ECB’s buzzwords/phrases – Part 2 ) Traders Caught with there Pants Down .

Posted Under ” Fundamental / News Price Action “

ECB Summary So far this Year for 2011

Since the start of the year ECB have ramped up their hawkish stance on policy by dropping the appropriate buzz words to  describe rates.

Going back to the start of the year, the ECB announced that they would “monitor very closely” in January and February before signaling “strong vigilance” in March.

In January, they introduced the statement that they see short-term upward pressure on overall inflation, and at the same time “very close monitoring is warranted.”

In March, the ECB signalled an April rate hike by announcing that “strong vigilance” was warranted on upside inflation pressures.

The Following month the ECB hiked interest rates in April to 1.25% from 1.00%.

Last month, the ECB signaled that they will “monitor very closely” the upside risk to price developments. The policy stance was described as “accommodative”.

Trichet latest comments for June of “Strong vigilance” would indicate a hiking of rates next month.

It is a phrase used repeatedly between 2005 and 2007, typically one month before it raised rates, although not always .

Eur/usd Daytrading

From a Day-trading Perspective Price reaction was pretty impressive with quite Erratic price reaction as Many Traders  were caught of guard with their pants Down from the Get go of the ECB press conference .

If you,re new to trading or the blog please also read these two short pieces below for further insight . It is essential to have a basic concept of Buzz Words to approach and do battle within the Fx market even if you are a purely Technical Trader like myself it is essential to be prepared even if Fundamentals are not your forte . 

ECB’s buzzwords/phrases      Planned and unplanned announcements

” Fundamental / News Price Action “

The baldy one has spoken – Copyright © 2011 FreshleySqueezedPips

The essence of Good Order/Entry execution

“ Trading Tips Edition 6 “

When trading is it critical to always use a top down approach .

Once the Direction of the auction Process broader flow has been determined only then must you trade “against” the Flow .

Going against the Flow ?

Buy into weakness /Sell into Strength …

Always Trade when price is moving against your predicted direction – let the market come to you eliminating chasing market Price .

This is the essence of good Order/Entry execution .

The baldy one has spoken – Copyright © 2011 Freshley Squeezed pips

“ Trading Tips Edition 6 “

Trader,s Exercise for a Primed Mindset

A Trader must be mentally in the right position to trade – An ineffective mindset leads only to further loses .

Decision making in highly pressurized situations such as Trading is mentally draining , it is important to remember to give yourself some time to recoup your expended – Emotional Capital .

This is why it is utmost to take a break for a few minutes after a losing or winning trade to settle your emotions .

This simple exercise of using a       “Break-Time”         enables you to recreate the correct focused mindset to get you back into your Zone of -Effective  winning behavior  & thus enable you to see your Day end through in a Highly Disciplined manner .

This is the essence to obtaining a primed Mindset .
Why these essential steps i personally take after each Trade exited aid toward consistency of my own execution trade after trade day in day out  .

- Entry of clarity -

After Exiting  each trade i take ,

step 1 Take 5 mins away from Pc/Screen ( get up walk get a drink , exercise etc )
step 2 Settle any emotions / anger / stress  nagging in the back of my mind .
step 3 Once i,ve cleared my head & feeling calm / relaxed & settled .

step 4 Come back refreshed & start re focused  all of my new energy on the next setup from an optimum state of mind .

So what advantages does this effective exercise make  ?

The next execution of ones trade in Orderly fashion in which your entry execution is one of complete calm married with complete  Clarity to coin my own phrase  i,e Entry of clarity is essentially what its all about .
Trading is all about the ability to take a win/loss and move onto the next trade
without it having any effect on the manner in which you trade .

I find this simple method works for me own ethos , hopefully it will help yours to.

See also  Mental Toughness on performance slump & account stagnation . 

The baldy one has spoken – Copyright © 2011 tweeterTrades

“ Traders wisdom Edition “

It is not down to you being right ?

It is not down to you being right , it is down to understanding how the market is going to act .

tweeterTrades .

The baldy one has spoken – Copyright © 2011

ECB’s buzzwords/phrases

For any Fx newbies and Pro,s alike In terms of the Eurozone Last month President Jean Claude Trichet employed the phrase “monitor closely” when referring to inflation .

Thursday sees the European Central Bank’s rate announcement this is one of the defining events of the week, particularly the inflation rate now up to 2.4%, around 0.5% above the ECB’s mandated target.

During the press conference after the release pay close attention to the buzzwords/phrases that come out of Trichet,s  mouth .

These phrases are listed in ascending order with regards to the ECB’s level of inflation concern        {     employed buzzwords phrases   }

“heightened alertness”,

“vigilant” or “strongly vigilant”.

Market participants dont expect ECB to adjust their current interest rate from 1.00% but rather anticipating a hectic preceeding at the press conference . We also see US Non Farm Payrolls, two events that will give traders plenty of profit making opportunities.

Have a Great week $

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Other key news out this week .

• Wednesday: ADP Employment Change (US)

• Thursday: ISM Non-Manufacturing (US), ECB Rate Announcement

• Friday: Change in Non-farm Payrolls (US)

Planned and unplanned announcements

As a Day trader it is your duty to develop a definitive plan of exactly what you will do when this sort of news hits the wires.

As the old maxim states, failing to prepare is preparing to fail...

