vulnerable position.

    A lot depends in China in global economic terms, but it would be wrong to assume that its economy and its other national characteristics were exactly the same as we have come to expect in the West, the recent great financial crisis notwithstanding.

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

    Tags: China, Forex
    Jul 17 3:31 AM | Link | Comment!
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