Look: If you haven't got edge, the best psychology and money management won't prevent losing money. Making edge the most important. Yet: Edge seems surrounded by confusion and misunderstanding, right? So, how do you get edge?
First start with a thesis for a catalyst
What's going to move price? Which direction will it move? And by how much? Take AUD/USD: It's a Thursday Asian trading session. Price has risen massively last 24 hours. But there's so much aggressive selling below current level? It's obvious to everyone a short covering rally is coming right?
Think: Do markets move in obvious ways? A little unknown is relative value for the Asian session is lower than current prices. But higher than what most think "a discount" represents. (relative value is where large buyers will enter) End-of-month is when dealers and commercials in AUD/USD rebalance inventory. The aggressive selling was inventory rebalancing. But most will think it's new short traders who are currently offside and the target of a short squeeze.
First thesis: Long traders exit their trades at a loss fuelling a move in price to relative value levels. First catalyst: Market makers manufacture a price increase enticing new traders to buy. The new buyers are the fuel for a move down. As they exit their losing trades, prices falls to relative value levels.
What does trading it look like? 1st: attempted short scalp = paper cut loss. 2nd: U̶n̶d̶e̶r̶ ̶N̶D̶A̶ playbook trade which includes scaling-up. Plus… 3rd: repeat of last playbook trade 4th: failed attempt to add another leg to above trade 5th: Premium U̶n̶d̶e̶r̶ ̶N̶D̶A̶ playbook trade:
Plus:
Notice one idea milked for all it's worth when you have a catalogue of strategies with edge (a playbook)? And this isn't even the most exciting development... The market didn't move as low as the relative value level. Appetite for the long side is so strong buyers are willing to "pay up" for it. When this happens - look at the steep price increase!
Which brings you to your Second thesis and catalylst. The market aligned with playbook trades on the longside. Developing a thesis and recognising catalysts is vital to your success. You develop these skills trading at a professional firm. Or you can work with a mentor to replicate their skills and subsequent edge.
That's everything. For a 1 minute recap in a live trading setting, see the video below:
Forex and derivatives trading is a highly competitive and often extremely fast-paced environment. It only rewards individuals who attain the required level of skill and expertise to compete. Past performance is not indicative of future results. There is a substantial risk of loss to unskilled and inexperienced players. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent
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GBP/USD trades below 1.2400, looks to post weekly gains
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USD/JPY retreats further from two-week high, slides below 133.00 post-US PCE Price Index
The USD/JPY pair surrenders a major part of its intraday gains to a two-week high and retreats below the 133.00 round-figure mark during the early North American session on Friday.
Editors’ Picks
EUR/USD stays below 1.0900 as Q1 comes to an end
EUR/USD has lost its traction and declined below 1.0900 in the American session on Friday. Quarter-end flows seem to be allowing the US Dollar find some demand but the risk-positive market environment seems to be limiting the pair's downside ahead of the weekend.
GBP/USD trades below 1.2400, looks to post weekly gains
GBP/USD has edged lower after having tested 1.2400 earlier in the day but remains on track to end the third straight week in positive territory. The upbeat mood remains intact after soft PCE inflation data from the US, making it difficult for the US Dollar to continue to gather strength.
Gold tries to stabilize near $1,980 following earlier spike
Gold price has returned to the $1,980 area following a spike above $1,987 with the initial reaction to lower-than-expected PCE inflation figures from the US. Meanwhile, the benchmark 10-year US Treasury bond yield stays in the red near 3.5%, providing support to XAU/USD.
Will Dogecoin price pull an XRP and rally 60% next week?
Dogecoin price has been in a tight range bound movement since November 22. The recent recovery above the range low looks promising and hints at an explosive move for next week.
Week ahead – Nonfarm payrolls to set the tone for US dollar
With the banking turmoil receding, market participants will turn their attention back to economic releases. The spotlight will fall on the US employment report.
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