"You can be forgiven for thinking that the world is a pretty terrible place right now: the downing of a Malaysian jetliner in eastern Ukraine and escalating sanctions against Russia, the Israeli invasion of Gaza, renewed fighting in Libya, civil wars in Syria, Afghanistan, Iraq and Somalia, Islamist insurgencies in Nigeria and Mali, ongoing post election chaos in Kenya, violent conflicts in Pakistan, Sudan and Yemen, assorted mayhem in central Africa, and the situation in North Korea, described in a 2014 United Nations Human Rights report as having no parallel in the contemporary world. Only in Colombia does it look like a multidecade conflict is finally staggering to its end. For investors, strange as it might seem, such conflicts are not affecting the world’s largest equity markets very much." Quoted from JP Morgan Asset Management, Eye On The Market, 21 July 2014
(This came across my desk today and triggered some thoughts. Nothing against JP Morgan at all by the way.)
It is no surprise nor strange to me how markets react or do not react to certain events happening in the world. The market is what it is, an aggregate of market participants' sentiments and more importantly actions. "Mr Market" is always right. It is futile to second guess how markets will react to specific events. Outcomes of such geo political events are binary in nature and do not present a good risk to reward nature for trade setups. This brings me to the point that most financial news are non actionable. They are at best informative or entertaining.
I used to be rather obsessed with financial media. Looking back it's just the addiction to the excitement of markets and the false perception that the more I know about EVERYTHING that is happening in the world, the more money I can make from trading capital markets. The truth is: there is hardly any consistently actionable piece of news that you can get out of financial media.
I was listening to a podcast the other day and it was an interview with Jack Schwager. They were talking about this rock climber featured in his new book, Hedge Fund Market Wizards (have not read this book, definitely on my reading list though). In short, the rock climber apparently does some dangerous feats and someone asked him about the adrenaline rush experienced during these feats. He basically replied that if he ever feels any form of adrenaline rush while he is attempting his feat, something must be very wrong. I guess he has a system that he performs religiously when he rock climbs and if he consistency performs the steps he will be fine. Isn't this true for all sportsmen? The name of the game is consistency.
The important parallel drawn to trading is that succesful traders do not feel any form of adrenaline rush from trading. It is a very systematic process and they follow their process as they navigate the trading journey. Now that's a truly important concept. By the way most successful traders and investors are systematic. Systematic sounds technical or quantitative but that's far from the truth. All it means is that there is a process to guide proper decison making. When A happens you do X, when B happens you do Y. Warren Buffett and Benjamin Graham has a very systematic process in searching for their stocks. Ray Dalio from Bridgewaters Associates has a very systematic fundamental approach to capital markets.
An effective way to reduce adrenaline levels in trading is to have a clear set of rules to guide your decision making. To take it a step further automating the mundane trade execution process reduces the need to stare at screens. This definitely reduces the chances of your emotions wrecking havoc with your rules!
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
Editors’ Picks
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
Gold: Volatility persists in commodity space
After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.
AUD/USD eyes 0.7050 hurdle amid supportive fundamental backdrop
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms
US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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