The continued debate of whether QE3 is on or off continues to plague market sentiments. Given a period of upbeat data with strong employment numbers, FOMC Chief Ben Bernanke says QE3 is off but interest rates will be held at record low levels to stimulate economic recovery.

Fast forward a couple of months and you have weak(ening) employment data with a mixed bag of results across the various reports, talk of QE3 is surfacing back up again. However, there were no official words though, just what the market sentiments are saying.

Further FOMC meeting last night didn't drift away any further from earlier reports that QE3 is not on the table and unless the recovery dampens dramatically, this will not be an option.

Mad Hedge Fund Trader John Thomas opines that if DOW breaks the 10,000 mark, that is when QE3 will be utilized again. PIMCO's Bill Gross states that weak employment numbers continuing for the next quarter will have QE3 back on again.

Well, it is all proving to be an interesting war amongst the market forces and the monetary policy makers.

What do you think?

It is good to be back writing again after almost a 2 month break! Back from holidays and a weird fever infection, i am back up and running again. Not back to my best yet, but i am definitely getting there. Thank you all for your wishes meanwhile

I had originally planned to start writing again on the 1st week of August, you know the feeling of starting the week and month afresh, but i had a couple of e-mails yesterday that made me put on my writing hat sooner than i had wanted to

I got 4 e-mails yesterday alone stating how frustrating it was trading the market. I cannot agree more. The market has been very volatile with little or no sincere direction and it has been frustrating to trade the moves, to say the least.

Frustrated at not getting what you want

For a feel, just of what happened yesterday, here are the numbers. Absolute price movement on;

1) Eur/Usd – 0 PIPS !!! (The open and close price is exactly the same! Should have bought 4D on the price value instead)

2) Gbp/Usd – 5 pips

3) Usd/Chf – 37 pips

4) Usd/Cad – 34 pips

Just to mention a few, but you get the idea.

The question is, what can you learn from such market conditions and more importantly, what can you (not)do that will save you some frustration should such market conditions re-occur again in the future. Quite honestly, there is no reason why they shouldn’t!

Tip #1

Do not trade;

1) If you have hit more than 3 consecutive losing trades for the day.

or

2) If your daily profit target/loss tolerance levels have been hit.

I know that this is easier said than done. However, this is an absolute discipline you must practice. Otherwise, you will always see your account balance shrink faster than it ever grows.

Tip #2

I see that there is always a pattern of traders trading only the majors. At best, they will look at the crosses such as Eur/Jpy and Gbp/Jpy.

Why such a myopic view? Remember that the currency market is the only market that allows you to trade with the concept of pairing and by pairing the currency pairs yourself, you can “create” pairs which can give you more momentum by pairing currencies of diverse polarity in strength, at that point in time. This is an art/study by itself and it can be very rewarding, especially during such market conditions. If you want to know more about this, try googling on “Synthetic Currency Pairs”

Tip #3

Change your trading plan

This is not the most obvious option as you won’t know what is happening at the markets unless it has happened. However, given the assumption that you already know that the market is in a range bound mentality, you can change your trading plan. Here are some options, especially if you are a trend trader;

1) Scalp the market.

This is probably the most easiest and obvious option. With sound money management and hard TP/SL levels, this can prove to be very effective within such conditions. On a day like yesterday, we had a scalping EA give us 4% ROI on our accounts, with just 0.25% risk on each trade. Pretty interesting returns for us!

2) Widen your stop loss and take profit levels.

Since the market will be very volatile within a certain price level, you may widen your stop loss and in turn your profit target level. This is done in expectation that when the market eventually leaves(breaks out) from this zone, your trade will see itself out. This requires better money management and by using dynamic position sizing, you can always stay within your allotted risk level. If you don’t know what these means, it is best to strike out this option. Also, this requires more patience as you may go for days without your trade working out if the market continues to be range bound. The earlier scalping plan might serve you better if you want more results.

Well, that will be all for now. I hope this helps your trading perhaps for today too and for the future.

Happy Trading,
Seeni

I have to admit. The market condition now is slowly starting to give me the creeps. It is a gut feeling that cannot be justified or backed up with any data or indicators, but from years of experience and dabbling with market psychology, i just get this feeling which cannot be quite explained.

There are extremely over bullish sentiments about the market right now. Considering the jaw dropping recovery that we have had since the meltdown of 2008, market continues to break new odds and spiral its way higher. Though much of these recovery can be credited to availability of TARP funds, QE policies by the various central banks and some aggressive fiscal policies undertaken, there doesn’t seem to be clear vibes of the repatriation of funds. Though the giving has stopped, the growth hasn’t quite stopped. A quick glance at DJIA and S&P500 indices gives us the snapshot that though the strong “V” recovery is indeed happening, we are not quite back to where we were. Regardless, look at the trading volume. There is increased speculative activity than there ever was before the financial crisis when record highs were made.

High Trading Volume, but not quite the evaluation