A typical trading trap is getting lost in the foliage.
You're only seeing the trees and missing the forest. All that clutter blinds you to the enormous opportunity right in front of you—the trade that makes your month or even your quarter. Let's fix that…
Now, picture Warren Buffet as an intraday trader.
Two crucial need-to-know facts about Buffet are:
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He doesn't bet uniformly.
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He's always ready to go big on asymmetric setups.
Asymmetric setups: where the reward is massively skewed in your favour, and the trade not working is unlikely.
Now, imagine Buffett trading in just one market—the same one I trade.
Given his principle of asymmetric setups, he’d choose this market for a critical feature: a built-in price floor.
Let me explain.
Without going into the fundamentals, at times, price becomes unhinged from reality.
In the 'near term,' the odds of the market going below the current floor are so low that it produces a trade so massively skewed to winning versus losing, savvy traders jump at it, going all-in to use a poker analogy.
From Monday
Above you see trading begins with short-term scalping—winning and losing equally.
Finally, the market trades at a level triggering the asymmetric long opportunity.
From Wednesday
Due to the EOM theme, the opportunity was greater.
Caveat
This is an advanced strategy requiring multiple points of evidence. Without all of the necessary variables trades which look similar on a chart will punish you relentlessly.
In summary
A market offering a built-in price floor and non-uniform betting is a powerful combination to achieve outsized payouts.
Not to be confused with 'bottom picking', these trades are only taken when the necessary multiple points of evidence are present.
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
Editors’ Picks
EUR/USD holds firm above 1.1900 as US NFP looms
EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.
GBP/USD recovers losses despite rising UK political risks, BoE rate cut bets
Pound Sterling advances against the US Dollar after registering modest losses in the previous session, trading around 1.3650 during the Asian hours on Wednesday. The pair could extend losses as the Pound Sterling faces pressure from rising political risks in the UK and growing expectations of near-term Bank of England rate cuts.
USD/JPY remains heavy around 153.00 on firmer Japanese Yen
USD/JPY is sustaining its three-day rout at around 153.00 in the European session on Wednesday, awaiting the closely-watched US NFP report. Rising bets on Fed rate cuts keep the US Dollar depressed. In contrast, expectations that PM Takaichi's policies will boost the economy and allow the BoJ to stick to its hawkish stance bolster the Japanese Yen, weighing on the pair amid intervention fears.
Editors’ Picks
EUR/USD holds firm above 1.1900 as US NFP looms
EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.
USD/JPY remains heavy around 153.00 on firmer Japanese Yen
USD/JPY is sustaining its three-day rout at around 153.00 in the European session on Wednesday, awaiting the closely-watched US NFP report. Rising bets on Fed rate cuts keep the US Dollar depressed. In contrast, expectations that PM Takaichi's policies will boost the economy and allow the BoJ to stick to its hawkish stance bolster the Japanese Yen, weighing on the pair amid intervention fears.
Gold sticks to gains near $5,050 as focus shifts to US NFP
Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.
US Nonfarm Payrolls expected to show modest job gains in January
The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
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