Intraday Volatility Calendar

http://www.forexfactory.com/calendar.php

This is an example of an economic calendar that I prefer calling it as “Intraday Volatility Calendar”. The default time stamp is in Eastern Time, so do adjust it to local time to get a better sense of it.

This is where i consider some fundamental analysis- to some extent- is acceptable, that is for volatility anticipation alone, not for directional analysis. And I prefer the word “anticipation”, because I don’t like the word “prediction”, lol.

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Prediction is Nonsense

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Thanks to R who consistently posts useful articles in his journal. This time he posted a link to an article at the economist.com. The most interesting thing for me in that article is these paragraphs. It is stated that,

To show how this works, Messrs Frydman and Goldberg examine the PERSISTENT failure of economists to predict movements in the currency markets. According to Kenneth Rogoff, an economist at Harvard who has long attempted to find rational models for predicting currency fluctuations, “it is stunning how hard it is to explain movements in exchange rates.”

All the models based on rational expectations now say that, on fundamentals, the euro is overvalued against the dollar, he reckons. But does that mean the dollar will soon rise? Mr Rogoff says he has no idea.

In rational-expectations theory, a range of variables including inflation, interest rates and growth should have a predictable impact on currency movements, but in practice this theory has proved less useful for forecasting than tossing a coin. Among rational economists, the debate is over “whether the glass is 5% full or 95% empty,” he says. Only over longer periods—say two to four years—is there any evidence of exchange-rate predictability, which is far too long to be useful to traders or policymakers.

So, isn’t it clear now.. just stop predicting.
Develop a trading model. Not a prediction model.

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Fundamentally Noisy

From Grace Cheng’s blog today:

The BOE quarterly inflation report prompted long profit-taking actions in the British Pound after the bank said it could comfortably allow interest rates to drop from their current level of 5.75% to around 5% without inflation getting out of control.
BOE governor King said he expects GDP growth to slow “sharply” in 2008 and the bank forecasts at least one rate cut in 2008.
“Further financial market fallout, either at home or overseas, poses the biggest downside risk to activity,” the report said.
EUR/GBP rallied to a 4-year high while GBP/USD fell 200 pips today to around 2.0660.

Fundamentally noisy. LOL. So now everyone should trade the market based on a rate hike due next year? That’s how analysts got their job, isnt it?

And market gurus wud say “buy rumors, sell facts”. Ya ya ya..
I’d prefer we just “Buy/Sell the FACT”. No rumors.
Only the FACT. No Noises.

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Geopolitical news, rumors or sentiment, are nothing BUT NOISE

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I’ve came across this article in a website. The tittle is “Modern Day Darvas Methods“. The article is very interesting because it highlighted the essential idea in the famous book, “How I made 2MM in the Stock Market” by Nicolas Darvas. The article stated,

“The book outlines how Darvas became a successful trader by overcoming his own mistakes through his ‘box theory’. Having gone through several different methods without finding any consistency in profitability, he ultimately became a chartist and a millionaire – imagine that!”

The article went further describing the book with more details on how Mr. Darvas prevent himself from “micromanaging” his trades,

While traveling the world by way of his profession as a dancer, he received his weekly copy of Barron’s, and reviewed his stocks of interest through these quotes which were delayed by days. After reviewing the prices and locating his favorite chart pattern, he would wire detailed trade instructions to his broker. Although today’s markets move faster than they did back then, at the end of the day he was simply focused on the price action and how his stocks were moving – just as we all should be. This means he was not being distracted by the extra “noise” of every tick, geopolitical news, rumors or sentiment.

I would put more stress on the last line: “…he was not being distracted by the extra “noise” of every tick, geopolitical news, rumors or sentiment..”

I couldn‘t agree more on this. Geopolitical news, rumors or sentiment, are nothing BUT NOISE. Just filter it out from the process of making trading decisions, and we’ll have a clear day

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Get rid of the noise like this.

Trading Forum Desperation

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I have recently visited a forex forum that I haven’t checked for a long time. The situation isn’t really any different. People are still asking about what to do on their position. Their fellows will respond with some ’smart’ advices.

