As most of you out there know, I prefer to trade with the trend. I also prefer to trade larger time frames and hand onto the trades for as long as possible. The key word here is possible, and I am afraid that the time a trade can be held onto in the FX markets is getting shorter and shorter. I cannot tell you how much I hate this.
When I started trading FX, there was still a very healthy “carry trade” going on, and therefore there was a lot of trending pairs. Since the financial crash, the last several years haven’t been very good at trending. Of course there are exceptions, but in general the markets have been absolutely schizophrenic. The Euro is of course the biggest culprit, but we have entered a brand new world, one where all risk is measured 1:1 against other risk assets.
In other words, if there is trouble in Europe, the New Zealand dollar is sold off relentlessly. At the same time, gold can fall, and the New York indices get hammered. The correlation has driven some of the largest fund managers out of the game, and has made life miserable for the rest of us. And let’s not even get started on the EUR/USD pair. The slightest positive rumor and the trend changes in a few short seconds, only to reverse a couple of days later.
The truth is that Forex is probably much more risky than it used to be just a couple of years ago. I will be very interested to see where the retail market goes to be honest. Certainly, the stock markets have a very bad reputation at the moment. The futures markets can’t be much better because of the recent scandals involving MF Global and PFG Best. These were two of the most trusted and well known commodity brokers in the US. The fact that the higher ups in MF Global won’t be facing charges has certainly done nothing to help confidence in that industry.
The Forex world has always been a bit on the shady side. There really aren’t many rules, and there are plenty of people out there playing games. The market is a difficult one in the best of times, and the recent spate of twitter-fueled rumors that I have seen move the market certainly isn’t helping.
With so much working against the average trader, it is no wonder that we are reverting back to a short-term world. The Forex markets used to have the reputation for being a very “trending” market. Not anymore, and I am worried that it won’t be anytime soon either. It is because of this that two things are happening: the number of FX traders is dropping, and the attention span is evaporating.
Adding to the problem: there is evidence that the high-frequency traders are starting to become a larger portion of the market as well.
It is because of this that I have suspended most longer-term trading, and have learned to take profits a bit quicker than I used to.
When I started trading FX, there was still a very healthy “carry trade” going on, and therefore there was a lot of trending pairs. Since the financial crash, the last several years haven’t been very good at trending. Of course there are exceptions, but in general the markets have been absolutely schizophrenic. The Euro is of course the biggest culprit, but we have entered a brand new world, one where all risk is measured 1:1 against other risk assets.
In other words, if there is trouble in Europe, the New Zealand dollar is sold off relentlessly. At the same time, gold can fall, and the New York indices get hammered. The correlation has driven some of the largest fund managers out of the game, and has made life miserable for the rest of us. And let’s not even get started on the EUR/USD pair. The slightest positive rumor and the trend changes in a few short seconds, only to reverse a couple of days later.
The truth is that Forex is probably much more risky than it used to be just a couple of years ago. I will be very interested to see where the retail market goes to be honest. Certainly, the stock markets have a very bad reputation at the moment. The futures markets can’t be much better because of the recent scandals involving MF Global and PFG Best. These were two of the most trusted and well known commodity brokers in the US. The fact that the higher ups in MF Global won’t be facing charges has certainly done nothing to help confidence in that industry.
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The Forex world has always been a bit on the shady side. There really aren’t many rules, and there are plenty of people out there playing games. The market is a difficult one in the best of times, and the recent spate of twitter-fueled rumors that I have seen move the market certainly isn’t helping.
With so much working against the average trader, it is no wonder that we are reverting back to a short-term world. The Forex markets used to have the reputation for being a very “trending” market. Not anymore, and I am worried that it won’t be anytime soon either. It is because of this that two things are happening: the number of FX traders is dropping, and the attention span is evaporating.
Adding to the problem: there is evidence that the high-frequency traders are starting to become a larger portion of the market as well.
It is because of this that I have suspended most longer-term trading, and have learned to take profits a bit quicker than I used to.
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