All Chop, No Action


PLAYING WITH FIRE - It was all looking so good for the Buck in the early week, and then out of nowhere, well, it wasn't. This is precisely why I have been advising against taking positions in Dollar pairs at the moment. Although it is a shame to miss out on these wild price swings, this just isn't the kind of price action that invites profitable trade. We are in a very tough spot with the Dollar markets now. On the one hand, the Dollar is locked in a very well defined broader uptrend. On the other hand, the Dollar has been bid up for so long now that the prospect for a more significant correction seems completely legitimate. And so, we have this indecisive, choppy trade going on at the moment, with the market jumping back and forth on a whim but going nowhere at all. As hard as it is to keep your finger from pushing that button, you need to resist the temptation. I would say that as much as traders blow up when markets are wild and trending, there is just as much blowing up and destructive behavior when the market isn't doing much at all.

RISK OF RUIN - I would even argue that it is precisely at these times when traders could even be more exposed to ruin. When markets are moving, there isn't as much of a need to take positions, as the opportunities are right in front of you and there to be had. But when markets aren't moving, many traders have a tendency to force a position just because and this often ends in disaster. A trader will get into a 'just because' position, not looking for a lot of risk, but before they know it, the position has moved against them and they don't want to take a loss on the position they now know they should never have taken. It just spins out of control from there. This worst and most unfortunate part of all this, is that quite often, after this irreversible mistake is made and the trader can no longer take on risk, the market then goes back to offering the right type of volatility, perfectly ideal for fresh positions. So don't make the mistake of trading when things are slower or less clear just for the sake of trading. The market will make you pay if you do.

There is tremendous danger in taking the 'just because' trades. Via @joelkruger

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