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How to Break Through in Trading

  #27 (permalink)

Schin Op Geul, Netherlands
 
 
Posts: 19 since Dec 2017
Thanks: 13 given, 24 received

@Jeremy1984

As promised an example.
EUR/CHF
If you were tracking financial conditions and markets back in late 2016-early 2017 then you would have understood the effect politics was having on the markets and participants (actually it is still having an effect, in particular in the UK and the US).
The risk at the time had much to do with 'protectionism'.
If you consider the French elections and the EUR alone, you could see that despite potential central bank divergence and economic trends (ECB and SNB), the EUR/CHF exchange rate remained suppressed. It was held down despite fundamentals pointing to higher prices.
Can you see how the EUR/CHF could be mispriced once the French elections had passed on an Emmanuel Macron win?
You had intelligent market participants trading in a risk premium (that was on a possible Marine Le Pen win), but once the risk had passed, these smart participants adjust and then pick up on the mispricing.
The risk premium needs to now be priced back out and price now needs to reflect diverging CB's and economies.

If you ever wondered what 'edge' is, then this is it!
It is the way you think about the market.
You have:
Participants
Risk events
Price

I'll get some more examples when I get some time and cover other aspects that will help you progress.
Keep at the fight! Never give up!
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