The US dollar is broadly lower and stock futures are jumping after the December non-farm payrolls report.
That’s not the reaction you would expect from a headline beat and fall in the unemployment rate to 3.5% from 3.7% but the market is instead focusing on softening wage growth. Average hourly earnings growth slowed to 4.6% y/y from 5.1% and that should give then Fed some comfort that they can pause without sparking a wage-price spiral.
At the same time, I have to believe that market participants were far too invested in a strong jobs number today given the ADP data yesterday.
The dollar is falling across the board with USD/JPY down to 133.41 after touching a session high of 134.77 shortly before the data.
There are a few key things you can do to avoid overconfidence in trading:
1. Know your limits: It is important to know how much you can afford to lose before entering into a trade. Overconfident traders often disregard this rule and end up taking on too much risk, leading to large losses.
2. Do your research: Before making any trades, it is crucial that you do your research and understand the market you are investing in. Overconfident traders tend to take unnecessary risks without fully understanding the market or their investment.
3. Be humble: Be aware of your own limitations and do not let your ego get in the way of making sound decisions. Overconfident traders often think they know more than they actually do and this leads to poor decision-making.
4. Have a plan: A good trading plan should include entry and exit points, as well as risk management strategies. Having a plan will help you stay disciplined and avoid overtrading, which is often the result of overconfidence.
5. Stick to your plan: Once you have a plan in place, it is important to stick to it and not let emotions or greed get in the way of following your plan. Overconfident traders often abandon their plans when things don’t go their way, which usually leads to further losses.
Overconfidence is a trader’s number one enemy. Why? Because overconfidence leads to overtrading, and overtrading leads to big losses.
When traders are overconfident, they believe that they can’t lose. They think that they have some sort of magical ability to always make the right decision. But the reality is that even the best traders make mistakes. And when those mistakes are made with too much money on the line, it can lead to disaster.
Overtrading is another problem that arises from overconfidence. When traders are overconfident, they tend to trade too much. They might be trading when they shouldn’t be, or they might be holding on to losing positions for too long because they think they can turn it around. Again, this can lead to big losses.
The bottom line is that overconfidence is dangerous. It leads to bad decisions and can ruin your trading career. If you want to be a successful trader, you need to keep your ego in check and trade with humility.
Cartoon via China’s Global Times, the paper noting:
Historic deadlock drags on in US House
218 votes are needed to win
The Republican Party majority in the House have ample numbers to get to 218 votes but a hard-line faction is voting consistently against Republican front-runner McCarthy, preventing him from getting the job.
The last time the Speaker vote went on this long was in 1859 – it took 44 rounds, and two months.