Scenario/Medium Term Trading in FX

Discussion in 'Forex' started by ThisIsNeo, May 18, 2011.

  1. ThisIsNeo


    Hi guys. I read the list of threads and there didn't seem to be one specific with this topic, so here we go.

    The goal of this thread is to identify so useful things successful traders of that kind of timeframe do and follow. Personally I try to base decisions on fundamental analysis, and timed using technicals.

    By scenarios, I mean doing what Bruce K. (see Market Wizards) does. He makes scenarios of what the world could be if so and so happened, and see how the markets would react. He also takes advantage of what he calls mistakes by central bankers and policymakers.

    I'll throw in an example right now with a known cross: EURUSD. Right now (May 18) the dollar is making what seems to be a pullback against EUR. Some reasons for that was an overcrowding of the long EUR position, since they raised rates for the first time in years and the ECB has been talking hawkish (until May 5) compared to the Fed. Many point to the alarming US deficits and lack of action towards solving that huge problem as being a dominant factor dragging the dollar lower (on top of obvious quantitative easing). Harming EUR now is the resurfacing of Greek problems among others. There are many reasons either way but I'm just listing a few for the sake of example.

    Another example is the fall of the yen post-earthquake. A theory for that impressive move as that since central banks announced they would intervene to weaken the yen and hadn't done so in about a decade, a lot of people saw this as an opportunity to load up on carry trades, in this case borrow in yet to go long in crosses and other vehicles. After this trade had a good run, the market possibly just went back to what was better "market determined prices".

    Some of the things I follow on a daily basis: politics, monetary policy, bond yields, macroeconomics (especially inflation), charts, etc.

    All comments welcome, but if you're a successful medium term trader, please mention it. Thanks to all for your input.