A Spread & Straddle Strategy Applied
The USD Price Action has been limited to a certain range level at the lower band of the trend in search of a base to solidify its next move. Surrounding fundamentals still remain with inflation, interest rates and equites volatility as key factors investors and traders are focused on.
Four weeks of price range and consolidation which the USD DXY have retested 88.38/43 low have now retraced and nearing its recovery back towards the 90.05/10 levels. The market is awaiting for fresh incentives to justify a continuing price move above this level. MegaTrade101 initial USDX Futures price level above 88.43 with a 'Spread & Straddle' strategy in case the market does otherwise. A test for neutrality with a net position in place whenever a break occurs is a smart way of testing the waters while it is calm. The advantage of having access to and maximize available strategies both with Futures and Options markets for the USD, Foreign currency and Equities.
As a background analysis, there are certain price action that formed a 'Cyclical Price Pattern' which were identified across major currency and a cross sectional difference between equities that share similar yet diverse signals. Thus making a summary report may only prove to be speculative rather than an absolute definition for stock picks to be able to pinpoint one from the other. Although, the financial sector has been identified to carry a direct correlation with certain stocks.
This would only mean that the prevailing market trend would still overcome the negative effects of the recent market sell off and current market volatility. In this case the USD current four weeks base pattern can serve as a valid support for now as shown above chart. On its simplest form from a chartist perspective they would call this pattern simply a 'Double Bottom' but that is after the fact. As a caution, we would not discount also the probability of a let down in the event unexpected overseas events and or comments from the UK comes through on interest rates as an example
And the next turn of events upwards would likely occur against all odds. This is where we have applied the basic principles on the 'Law of Total Probability' in current market conditions. Which still proves that the over all positive tone surrounding the financial market contrary to the recent market sell off would eventually continue. And it can only be proven 'After the Fact' when price action will justify this market call, as we are left with slightly over a month nearing the end of the 1st quarter trading. In the event that prices do move otherwise, subsequent trade adjustments on the positions can easily be rectified.
Using both Spot and Futures contracts in USD and other foreign currencies can definitely be an advantage for tactical investors and traders. Buying and Selling is just the basics, but what is important are the strategies in place to make it work.
ReplyDeleteWith the upcoming elections in Europe, and Brexit still hovering above the ground, the USD is slowly navigating its way above waters as it is currently nearing the 90.00 basis point as of this writing.
ReplyDeleteMeanwhile, equities have scrolled back from their respective highs but still the DOW is in triple digit rise at 25518.41 with the rest simply waiting for any incentives that would be forth coming from Powell's testimony and likewise from the European side.
The last week of March have been better for the USD as it closes for the 1st quarter with sentiments a bit positive which may spill over to the 1st two weeks of April trading. When volumes picks up after a shortened week trading we can expect a gradual buildup for the USD as it retest its high.
ReplyDeleteLikewise, watch how Gold and Oil prices behaves as price swings are flirting on their respective resistances that draws a pullback swing lower every time it touches key resistance areas of USD1350/60 and USD67.00 nearing the USD70.00 /bbl
Having patience in this market eventually pays off with the USD regaining its strength while trading at 90.33 as of April 20, 2018 to this writing. As mentioned the DXY have gained traction from the US Treasury yield nearing its 3% threshold as the main catalyst for its tight yet good recovery effort.
ReplyDeleteThe Law of Total Probability in the FX Market
ReplyDeleteAt times the Law of Probability do apply, knowing 'how to' is equally as important as to knowing 'when to' use the application in certain market conditions.
Being able to fundamentally relate marginal and conditional probabilities are essential to the equation; as market conditions changes at the same time that prices do. The process to achieve a higher degree of probability in projecting price accuracy can only be achieve by a method that we have developed at MegaTrade101 called as 'CIPHER3' Analysis.
This method only applies at certain market conditions whereby the process of going beyond charting and price action analysis goes hand in hand with market sentiments and specific price behavior of correlated currency pairs.
On a quarter to quarter market outlook, this trade sequence have generated a substantial gain as they have weathered the volatility swings of the USD.
ReplyDeleteWith that said, the effectiveness of the strategies in play have been accumulating much more than what's been expected from a base entry at 88.45 in February, rolled over and scaled on the way higher.
As position trades can best be maximize especially when trailing corrective moves likewise is very much tolerable. This is only true as additional equity have been built where gains marked are recapitalized for a continuing run.
Now as of the week ending Aug 10, 2018 the DXY have registered a high at 96.45 right back from its mid-price point after its
ReplyDeleterecord high of 103.82 last January 2017.
The current price above 96.00 is the mid-way classic Fibonacci 50% retracement price recovery from the low of 88.25 where it became the pivotal turning point of a reversal signal in the making. As we stated on our market call that there is a higher probability that the USD have reached its bearish objective then.
When the market is fundamentally driven, the best way to protect what already has been gained, is to have technical trailing orders on both sides of the trade are always in place.
ReplyDeleteFrom time to time, there would be a need for price adjustments which should not disrupt strategies correlated to the other traded instruments. Especially when unexpected reports says otherwise.
Besides, MegaTrade101 responsibility is to be able to monetize and translate the trade analysis into the right trade position and have the best probable bottom line end results. For as long as we can adapt to market conditions, we do have a greater probability to achieve this.
Likewise, it helps to know how investing & trading by correlation provide a cushion to preserve and enhances the value of every investors portfolio.
And to navigate the trade positions that has already been recorded into a trade plan and journal is one of the most difficult part to sustain while still in the market exposed. That is also why there should always be a cushion for the unexpected. As Warren Buffett said, it is only until the tide comes down when we see who have been swimming naked in the market.
ReplyDelete