A stern word about QE 4 nonsense

The markets are utterly hyped at the moment and there is a lot of nonsense flying around, so I wanted to give my take on what has been, for a lot of pro traders, a crazy week – yet it honestly shouldn’t have been for any sound retail traders.

Let’s cover my last point first: why would this week have hit pro traders and not retailers?

Well, if you have a well-defined strategy and you are clearly following the rules, most retail traders would have seen big moves this week but would have come out OK – especially if you are playing daily, swing or position trades.

Sam1Following nightly rules and set-ups often meant you missed the intraday volatility and, frankly, I think it’s the best way a retail trader can trade as you typically won’t have the technology to actually play the more advanced intraday stuff (trust me: MT4 is not enough).

That said… our office was mental.

The reason being was that we had some really aggressive moves, down to the fact that we had significantly increased volume around a news flow that resulted in people reacting violently.

The reason I think retailers are better off looking at daily charts and overnight, is that you miss all this noise that causes so much havoc.

You look at a recent EURUSD and GBPUSD chart and you can see the potential for bounce plays. We had a good set of order flow coming to the market and strong support. Even COT was pointing towards some of these clues. But actually, the long-term trend is intact and if you completely ignored a lot of these moves then you are fine for the time being.

Now, the reason this got amusing for us in the office was the nonsense rumours flying around that people were reacting too.

It all starts with poor US data.

The key to the poor US data was what the market expectations were. The market is essentially trying to price in rate hikes in both the UK and US and, if you have listened over the year, in my opinion the story has been consistent. It will take them a long time to change, they won’t react to small improvements (rather, big trends) and they will only make minor changes when they do increase.

That said, the market is just like a tabloid newspaper and loves to make something out of nothing, and so we have had various rumours of larger rate hikes sooner which the market has started to price in (big mistake, these always correct).

So after the poor data these new junkies, like addicts, went mad and started calling for QE 4 in the US….

…sorry what?

You don’t jump from one extreme to the next, especially when we have had such beautifully trending markets that have been really easy to trade in H2. It’s utter nonsense frankly, and is more designed to get headlines than being even remotely useful.

I know people love a good contrarian view, but if you followed the trends over the past few decades you make a lot more money consistently, as opposed to always going from one extreme to the next. It also turns out you have a happier life and live longer (…OK, so I have no evidence for the later, but I do the first).

Yes it’s good to make money on the turns, but why not wait till the market actually turns and just trade the trend and start ignoring all hype?

That would be my advice anyway – stick to those well-defined daily trades, ignore the noise, make more money and live longer (probably…).