Archives of “May 8, 2019” day

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The Most Important Math in Trading

  
Analysis, Education
  1. Most new traders think their win rate is the most important math in their trading. It is not, you risk/reward ratio will determine your profitability more than a win rate. The reason for stop losses is to limit your losses when you are wrong so you cap your risk. Capping your risk makes it easier to have a reward that is multiples of your potential risk. If you risk $100 to make $300 it is a 1:3 risk/reward. If you open yourself to big losses it will be difficult to maintain a good risk/reward ratio. You can have a random 50/50 win rate and still be profitable through letting winners run and cutting losers short.
  2. “The trend is your friend until the end when it bends.” – Ed Seykota
  • An uptrend is measured through higher highs and higher lows in your time frame.
  • A  downtrend is measured through lower highs and lower lows in your time frame.
  • The 10 day EMA can measure the short trend by which side the price is staying on.
  • The 200 day SMA can measure the long term trend by which side the price stays on.
  • How many losing trades in a row can you survive and not blow up your trading account.

3. Risking a small percentage of your trading capital will help you avoid your risk of ruin If you risk 1% of your capital trading with position sizing and a stop loss you will be down 10% after 10 losing trades. How much would you be down at your current rate of risk? Ten losing trades in a row will happen eventually it is just a matter of when and will you survive the losing streak mentally and financially.

China said to have backtracked on nearly all aspects of US trade deal last week – report

  
  Analysis

This was what prompted Trump’s tweet in response

The latest report by Reuters – citing sources with knowledge of the talks – says that China had deleted its commitments to resolve core complaints by the US last Friday i.e. theft of intellectual property and trade secrets, forced technology transfers, competition policy, access to financial services, and currency manipulation.

Adding that the document handed over by the Chinese camp was riddled with reversals on said key commitments and undermined core US demands.
The report adds that the stripping of binding legal language in the agreement was greeted with a cold response from Lighthizer as he views changes to Chinese laws as the highest priority for trade talks and is afraid of ’empty reform promises’ from China.

Well, that doesn’t come as too much of a surprise now, does it? As mentioned here, if the two were to strike any semblance of a trade deal, it would be as though both sides are putting together a car without its key parts. In this case, there is no way China will legally accept to IP theft laws and an exchange rate pact.
Let’s see if Trump’s latest tariffs gambit will be able to change China’s mind as the two parties meet tomorrow. I doubt China will offer much in return, so if the US is hoping for major concessions, well tough luck.

Theresa May said to be close to setting out timetable for her departure

  
Analysis, Economy

She’s facing increasing pressure from the 1922 Committee to provide more details on when she will be leaving her post

May

The above is according to The Sun’s political editor, Tom Newton Dunn, adding that the 1922 Committee chairman, Graham Brady, had a “very productive” conversation with May earlier and will await firm thoughts on her departure in the near future.
It’s a case now that if May fails to provide much clarity surrounding her leave date soon, the committee will decide her fate for her and overthrow the leadership challenge rules in order for the Tory party to call on a confidence vote against May again.

US equity futures extend declines

  
Analysis, US Market

S&P 500 futures down by over 0.6% now

E-minis 08-05

It’s starting to get a bit ugly now ahead of the opening bell later. US 10-year yields are also holding at one-month lows now around 2.428%, down by nearly 3 bps on the session. If risk sentiment continues to deteriorate further when Wall Street traders come in, expect a more serious test of levels below the 110.00 handle in USD/JPY to come about.
And that should trigger further negativity among risk currencies and promote more haven flows for the dollar and swissie as well.

Economic data coming up in the European session

  
  Analysis

Not much on the economic calendar today

Comic 08-05

Good day, everyone! Hope you’re all doing well as we gear towards the European trading session later. Markets are generally lively as the focus remains on US-China trade tensions, with USD/JPY now finding room below the 110.00 handle. But the notable mover today has been the kiwi after it fell as the RBNZ moved to cut its OCR by 25 bps to 1.50%.

With little of note in the calendar day ahead, expect market participants to keep their focus on risk sentiment as we move closer to trade talks between US and China tomorrow.
0545 GMT – Switzerland April unemployment rate
Prior release can be found here. Labour market conditions in Switzerland has been tightening since 2018 and the data here should continue to signal similar sentiment. Not a major release by any means.
0600 GMT – Germany March industrial production data
Prior release can be found here. An indication of industrial activity in the German economy, but this will feed into Q1 data in which we know has been rather soft as a whole. Given the context, this is a minor data point.
0730 GMT – UK April Halifax house prices data
Was scheduled for yesterday but appears to be delayed. Prior release can be found here. General indication of housing market sentiment in the UK economy. A minor data point.
1100 GMT – US MBA mortgage applications w.e. 3 May
Weekly US housing data, measures the change in number of applications for mortgages backed by the MBA during the week. Not the biggest of data points, but a general indicator of the housing sector sentiment.

China trade data for April: CNY 93.6bn (vs. expected 216.75bn

  
Analysis, Economy

China trade data for April 2019

Yuan terms
China trade balance: CNY 93.6bn … miss
  • expected CNY 216.75bn, prior was CNY 221.23bn
Exports +3.1% y/y: … miss
  • expected 8.0%, prior was 21.3%
Imports +10.3% y/y: … a beat and augurs well for the domestic economy
  • expected 3.0%, prior was -1.8%

USD terms (these may be later)

China trade balance: USD 13.84bn … miss
  • expected $ 34.56bn, prior was $32.67bn
Exports: -2.7% y/y … miss
  • expected 3.0%, prior 14.2%
Imports: +4.0% y/y … beat
  • expected -2.1%, prior was -4.8%
Chinese data … questions on their veracity are never far away. But … the weaker exports might give them some breathing space at trade talks this week?

JPMorgan CEO Dimon: Sees an 80% chance of US – China trade deal being done

  
  Analysis

Speaks on Bloomberg television

  • Dimon says better for Federal Reserve to ditch forecasts on rates
  • US 10-year yield at 2.5% is ‘extraordinarily low’
  • Nothing wrong with wait and see for the Fed: hit to world growth if u.s.-china talks go really south
  • Would rather not do trade deal than have a bad deal
  • Sees 80% chance of US / China trade deal being done

Not too much to go on from Dimon there. Yeah, the US and China will patch together some sort of trade deal.

US Indices take it on the chin, but late day buying softens the blow

  
Analysis, US Market

Broad decline on Iran tension and US/China fear

There were a couple of catalysts for stocks.  There is some anxiety coming from Iran, and the fear from US/China trade hiccups was a concern.
Having said that the Dow was down 648 points at the low. It is ending down 472 points. The Nasdaq and S&P had similar rebounds into the close.
The final numbers are showing:
  • The S&P index fell -48.42 points or -1.65% at 2884.05. The low reached 2862.60
  • The Nasdaq index fell -159.53 points for -1.96% at 7963.75. The low reached 7899.02
  • The Dow fell -473 points or -1.79% at 25965.09. The low reached 25789.71.
Below is the % change range for the North American and European major stock indices today.  Things certainly could have been a lot worse (thanks to the rally into the close).
Broad decline on Iran tension and US/China fear
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