News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • #2020election polls continue to show Democratic nominee Joe Biden maintaining a strong lead #Trump Supreme Court nomination may throw a wrench into bipartisan stimulus talks #AUDUSD is trading at former resistance-turned-support. What happens if it breaks? https://www.dailyfx.com/forex/fundamental/article/special_report/2020/09/27/AUDUSD-Analysis-Ahead-of-Presidential-Debate-Supreme-Court-Nominee-Battle-.html
  • USD/MXN pushes higher as a long-awaited correction in the US Dollar gets underway. Get your #currencies update from @HathornSabin here: https://t.co/QMpun4KOgO https://t.co/KAYojshy0P
  • Emotions are often a key driving force behind #FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk. Read on and get your emotions in check here:https://t.co/eILWbFgHRE https://t.co/KXMefr6a3r
  • Join analyst @DavidJSong at 6:30 PM ET/10:30 PM GMT for your weekly update on key news trading events. Register here: https://t.co/gBlrRpCc55 https://t.co/5FwNLSVYje
  • *Reminder: Weekly Strategy Webinar tomorrow morning at 8:30am EDT on DailyFX! https://t.co/lxd5fZnn4H
  • EUR/USD fell sharply last week and there are few signs yet that the selling is over. However, a bounce is likely before the decline resumes. Get your #currencies update from @MartinSEssex here: https://t.co/BxglKuKVhj https://t.co/8nJQXhUTHI
  • The week ahead has many systemic issues that take control of the markets, but scheduled data is heavily skewed to the Dollar. Here is my video for the week ahead: https://www.dailyfx.com/forex/video/daily_news_report/2020/09/26/SP-500-Break-Risk-and-Dollar-Charge-Sees-Accelerants-Next-Week.html?ref-author=Kicklighter&QPID=917719&CHID=9?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/PL3KZhn1HV
  • GBP turbulence persists as investors eye the next round of EU-UK Brexit negotiations. Cautious optimism signals a deal is near. Get your #currencies update from @PaulRobinsonFX here: https://t.co/WjU4oYpmf7 https://t.co/QJp3jpS3Ui
  • The AB=CD pattern is simple once you know how to spot it and draw the proper Fibonacci retracements. Make your trading strategy as simple as ABCD here: https://t.co/AKmlmaAZBS https://t.co/ukvZfr6BXf
  • BoE’s Tenreyro says evidence on negative rates are “encouraging” Meanwhile, STOXX Europe Banks Index resides at all time lows https://t.co/bBYcLrtXhj
Seek Out and Position with Value, Especially for Short Term Trades

Seek Out and Position with Value, Especially for Short Term Trades

2017-07-18 04:00:00
John Kicklighter, Chief Strategist
Share:

Talking Points:

  • Value refers to finding deeper and underappreciated opportunity in a market or asset
  • Looking too far into the future to find the obscure or falling in with a saturated trend yields a similar lack of value
  • As with highlighting temporary corrections to longer-term technical trends, fundamental trades should align to deep value

See how retail traders are positioning in EUR/USD, AUD/USD and other Dollar-based majors using the DailyFX speculative positioning data on the sentiment page.

Speculative navigation of the market often means turning down the focus on time frame and shifting away from an emphasis on big picture fundamental themes. However, that change in objective does not translate into ignorance - much less conflict - with deeper value. That term, value, is often associated with 'investors' whose trade duration is significantly longer than that of the speculator or trader, and who also places greater emphasis on fundamentals rather than technicals. It is true that priorities shift between these two different classes of market participant, but both benefit when they align to deeper and lasting currents in the market.

There are two extremes in the thinking that usually goes into analysis: seek out what no one has realized or jump in on a trend that everyone already believes. To position with the arcane is to take a very risky position in an unproven and ultimately unlikely scenario. Coming to a believe before the vast majority of the market takes exceptional skill and not a little luck. When we look that far afield, a number of factors usually have to align in order to make that unexpected event come to fruition. It is more likely that it is never met than it is realized. It is generally not a good trade strategy to pursue low probability scenarios. On the opposite end of the spectrum, positioning with a very familiar scenario may improve your chances of being in the right side of a trade but such assurances usually comes at the loss of most if not all of the potential returns. Following the herd in a saturated position is just as fraught as trying to 'outsmart' the masses.

Looking for value means finding a happy median between the two aforementioned extreme. We should seek out exposure that is likely to see forecasts come to pass but would still render reward for taking that stance. This seems straightforward for the long-haul investor, but the same is true of the shorter-term trade. To position against a prevailing trend - even for a short period - is to try fight natural progression. Similar to the technical traders mentality, there is little wisdom in attempting to pick tops and bottoms. We instead bolster our probabilities when we look to take position in temporary corrections to the prevailing trend which we can jump on when the opportunity arises. A great illustration of positioning with an underlying trend that is still not fully devoid of premium was going long Dollar back in 2014. A bull trend started to arise when it was clear that the US central bank was gearing up for an early effort to tighten the policy reins - but well before they actually pulled the trigger on the fist hike. The Euro may be our modern day version of this balance between probability and potential with a view of value. We discuss this concept more closely in today's Strategy Video.

To receive John’s analysis directly via email, please SIGN UP HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES