Scared Little Bird, or How An Individual FX Trader Survives in Volatile Environment.

Sometimes I see the markets as jungle. Thousands of animals trying to find a way to eat each other. Some of them are big predators, hunting for their victims, the others run and hide. Everyone is hungry though, and the task is to eat some food, but not to become a food for someone. I imagine myself as a scared little bird sitting on a tree in a safe haven zone (squared). No predator can reach me here, but there is no food (profit) though. I’m watching what’s happening on the ground near this tree, trying to search for a piece of food. I realize that my biggest advantage comparing to big predators (hedge funds, institutional investors, huge banks) is the SPEED. I can fly down rapidly from my safe place on the tree, grab my piece of profit and come back to safety in a blink of an eye. So when I see volatility period is coming, I’m looking only for quick deals. If I understand that I’m stuck with a position for a longer time that I was hoping for, I just drop it and run away. Tight stop losses also are a must in volatility period.

What’s happening in the bush currently? I recall very similar period as it was in the end of August - beginning of September 2017. Same rally in worldwide stock indices led by historical highs in U.S. NASDAQ posted all-time high closing levels yesterday. Commodities have a bullish run with oil above $60 and gold above $1300. Euro is above 1.20. Most of traders are running to any asset, not to stay in cash (the greenback as cash here). Sell-off in USD. But suddenly a scarecrow is coming out from nowhere: “Nuclear war eyes on horizon! Run back into cash!” And some of the traders reverse their greed-on mode to fear-on. But the others wait behind the corner and buy what those sell. The only difference now is that two fat guys tweet each other, who’s button is bigger...
Allright, jokes apart, let’s be serious. I got nothing to do with nuclear war tweets, but ignore them. I’m waiting for FOMC Meeting Minutes to see the next wave of disappointment in the greenback. Fed is obviously behind the curve. Yellen tried to be hawkish in October and she had some temporary success with the greenback retraced from lows. But they had a tax reform positive expectations that time. What do they have now? Growing budget deficit, growing external debt and growing negative trade balance? Oh, yes, they also have a growing disappointment in the tax reform. What is an alternative way to turn the attention from these problems rather than to talk about nuclear buttons? So I expect nothing, but disappointment from the upcoming Minutes today.
We went long on EUR/USD again on the retracement yesterday, and we’ll be looking to add longs later today. But we keep in mind Scared Little Bird tactics, and our stop-loss orders are tight. A deep retracement is still possible, cause the upcoming NFP report could have rumors about strong employment in U.S. and could bring the greenback bulls some fresh air to breath.

Gold went big path in a very short period of time. Look at two charts of gold futures below. First one has been posted on December 19th, the second one is from today.

Almost 800 pips and almost +7% in two weeks!! What a run!

But they need a retracement if they want to proceed. At least the price needs to come back down to the last breached resistance around $1308.00/1309.00. Please note that I mean here Gold futures. The prices of CFDs for Gold are usually couple of bucks lower.
One more interesting observation is about the British Pound. Fundamentally, it’s been underpriced in my own opinion. Brexit mantra does not have such an impact as it was described by BoE officials. They only use it as the justification to keep the interest rates at low levels and compete on the external markets thanks to the currency slower growth comparing to others, like Euro for example.
But look, what’s happening nowadays? Sterling breaks some important technicals. Especially versus the Japanese yen. Well, we see it this way: a lot of traders got used to play ping-pong with the pound pairs. It’s very easy to sell it when it goes up and reverse on certain lower levels. But seems like someone big is trying to catch an additional haul to the nets, hunting for stop-losses, margin calls and traders who do not adopt for changed environment. You may see below two interesting daily charts of GBP/USD and GBP/JPY.

GBP/USD is back above 1.36000 as I write these words, second time since Brexit vote with the highest daily closing prices in the period. GBP/JPY is very close to breakthrough an important technical resistance, which held for a while with several failed attempts before. Will it stand this time? I doubt.

Aggressive intraday longs of these two pairs with a target of 100..150 pips could be a quick piece of food for the Scary Little Bird on the tree.