One asked, “I have some Sell trades open a few weeks now since EUR/GBP took its damn rise. Anyone know if EUR/GBP is going to go back down anytime soon?”
And here’s several responses he got from fellow traders:

“I heard that it is going to stay around .7000 in an effort to teach people to use stop losses.”
Heard from where/who? LOL

or watch this one: “it wont turning back….believe me”
Yeah, sure.. you’re having some insider info there?

and this one is fun too: “Hold on to your shorts. It is going back to 6800.”
Hahaha..LOLL.. so inspiring.

And there’s someone with a ‘more technical’ advice : “You are still inside .7 and .66 range, let’s see what happens next before you make another move.”
Alright.. Let’s wait and see forever and we can have beer while waiting for the margin call.

And someone was responding with no better situation: “I’ve been frustrated with this pair on several trades and being range bound as folks have been saying makes it easy to think one has picked a top or bottom only to see it move in the wrong direction…”
He has several nice folks.

Oh and this one too, a ‘more experienced’ one: “Right now the overall direction appears to be trending upwards ever so slowly!! What is the consensus on the pair breaking the .7028 top (of Sept 26th)? I’d like to see it get there as I think it might take off quite speedily after that …”
Allrite, how can I pay you for a complete daily analysis?

Let me tell my view on the market. Regardless of the support/resistance lines we might have somewhere on the chart, or how the stochastic or MACD is pointing at, or the economic fundamental situation is, the pair have the same probability of going lower or not. I’ve seen so many times, any kind of trendlines or support lines or fibo lines have been broken, then all the technical traders/analysts will eventually find another technical explanation to describe the revealed situation. And even worse with the fundamental analysis mumbo jumbo.

A successful trader prefer to trade his well-developed strategy, and then to hear no evil, speak no evil, see no evil.
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Volatilitas, milis dan analyst

Beberapa hari lalu gue posting opini dan hasil riset gue tentang volatility di beberapa milis.
Di antaranya adalah milis Indotraders, milis AATI dan milis Berjangka.
Di milis2 itu gak ada satu pun yang menanggapi.
Apalagi di milis Berjangka yg isinya cuman caci maki menghujat dunia bursa berjangka Indonesia itu, parah banget. Boro2 ditanggapai, wong message gue kagak di-approve ama moderatornya. Karena pake english, disangka spam kali tuh, ha ha ha… Judulnya aja berjangka & derivatif, tapi isinya caci maki melulu..
Jarang ada omongan soal market di situ. Kalaupun ada, isinya tuh ramalan2 dan analisa2 market yg isinya menurut gue sih BS semua. Wong market udah gerak kok diomongin, dicari ceritanya. Dikomentarin. Buat apa. Emangnya komentar bisa dijadiin duit ? Trus kalau ada prediksi, ujung2nya biasanya tanda tanya.
Misalnya kayak gini nih para expert/analis/pakar tuh ngomongnya:
“Euro akan mencapai titik tertinggi ????”
“Terjadi bullish divergence, pound akan reversal ke atas ???”
Lha ampun, emangnya kalo pasang posisi di market bisa pakai tanda tanya ? hahahah.
Stop loss ya stop loss. Buy ya buy. Sell ya sell.
Gak bisa kalau minggu lalu bilang pound menguat, trus begitu ternyata sekarang melemah malah berbusa2 ngomong alasan fundamental kenapa ternyata melemah. Kelihatannya sih pinter, jago, ngerti soal2 gituan. Tapi sebenarnya rugi atau untung, kagak ada hubungannya ama busa2nya analisis fundamental berbuih2 itu kan. Apalagi analisa teknikal yg ujugn2nya cuman tanda tanya, ha ha ha..
“Terjadi bullish divergence, pound akan reversal ke atas ???”
cape dehhhh..

Kembali ke volatilitas..
ternyata gak banyak orang yg merasa perlu memperhatikan volatilitas.
Gak ada yg ngeh, atau emang cuman gue doang yg merhatiin volatilitas sih ?
Well, kayaknya sih bukan gue doang. At least ada researchers di BIS (Bank for International Settlement) dan Citigroup yg mikirin volatilitas.
Yah gitu deh.
By the way, kayaknya volatilitas short term di market udah mulai membaik nih.
Kita lihat aja deh perkembangan minggu ini.
Good luck to us.

