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Is this price action nauseating, or what?

  #31 (permalink)

Posts: 41 since Jun 2012
Thanks: 19 given, 18 received

Does anyone else feel this bubble of apathy and lethargy?

tigertrader View Post
This truly appears to be a structural change in the markets and not a cyclical one, I'm afraid. Current market reality is that an overwhelming share of trading activity is based on short-run price forecasts rather than fundamental research. Under these conditions, how can one expect prices to track changes in the fundamental values of the income streams to which the assets give title?

Markets have always been based on a shifting balance between information augmenting and information extracting strategies, but the HFT arms race coupled with changes in institutions and regulation seem to have shifted the balance markedly towards the latter. Unless the structure of incentives is altered to favor longer holding periods, I suspect that we shall continue to see low volume and low volatility as any market inefficiencies that exist are quickly gamed by HFTs.

Changes in the perceived volatility and an acknowledged Fed put have given rise to greater risk taking and greater asset allocations by institutional and retail investors, but it has also served to remove not only all the risk from the markets, but all the doubt as to where the market is headed. Who cares what happens in Europe, if the ECB and the Fed are ready willing and able to provide liquidity. So , the market continues to melt up ever so slowly.


I really like the way you said the markets will continue to melt "up" ever so slowly. That is exactly what is happening. In equities anyway! If you look at the start of this thread,started by me, many people told me to "relax", it was just another august month. I bet most who read this thread did not even think it worthy of response. But something very interesting, if not ominous is truly happening. In every instance Ive ever seen where liquidity dries up, that market 95% of the time falls. Yesterday night I was watching the eur/usd trade right at the sweet spot around 3-3:30am. What was amazing was that on a 15 min chart I saw 4 candles in a row with nice price action upward and every bar finished just a little lower than the one before it. This is a call to get in. If you are biased long, all the players are screaming "look, it keeps trying for higher highs.!" If you believe in standard candle analysis, you will go "Ony God, 4 candles with big needles. Market is very toppy!. Jump in!" But after 2 hours price was right where it was 2 hours before! Not even a big fat spike to make things interesting for scalpers. Its like the FX is getting constipated. It wont go in "or" out. Up "or" down. So then I started watching silver and crude and they were trading the same way. Equities all aug., and many wide range bars did we see on the daily. I cant remember one! I mean equity markets frequently now have 2 indices up and one down. Like .15%. zzzzzzz

So I ask, if so few are buying, and so few selling...whats coming next? Most technicians would say a crash or a huge correction in both equities and metals. But look at this ever persistent pattern. Like you said...we are melting upward and it makes me sick. Know why? All the relatives I have who think I am nuts to try to be a trader to begin with, have been laughing their a$$ off with their buy and hold strategy which we all know has probably outdone most any other in the last 2 or 3 years. My own sister who never bought a stock in her life is making more money buying and holding and would never even think to go partners for $5!!!... with her brother...."the risk taker." Unless we are pros already making a living, this market, the whole market from Forex to stocks to metals is making us look like fools. Funny, the minute I saw the first headline after the 2008 mortgage debacle: BUY AND HOLD IS DEAD, I should have known, it aint! -( I make a prediction that more traders go back to work this past qtr. than in the last 2 yrs combined. There isnt enough volatility for even 5% of us to feed on. The average true daily range of the EUR/USD last year was over 100 pips daily I believe. Now it moves 50 pips and we get excited. This is not the career I signed on for,boys. Tell you the truth, I bet money in this climate not 1/3 of those wonderboys in the book Market wizards would even have turned a profit. Only the long term position players. All others--nap time!

One more thing....remember 5 yrs ago when you'd see them show the floor traders in the pit, we'd always stop and watch just for a moment, even if there was no sound on the TV because the excitement,the energy sucked us in. Now I feel like they can just bring in actors onto a set and no one would even look close enough to tell the difference......or care much anymore. It is like we entered a bubble,not a financial bubble. But a bubble of lethargy or apathy. Anyone else feel it?

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