Let's take a look at the most interesting USD long ideas. I favor the following pairs:
USDMXN
USDNOK
USDSEK
USDEUR
USDGBP
USDCNH
USDJPY
USDTRY
These have strong trends, and fundamental reasons to continue trending higher and steadily. We can take trades in the basket I present here, but we don't need constant exposure to all the pairs. Being selective with the FX positions, and the combined size will be vital to achieve profitability in the long run. If you're trading the same idea, with the same sizes, technical entries, and stops, you're basically multiplying your risk. I have come to determine that a swing trading and position trading strategy is more suitable with my personality, and also, a good way of riding trends without having big risks initially, but, on the contrary, increasing exposure gradually while the trades prove us right.
Right now, we see that USDMXN, USDGBP and USDTRY are the most volatile, and the ones with the biggest advance YTD, with more than 20% progress. USDJPY and USDNOK are down for the year, but had a massive recovery after the presidential elections in the US. In fact, on a time vs price basis, USDMXN, USDGBP and USDJPY sport the sharpest advances in all of these pairs. So, I'd say that the trend is bullish without a doubt, despite being in the red on some pairs, for the year.
We can also observe the type of consolidations and volatility, to determine which pairs we want to approach in which way, this will be critical in ensuring your chosen trading strategy is suitable for trading each pair, or when to favor a specific trading style, on which pair, and when to simply stay put until conditions are favorable. This type of observation will be vital for FX traders. It also puts thing in perspective, and is the type of analysis that some instutions or hedge funds might do, when looking at assets, performance, volatility, drawdown YTD, on a monthly, quarterly, weekly, daily basis, etc. We can see that, the top dogs are: USDMXN and USDGBP, on a p&l YTD and max drawdown basis, with 20.59% and 20.03% advance, and a small drawdown of less than 1% and 1.85% respectively. So, we might see that these pairs see a continuation of the advance going into year end.
Hope you find this helpful, if you have questions or comments leave them below. Cheers,
Ivan Labrie.
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Monitoring these to reenter longs, need to wait for bearish momentum to end.
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Very important chart...see how MXN and TRY acted. These are extremely weak currencies, and thus, interesting ones to fade against USD.
Missed the most import one DXY.... Monthly looking like it could do divergence.... .... Weekly looks like it is having some problems going up.... .... Daily is looking like divergence is now playing out and the move down on DXY is fixing to start anytime.... Just how I see the $ index...
IvanLabrie
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@RobbyWestHouston, hi.
Thanks for stopping by.
I disagree with your read of DXY, also, it is not a currency pair, but an index (and a not too productive one at that, considering that the Fed uses different trade weights and instruments in their own index). I do monitor DXY too, but it's secondary in my analysis.
As for the reason of my disagreement, this type of trend and breakout we saw from the monthly range, won't let people join it, it'll just trend violently, until they give up and start to buy en masse expecting it to go higher perhaps. The fundamentals and the technicals align for a rapid rally of 15%+ in the dollar, from where we are give or take. Keep in mind Trump didn't even take office yet, which might make some assume the dollar rally is priced in, but once he reduces corporate tax this thing will probably go nuts.
Cheers.
RobbyWestHouston
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@IvanLabrie, I agree the DXY / USDOLLAR is garbage / junk but one has to pay attention to it because it is a driving factor in all of those pairs and others you did not list. This move on the USDOLLAR in my opinion is over done ( too far too fast, slop is too high to keep going longer term time frame ). Trump reducing of tax will take a while and will not be as easy as people think it will be. I am a USA Citizen and I would love to see 15% tax on my company! I haft to deal in what can happen. Tax reform like reagan tax cuts took almost 2 year before the law was passed and then the third year the company saw tax benefits. The USDOLLAR thinks the tax cuts of 15% is already done and on the books but just not to the IRS yet. This is simply not the case. The DXY / USDOLLAR has stopped at a horizontal zone and is showing divergence on daily and sub daily time frames. That indicates to me, a pull back in USDOLLAR is here and any kind of pull back will stall any move up in USD/JPY or USD/CHF or move down in EUR/USD or GBP/USD. For me it is sell USDOLLAR and look for pairs that have respected trend lines and price zones. Right now I do not see any gas in the tank to take out these price zones and trend lines. Me, it has to reverse. For me that is the best R:R is to be short USDOLLAR. Just me.
In a strong trend, you want to fade the pullbacks, or sideways ranges in general, and they tend to last longer than everyone expects.
I'm quite adept at trend trading, so I think we're entering 'my turf'...the market hasn't been favorable to me since 2014, since there was no trend after the top in 2015.
TradZ
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Well said and well thought out ;) I use to be all about scalping as I found it easier to play, with big money. But as my money got short(lol) I chose to try out Swing-trading, so much more relaxing! Anyway nice work.
IvanLabrie
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@TradZ, hi, yes, glad to hear.
Although more time to think can be a double edged blade (more time to think can lead to doubts and you abandoning the idea before seeing it play out), it can certainly increase your profitability because well, you have more time to think and execute the trade, instead of having the high risk, high stress decision of betting the house on a minuscule margin of error, time and time again. This will invariably increase your win rate if you take profit too soon, but it will also reduce your avg win relative to avg loss, and it'll reduce your expectancy more often than not.
TradZ
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@IvanLabrie, lol so True! For instance, I had a STOP in place based off the 4hr chart but decided to change STOP a bit above break-even thinking that I can get into a much better entry once it being hit and then BAM! After stopping me out in the positive, it goes up with the quickness lol
I'm learning how to deal with keeping my idea intact while being home. Have to learn how to walk away from the screen ;)
Thanks for the uplift
IvanLabrie
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@TradZ, that's where position sizing and the entry strategy kicks in. Once you follow your rules based entry and management cues, you can leave without worrying too much, although trading more seriously will require your attention during the NY session at the very least.
As for stops, I don't use them now, only after I WANT to be taken out in profit.