Logics versus price action in fx trading

A lot of folks are searching for logics when they study fundamentals in Forex or any other financial market. And they fail. Fundamental news and price action rarely have common logics. You might have the most promising data and the market will still continue to fall and vice versa, you can have the most disappointing data and the market will continue rising. What to do in these kind of situations? You stop following your logics and try to understand market logics. 

Well, there isn’t much logics in that expect that markets run on expectations. That’s it! And do not try to think otherwise, because you will fail. You’d better change your mentality and try to understand where the market is headed by trying to figure out market expectations. I have been disappointed a lot of times seeing how market fundamentals and directions do not add up. There is a good article on the topic by Kathleen Brooks on trade2win website. Read it to expand your knowledge on the subject. Here is the article. 

Ok, there are just a few days left till 2013. I will write at least one post before the event. Happy Christmas season. Do not overtrade while waiting for the best opportunities.

Key events in currency market this week

For those who favor trading news it is very important to have the schedule of all macroeconomic events in the market before the week begins. This is holiday season and it may be wise not to trade at all this week. However, it is still good to watch what happens around various events and how markets perceive them. This is how you really learn how to analyze Forex or any other market. Then you can learn another thing: how to trade what you have learnt.

So, what do we have this week coming?

Monday

Bank of Japan issues Minutes of Board meeting at 23:50 GMT

There is nothing significant coming on Tuesday and Wednesday as these are Christmas days. 

Thursday

US consumer confidence at 15:00 GMT

And that is it for the week! Pretty light, huh? Well, don’t you think that nothing is going to happen. When everybody is on holiday it is pretty easy to move markets and earn nice buck. I have seen a few wild holiday seasons. It does not mean this one will be like that, but who knows… 

Ok, enough talking. I hope to write something more meaningful soon and give you more sound tips. Bye.

When markets neglect news

You should not be surprised to see how often the market neglects news. It is very good. Why? Because it shows that there is a direction in the market and a strong trend. If the market is going up and some negative piece of information reaches traders they might take partial profits, but then buy quickly the security back at the previous support level. I have just seen it happen on eur/usd pair. Just look at the chart to see what a powerful reversal the pair saw yesterday and how it is recovering its' losses today.

I saw this happening hundreds of times. The tendency is strong. They same can be said about gbp/usd pair recently. Retail sales were down today (the report says), but pound traders refuse to sell the cable. They shrug the news off. They believe it is still right time to stay with the move till all negativity about US dollar is exhausted. I hope it will happen soon, but it may take up a few weeks for the market mentality to change from bearish to bullish.

Ok, enough for now. Hope to see you soon. Don't forget to buy presents for your loved ones.

Volatility increase in Forex before holidays

You have probably noticed how volatility has been increasing in financial markets. As I am mostly interested in Forex market I spend most of my time watching how various currency pairs behave. It is quite clear that Yen pairs are most influenced. Recent remarks by the president of BOJ (Bank of Japan) has put Japanese on strong pressure. You just can look at eur/jpy, gbp/jpy and usd/jpy or any other Yen pair to see that.

In my opinion this strong volatility in fx market will continue. It will also affect dollar pairs as I do think that dollar will go down till the end of this year. It does not mean we have to trade during holidays. However, if we do decide to trade we should check what news comes out this week and be aware of extra volatility that those might bring to the markets.

Here are the most important news this week:

Wednesday - Bank of England minutes at 9.30 GMT
                     Gross domestic product of New Zealand at 21:45 GMT

Thursday - Bank of Japan rate decision at 00:00 GMT
                 German producer prices at 7:00 GMT
                 US gross domestic product at 13:30 GMT

Friday - Gross domestic product of Great Britain at 9:30 GMT
              Consumer price index of Canada at 13:30 GMT
             

These are pieces of news of high importance. Be careful if you decide to trade around these times.
Good luck and see you soon.