Whenever I See This I Know It It Time To Sit On My Hands

Dave Floyd Aspen Trading Group

Traders,

One of the biggest challenges traders face is knowing when to simply not trade - or trade less/smaller positions. This is one of those times.

It can be a hard fact to come to terms with given how we view work as a society: put in a solid days work and collect a paycheck. Markets do not work that way though.

Traders will typically make 80% of their profits 20% of the time - so the old adage goes.

Right now, FX traders need to be aware of two things and be very clear about the implications

The Dollar Index (DXY)
Risk Reversals

DXY has either just completed a solid 5-wave move higher and is set for lower levels.....or, it is simply pause and due for another push higher. Sure, I know that is not terribly helpful, but that is the reality. At least that is how I see it.

In terms of the 1-Month 25 Delta Risk Reversals - that is a different story altogether - numbers are numbers - no subjectivity. Normally unless you see the PERCENTILE numbers reach extremes, you can expect price action to be fairly subdued. Only USD/CHF shows an 'extreme' reading right now. I am inclined to view that pair from the short side right now.

Author

Dave Floyd

Aspen Trading Group

If he lived anywhere but Central Oregon, where the trails of the Cascades mingle with the warm sunshine and fresh air of the high desert, Dave Floyd would probably be one of those guys who lives and breathes trading and analysis 24/7.

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