Alasan fundamental

Apa sih penyebab turunnya volatilitas di market semenjak november 2006 ?
Masih inget dengan temen gue yg namanya Asrul kan ? Yup, asrul, yg gue tulis di blog post sebelumnya yg berjudul a funny friend of mine. Seperti yg gue pernah sebut sebelumnya, dia itu market master. Perilaku market udah mendarah daging bagi dia dah, ha ha ha. Pokoknya doi tuh oke banget deh.
Berikut ini diskusi gue dengan dia soal faktor fundamental yg menyebabkan menurunnya volatilitas market :

darmasdt: ini ada penurunan volatilitas di semua pairs
darmasdt: gue udah kasih filter, tapi jadinya jumlah transaksi berkurang
darmasdt: semenjak oktober november 2006
darmasdt: ada apa ya secara fundamental ?
darmasdt: kok volatilitas menurun
darmasdt: panjang bar memendek, gitu lho
darmasdt: yg tadinya dalam 1 bar 15 menit itu panjangnya 15-20 pips, sekarang ini hanya 7-8 pips
darmasdt: kenapa gitu ya as
darmasdt: ?
asrul_daf: thn 2004 kan US kena double deficit
asrul_daf: policy naikin rate sampe 14 kali…disatu sisi bagus
asrul_daf: tapi sisi satunya malah inflasinya bengkak
darmasdt: ini kelihatan perubahan signifikan, menurunnya volatilitas itu sejak november 2006
asrul_daf: 2004-05, volatiliti bagus, karena US lg jelek,,,plus minyak juga naik
darmasdt: ic
darmasdt: trus
darmasdt: akhir 2006 apa yg terjadi ?
darmasdt: ekonomi dunia stabil ?
asrul_daf: 2006 setelah greenspan turun, diharapkan tdk ada lg kenaikan rate US.
darmasdt: ic
asrul_daf: kenyataanya mau potong rate juga bernanke msh belum yakin, karena takut inflasi malah naik trs
asrul_daf: trs ekonomi duni lagi mengarah ke asia, terutama Cina
darmasdt: oke
darmasdt: thanks as
darmasdt: siip banget lu
darmasdt:
darmasdt: top abisss
asrul_daf: namanya juga gosip news
asrul_daf: gw pikir udh jln live nya dar
darmasdt: belum as
asrul_daf: kyk yg lu bilang…STS emang bgs kalo pasar US yg leading ya, kmrn pagi Asia udh gerak , byk kena SL ya STS dar.
darmasdt: filter volatility nya barus selesai tadi subuh, gue gak berani live pakai yg cuek kayak kemarin gitu, terlalu pasrah ke market
darmasdt: iya. itu dulunya belum sempurna, terlalu mengandalkan siklus itu
asrul_daf: kalo ada market yg libur, mending systemnya ga dijalanin dulu kali ya dar
darmasdt: setelah kejadian drawdown seminggu kemarin, gue baru inget, ternyata memang ada handle yg belum gue kerjain. baru selesai tadi subuh
asrul_daf: kmrn kan pasca libur pasar Eropa, paskah

Emoticon nggak tampil di copy-paste ini jadi kesannya kaku gitu. Padahal banyak icon2 ketawa, nyengir dan sebagainya, diskusi yg santai tapi oke banget deh dengan master asrul.

News trading

Another excerpt from Paul’s blog:

If you are going to trade the news make sure you completely realize what (if any) cause and effect relationships actually exist between news events and price moves, and what the timing of them is. For example, significant news announcements for stocks usually cause increases in volatility, liquidity, and volume, but not necessarily in a predictable direction – that depends on the differences between actual and anticipated news.

For this reason it is better to base a trading method simply on anticipation of higher volatility rather than attempting to accurately predict the future direction. In this way you can still profit even when it turns out that the long-term reliability of your perceived cause-effect relationship actually turns out to be no better than random.