Front page of the Wall Street Journal's October 26 edition

Price is the Ultimate Source, WSJ is entertainment

Before boarding a recent flight to Amsterdam, I grabbed the October 24-26 weekend edition of The Wall Street Journal (WSJ). Reading the news is quite out of the ordinary for me, a full time trader who relies almost exclusively on price action. The only reason I got my hands on the paper was solely to kill some time during the long eastbound red-eye flight.

The front page article caught my eye, since I often trade currencies, “Bulls Slow Stampede into Dollar.” The analysis was comprehensive as it covered in depth the pros and cons of further dollar strength, including “the prospects of higher interest rates,” Fed monetary policy, U.S. economic data, a dollar selling recommendation against the Swissie by Merrill Lynch, Ebola concerns, the ECB and Bank of Japan’s attempts “to boost inflation” and many more. As a reader seeking entertainment I had hit the jackpot with this thoroughly selected range of commentary. As a trader, not so much. This popular style of “guessing game” analysis had always made my head spin.

Don’t get me wrong, I understand every point covered in the column, since I studied economics in college. Even 20 years ago, as a novice trader, I weighed fundamental factors, and speculative rationale, like the ones in the article. It still amazes me how many people commit themselves blindly on opinions like “Dollar Crowd is Thinning as Worries Mount.” I guess many are more interested in the “whys” than the “whats.” Readers don’t realize that any price move in any direction can be justified based on news or fundamentals; IN RETROSPECT.

After trading for a short time, though, I had to learn what really matters; and, that’s to shift attention to price and momentum, not the news cycle. How do you deal with the question of timing, target, probability, and risk from an article of opinions? Where are the numbers; where is the action plan? When using the charts, we have objective answer for all of these. Price is the ultimate source of edge for our serious business.

The author's Tweet about the next EURUSD trading opportunity

As soon as I landed in Amsterdam, I downloaded a chart of EURUSD. It took me five minutes to form an opinion based on the incomplete structure, the strength of the existing trend, and then I estimated how much further the decline would go based on proportion to the previous trend and corrective legs. In short:  The result was a simple, straightforward tweet at 4:26 a.m. P.T. (the following morning) about a move that seemed good down to 1.2360 within “a couple of weeks.” At that point in time EURUSD traded at about 1.2670. The move was likely to happen before the EURUSD would take out its October 21 high of 1.2840.

Last Friday, 13 days later, the EURUSD reached a low of 1.2358 for the day.

EUR/USD daily chart at the time of the call and 2 weeks later when reaches the target
EURUSD Oct 27 (left) and recently (right) after hitting the target Nov 7, Friday

On a side note:  Do you know how many “engagements” my tweet had? Zero. I don’t take it as an offense because zero means that proprietary technical trading is still an untapped source of profit. Trading the price structure or as Richard Dennis puts it, “the numbers” is still the privilege of a small elite group of traders.

By the way welcome to the club if you happened to read this post.

My experience with the Wall Street Journal article epitomizes the reason for Trader Skillset’s existence. The WSJ or other newspapers are a guarantee for a crowded trade and an emotional roller-coaster in decision making.

Conversely I think traders and investors will gain value from a financial media source where articles are written off objective, actionable criterion. A place where, as short term traders, we can share our views about the world and the markets. As a result, was born, so traders might understand the difference between creating an opinion (like the Wall Street Journal), and determining an objective Context based on price action. And, more importantly, the difference between a trading tip, and an actionable trading setup, which is identified through Momentum and Signal in our proprietary process.

Please follow @nagyferenczi and @traderskillset on Twitter for real time notifications. Visit our website’s “Open Source” column for our tutorial type of posts to learn more about our technical approach.

The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

Leave a Reply

Your email address will not be published. Required fields are marked *