A current example of a gut-feel
trade might be on the EURGBP. I believe that the EUR will weaken against
the USD before the GBP weakens against the USD. So overall EURGBP going
down, my first entry was at 0.6758 with a possible bounce coming in at
0.6800 so I took minimum position at 0.6758 and then at 0.6780 I closed
about 75% (for a loss) and put it back on at 0.6792. This happened over
the last 2 weeks or so. Last night I decided to add a bit more at 0.6768
to see if we can go below 0.6750 initially to target back to 0.66 at
some time this year or next. Should my view be wrong then I will cut
back again at 0.6790 and close everything at about 0.6820'ish...Idon't
know whats going to happen but after looking at inflation etc. I feel
the eurozone will first start making noises about the "strong" EUR and
cause EURGBP to fall. Maybe I'm wrong but I'm willing to back my view
and know that if I'm right I can have at least another 3 such losses
without braking the bank.
Another gut trade at the moment is on oil reaching $80 in the very near future as first target. All indications is it should hit sometime. I won't like $80 anymore once we trade below $70 without hitting $80. This is a very short term view maybe in the next 2 weeks to month.
Also on the SA market the All Share index will hit 30,000 sometime this year before it goes back below 28,000. In fact it should hit the 30,000 very soon. It is a big level and there is a lot of development and investment going on in that country regarding the 2010 world cup soccer so it should be a one way bet up until such time as the cup takes place...beware the dips. Also on that countries currency...they have introduced a new "National Credit Act" and already indications are: less cars sold as well as less homeloans approved. Now this might give the governor of the reserve bank the reason to NOT hike rates any further. Should this happen we should see 7.50 against the dollar by year end. There is also indications that the government is actively buying dollars below 7 at the moment shown so by their USD holdings increasing. The fact that interest rates might stabilise for the remainder of the year might mean people/investors going for the All Share again instead of the government bonds as investment vehicle. Hence the target of at least 30,000 on the all share - probably more - but i am expecting a pullback once they hit 30,000. Of course to enter now on the All Share is crazy as the target is very close.
That is typically how I would make up my mind as to the direction to trade.
Now I can easily be wrong but I don't care about that anymore because I know I need only one good strong long term trend to take care of all the little wiggles trying to get in on a trend.
Once I have made up my mind about this I will bounce the ideas off my fellow traders to get insight into their thinking as well, I try and speak to the ones actively trading these markets as they are very close to all the information on it. These discussions will not change the direction I am willing to back but it might influence the size I take as a first punt. Remember nobody knows where the market is going to go they are guessing just as I am.
When I started trading I felt that the broker knows my position and is keeping the market just out of reach of my orders so I can't get closed for a profit, while they run on to my stops at speed and close them easily. It even happened that I decide to close a trade as soon as I reach breakeven again...waiting and watching the screen seeing a single pip loss but not taking it because I want to close at zero but the broker just won't move the market that 1 pip towards me to make it zero.
Well, these feelings are all fabricated and false. See first of all the execution is very fast and they offset the position to the market almost immediately or they might pass it on to their "client" desk to offset positions there. BUT if you trade interbank you have to "click" the broker and then before confirmation of the trade is done you physically book the trade using another system and the booking of that trade could happen hours after the trade was actually done via the broker-station so they don't know if you might dispute the fill or decline the trade completely (you can't just decline it but it might not show on the broker statement etc...there are some admin issues)...so they can't honestly trade against you until the trade is confirmed by back-office. By that time so many other trades were done that they honestly don't know your position anymore. The broker-stations used do not record the P&L, margin etc like some "trade-stations" like fxcm I have seen. All it has is two-way prices and then an "audit" of what was recorded on it. There is also nothing like double click and "are you sure?" or any of that you click your done and thats it. So NO throwing balls in the dealing room.
