Forex Signal (Tue, August 24 2010, 10:00am NY Time EDT) - US Existing Home Sales...

[PipDog]

You Guys Need to Start Being Real Careful - Today, 02:35 PM

I posted this in the CA Retail Sales post. Thought I'd repeat it here.
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On both of the news events today...the CA Retail Sales and the US Existing Homes...the reaction to "so-called tradeable deviations", was very muted. The reason for this is that when the equity markets of the world go into a risk aversion mode...global meltdown eminent...and the "news" we trade becomes more like "noise". I've been doing this for some time and have witnessed this affect before. You need to move your deviations out...for instance, if you'd normally trade a +/-1.0 deviation, then to be safe you may want to consider a +/- 2.0. Henry, since many of these newbies seem to follow your recommendations so religiously, you may want to note a normal deviation and a safer deviation to trade.

Be careful and patient...this could get very expensive. Hopefully the equity markets will settle out at some point and the news will drive the markets harder.

 

[Dean Lau]

Sorry, I'm having a doubt here.

The news seems to have small effect to the market. The market dropped in the first 3 to 4 mins but went up after that. Seems that USD had strong support 5 mins after the news announced, even others currencies. Why is this happened?

Any idea?

 

[duck]

I'm wondering if perhaps the initial 22 pip retrace on a 28 pip initial spike might have served as a warning that something wasn't quite right as it was a very strong retrace? Perhaps "normal" & profitable retraces for entry should be closer to 50% or less? That's the only thing I can see as learning from on this one.

Any comments on that?

Lost a few pips (9) on this one but... ya gotta risk something to make something! And it's times like these where good money management is important.

 

[swingfiddle]

hmmm...in both news releases the opposote thing is happening in the sence of 1 2 hours space...BUT ,ΤΗΕΡΕ where some explodes in a matter of very few seconds that we all saw,and at that time that i had profit my platform REFUSED to close my orders..now i am far byeond than profitable but thats ok i play virtual.i cant believe that this can happen in real...
ps my broker says that its ok to trade the news in his FAQ..what happend?

 

[ben44]

what happened?

I also fell on this I dont know what happened, it seems like a huge retracment...
I hope there is no shift in the overall trend has I will be in big trouble...

 

[duck]

The reason for this is that when the equity markets of the world go into a risk aversion mode...global meltdown eminent...and the "news" we trade becomes more like "noise". I've been doing this for some time and have witnessed this affect before. You need to move your deviations out...for instance, if you'd normally trade a +/-1.0 deviation, then to be safe you may want to consider a +/- 2.0.

I think the risk aversion thought has to be the explanation. I'll be interested in Henry's take. However, the Home Sales figure today was already well below the sell level. Well below it, some twice Henry's deviation.

So maybe it was too low, scaring people into risk aversion mode such that if it was a more moderate figure, say close to 4.3M, it wouldn't have pushed the markets into risk aversion.

If that's the case, expanding the market entry thresholds would do no good. In fact that would make things worse.

Comments? (And I'm a news noob so don't anyone take my speculation as gospel).

 

[duck]

I also fell on this I dont know what happened, it seems like a huge retracment...
I hope there is no shift in the overall trend has I will be in big trouble...

You should never be in a position where you will be in big trouble if the market goes unexpectedly. As someone famous said, the markets can remain irrational longer than you can remain solvent.

If that's your case, you need to close out whatever positions you have and regroup with proper money management, never counting on a single trade to make you millions. That means always risking the same minimal % of your account every time, no matter how likely you expect the market to go in any direction. Good trading means having a system that is profitable over hundreds or thousands of trades, making the law of averages work in your favor. Never bet your life or your trading account on a single trade.

 

[PipDog]

I think the risk aversion thought has to be the explanation. I'll be interested in Henry's take. However, the Home Sales figure today was already well below the sell level. Well below it, some twice Henry's deviation.

So maybe it was too low, scaring people into risk aversion mode such that if it was a more moderate figure, say close to 4.3M, it wouldn't have pushed the markets into risk aversion.

If that's the case, expanding the market entry thresholds would do no good. In fact that would make things worse.

Comments? (And I'm a news noob so don't anyone take my speculation as gospel).

This news event did not "scare the markets into risk aversion". Go look at the stock markets of the WORLD, not just the US, over the last couple of weeks. You will see the telltale sign of risk aversion...down, down, down. If you're going to trade the forex, you really need to watch all stock markets and the news events that drive them. And not just economic news events. For instance, remember 9/11? Not an economic event, but the impact was very significant. And, if something was to break out in the Middle East, like a skirmish around the Iran Nuclear Reactor...look out!

Normally, if stock markets go down, the dollar will go up. This is due to the USD being regarded as a "Safe Haven Currency". What I'm starting to see evidence of is a reversal of this correlation. The world appears to be less enthralled with the USD as a safe haven. If this process would continue or accellerate...talk about chaos in the forex!?!!?

There is so much more to trading the news in the forex than the news itself.

Henry...? Time to chime in with some experienced wisdom. It could be that some of these newbies are teed up for some hits...

 

[friday rufus]

eur/usd

usdjpy is highly unstable henry is doing a very good job but he should lets settle for currency that are reliable

 

[Simon Edwards]

i was busy in usd/cad for this release it retraced a huge amount of pips.

Something was definitely afoot on this. before the cad release usd/cad rose to 1.0640 the cad release was muted

the usd release retraced down to 1.0580