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- User Case Study: Week Four Of Using Forex Source - March 6, 2020
Hey guys. To put it simply, it’s been a complete, complete rollercoaster with news coming out pretty much unexpectedly.
Markets moving and reacting on things like tweets from reporters in China or rumors which then get denied by people with higher authority and it’s been pretty much a week of strong ups and downs, sentiment, doing 180 turns.
But besides that, I have actually managed to have, still, a profitable week. It has still been pretty successful.
I wanna show you, with a couple of examples, how it is that is navigate such a week. One of the main tools that I do use is the Forex Source terminal which keeps me basically aware of the context regarding all the things that move the currency in the moment that they do.
Now, over the weekend there were some polls showing that the Conservative party in the UK was having more votes and it was being favored so this strengthens the British pound.
At the same time there was some optimism regarding the trade war, so I took a long position in British pound versus the yen, which was doing somewhat well, but then I got this tweet. This tweet immediately shook the market. It sent the yen going way up which, again, made the pair of the British pound yen start going down. I cut my losses at somewhat of a loss.
However, I made up for it because at the same moment I bought the Australia dollar, I bought the Canada dollar and all of them, against the yen. And I made several trades that were quite successful.
Then later in the week something very weird started happening. So, as you can see here, the British pound had been seeing a lot of support thanks to the election news over the weekend. Meanwhile the Australian dollar was being pressured because of the trade war.
Now, there’s a huge drop. However, none of the fundamentals changed, the British pound was still supported because of the election polls and the Australian dollar was still pressured because of the trade war. There was no real catalyst moving this down.
Obviously, this is pretty confusing so then in the live analysis, the analyst was explaining how this, it happens every several weeks that suddenly the markets will move completely opposite to what the fundamentals indicate. And that this is called a squeeze. It is kind of a chain reaction of people looking for liquidity. It’s kind of a domino reaction of big institutions searching for liquidity which then activates cell orders and then more people jump in on the short. And it creates this strong downtrend that lasts, really not too long, but, I was aware that this was, let’s say, an unnatural thing and the currency should be more up here which is where they were at given the more recent news.
So I spotted some resistance so I bought it. I had to hold it in negative for about a day and then suddenly, again, without a catalyst, without a reason, it jumps back up to where it was trading somewhere before. And I managed to take profit.
Once I, again, encountered a resistance and it was staying there, resulting in some profits.
Now, this week has been incredibly, incredibly sentiment based, so how exactly do you navigate this?
Basically what I do is I tune in to the Forex Source terminal here. And what I do every morning first is I go into the live analysis. I listen to the live webinar where they just give you some context, maybe what happened while I was not tuned in. With this I get some context, I know exactly where the sentiment is at the moment and what things to look out for.
Then the rest of the day, I stay pretty much glued to the sentiment stream. Where I can see exactly what are the things that are moving the market as well as, every once in a while you get video commentary just putting you as in context as possible.
Let’s say the sentiment is bad. So, the trade war is not going well, I sell the Canada dollar and then buy the yen. And this, I hold it until further notice. Further notice can come through the audio squawk.
You don’t know if a tweet is gonna come out at eight, or if a tweet is gonna come out at midnight so having been tuned in to the sentiment stream and to the audio squawk is really really important.
So I’ve actually been closing my trades every time I’m not tuned in to the sentiment stream and this has helped me stay pretty protected from the rollercoaster of sentiment that has been this week.
I’m pretty happy with the way that I managed to navigate the sentiment. And I do plan on perhaps making a more in depth video on how to navigate sentiment the way I did this week.
The terminal has really helped me stay tuned in to the context of the market which is exactly what is necessary if we’re gonna be successful trading during a sentiment rollercoaster like the one that we saw this week.