Also the spreads are very tight while at news times it is very wide and getting filled is almost impossible...BUT some of the brokers are very good on filling orders at news times but you are not guaranteed anything and should plan for slippage. It is your relationship with the broker that determines everything. However if you trade on a small account at an "internet" broker I think you wont get good service and if your account grows to a certain size you will run into significant "execution" issues.
I have read these news trading services and actually laugh at them making money because in the "real-world" it wont be possible to get fills at any respectable broker. They are just exploiting a shortcoming that does not exist anywhere else but with some slow brokers. This gap is being closed as time passes.
Another gut trade at the moment is on oil reaching $80 in the very near future as first target. All indications is it should hit sometime. I won't like $80 anymore once we trade below $70 without hitting $80. This is a very short term view maybe in the next 2 weeks to month.
Also on the SA market the All Share index will hit 30,000 sometime this year before it goes back below 28,000. In fact it should hit the 30,000 very soon. It is a big level and there is a lot of development and investment going on in that country regarding the 2010 world cup soccer so it should be a one way bet up until such time as the cup takes place...beware the dips. Also on that countries currency...they have introduced a new "National Credit Act" and already indications are: less cars sold as well as less homeloans approved. Now this might give the governor of the reserve bank the reason to NOT hike rates any further. Should this happen we should see 7.50 against the dollar by year end. There is also indications that the government is actively buying dollars below 7 at the moment shown so by their USD holdings increasing. The fact that interest rates might stabilise for the remainder of the year might mean people/investors going for the All Share again instead of the government bonds as investment vehicle. Hence the target of at least 30,000 on the all share - probably more - but i am expecting a pullback once they hit 30,000. Of course to enter now on the All Share is crazy as the target is very close.
That is typically how I would make up my mind as to the direction to trade.
Now I can easily be wrong but I don't care about that anymore because I know I need only one good strong long term trend to take care of all the little wiggles trying to get in on a trend.
Once I have made up my mind about this I will bounce the ideas off my fellow traders to get insight into their thinking as well, I try and speak to the ones actively trading these markets as they are very close to all the information on it. These discussions will not change the direction I am willing to back but it might influence the size I take as a first punt. Remember nobody knows where the market is going to go they are guessing just as I am.
When I started trading I felt that the broker knows my position and is keeping the market just out of reach of my orders so I can't get closed for a profit, while they run on to my stops at speed and close them easily. It even happened that I decide to close a trade as soon as I reach breakeven again...waiting and watching the screen seeing a single pip loss but not taking it because I want to close at zero but the broker just won't move the market that 1 pip towards me to make it zero.
Well, these feelings are all fabricated and false. See first of all the execution is very fast and they offset the position to the market almost immediately or they might pass it on to their "client" desk to offset positions there. BUT if you trade interbank you have to "click" the broker and then before confirmation of the trade is done you physically book the trade using another system and the booking of that trade could happen hours after the trade was actually done via the broker-station so they don't know if you might dispute the fill or decline the trade completely (you can't just decline it but it might not show on the broker statement etc...there are some admin issues)...so they can't honestly trade against you until the trade is confirmed by back-office. By that time so many other trades were done that they honestly don't know your position anymore. The broker-stations used do not record the P&L, margin etc like some "trade-stations" like fxcm I have seen. All it has is two-way prices and then an "audit" of what was recorded on it. There is also nothing like double click and "are you sure?" or any of that you click your done and thats it. So NO throwing balls in the dealing room.
Also the spreads are very tight while at news times it is very wide and getting filled is almost impossible...BUT some of the brokers are very good on filling orders at news times but you are not guaranteed anything and should plan for slippage. It is your relationship with the broker that determines everything. However if you trade on a small account at an "internet" broker I think you wont get good service and if your account grows to a certain size you will run into significant "execution" issues.
I have read these news trading services and actually laugh at them making money because in the "real-world" it wont be possible to get fills at any respectable broker. They are just exploiting a shortcoming that does not exist anywhere else but with some slow brokers. This gap is being closed as time passes.
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