Do not find yourself in the dangerous position of not knowing what to do EVER .

key options you must consider - how you will adjust your risk management both in terms of your trading size and stop .

Developing a definitive plan of exactly what you will do when this sort of news hits the wires will help you Automatically develop improved clarity of decision making and ultimately help you to prepare and set your expectations for similar trade opportunities next time .

So the next time a sovereign debt crisis, Chinese interest rates resurfaces be prepared because without thorough preparation you will not have the ability to make money from these opportunities .

“Trading Tips Edition” The baldy one has spoken – Copyright © 2011 tweeterTrades

Hawkish or dovish comments/news ( Trading Tips )

key driver of the markets

Paying special attention to ECB speakers – both scheduled and unscheduled .

Last week witnessed Jean Claude Trichet’s press conference which turned out to be the key market driver as he commented upon Eurozone inflation increasing from 1.9% to 2.2% and the ECB’s bond buying programme.

Trichet’s hawkish tone, highlighted by his use of the key phrase “monitor closely” when referring to the current level of inflation in Europe, caused a general sell-off in core European bond markets .

ECB Press Releases

It is your responsibility as a Trader to research which ECB members are hawkish/dovish in order to provide you with an advantage upon the release of any relevant comments.

Traders should pay close attention to price patterns upon the releases these patterns often repeat in the markets on the back of subsequent comments .The markets’ reaction will also give you an indication of overall market sentiment. Such trade ideas do not always work out but it is your Job to be quick to spot them and be fearless in your execution of them.

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As Previously Stated in the  “open – rejection – reversal piece ” on News Fades – When reacting to news Often the market will move in a contrarian direction until such time as the herd begins to dismiss the validity of the original data and begins to reverse both their opinion and trades – A profitable trade historically for traders has been to fade aggressively the release of News

The baldy one has spoken – Copyright © 2011 tweeterTrades

“Trading Tips Edition”

Eur/usd – A Case of deja vu

When trading you must constantly be searching for the indicator(s) which leads price movement in the markets you are trading. These indicators come and go i.e correlated weakness/ Strength in differing Indexes , and it is your job to identify them swiftly.

The storm clouds continued to hover over the Euro currency with continued peripheral debt concerns on Wednesday 15th Dec . We had Spain and Portugal concerns in the early morning session across the news wires – with pressure internally from the ECB and from the market to get their finances in order with policy makers  confirming the need for a permanent European Stability Mechanism .

So what happened with Euro price action that day ?

We actually seen euro shrug of the news – and both Euro and gbp/usd Began forming basing pattern on the lower times (5min) before Euro began popping to new higher highs ( 5mins )  . The rally was short  lived though with euro retracing back into a 61.8% area before price was mark down aggressively with a drop of more than 170 pips in quick succession . Now the interesting thing to note is that gbp/usd Basically sat there in fact it began selling off a little – It refused to break to new highs with its little brother .

Fast forward to Friday 17th Dec and you have yourself a Case of deja vu -

Early morning News / Fundamentals wise we had Moody,s Downgrade Ireland debt to Baa1 from Aa2 – and Further rhetoric on Spanish Banks hit the Wires .

Euro,s Price Reaction ?

Basically we seen the exact same price action play out on Euro breaking higher retracing on Friday into the 50% Fib Retracement/reversal level while Cable was glued to its tight range .

 

Here,s what I tweeted that same day to Euro Traders

1. Possible Deja Vu as Wed Euro Rallies higher ignores bad News”Ireland/Spain etc” Cable stays flat to down Then both Go Down LetC#FXCommentary 9:55 AM Dec 17th via Echofon

Then less than 1 hour later we had then exact scenario play out and by End of day Euro had Collapsed 220 pips of its 50 back -

1. Same scenario @ Play #Eur/usd shrugs off Bad news pops to 50 back then sells off Same old story > http://bit.ly/hVMxNV11:51 AM Dec 17th via Echofon

As I wrote in my open – rejection – reversal. “News Event Driven plays” “When reacting to news Often the market will move in a contrarian direction until such time as the herd begins to dismiss the validity of the original data and begins to reverse both their opinion and trades. Only once these “weaker” participants are out of their initial positions does the market subsequently resume its correct, fundamentally-driven direction. As a result,   such price movements on the back of fundamental news are fading opportunities and that,s exactly what we got – Once again . “

“Fundamental news driven Price Reaction” The baldy one has spoken – Copyright © 2010 tweeterTrades

open – rejection – reversal. “News Event Driven plays”

The market is very aware of the likelihood of a domino effect occurring in the Eurozone .

The absence of certainty and confidence is bearish for general market sentiment, When reacting to news Often the market will move in a contrarian direction until such time as the herd begins to dismiss the validity of the original data and begins to reverse both their opinion and trades. Only once these “weaker” participants are out of their initial positions does the market subsequently resume its correct, fundamentally-driven direction. As a result,   such price movements on the back of fundamental news are fading opportunities and that,s exactly what we got on the open on last nights Sunday confirmation  EU bailout of Ireland .

It is important when the market is trading in a nervous state to be patient. Currently, markets have a tendency to drive up and stop out weak shorts only to then drive down and squeeze out weak longs. Only after this do the markets make a more concerted move to new price areas.

open – rejection – reversal =  At the moment, the original price movement is often followed by a larger move in the opposite direction within any one trading day .