At what point should we bet against fundamentals because of technicals? Let me give you an example, but before I do, I just want to state some of the facts I believe to be true about the markets and relevant to this thread.
1. Price is never too high to be bought and never too low to be sold.
2. Overbought and oversold doesnt exist the way retail traders think it does.
3. The most popular trading system in the retail world is NOT trend following like SMC traders and other cults have tried to sell you (not tell you, but sell you lol) and I can show it to you (see some of the pictures I will post below).
4. Reversal will happen at some point, but trying to predict it is very expensive.
About trend following vs reversal amongst retail traders.
Here is GJ weekly chart.
It has been going up since the end of march 2023. Now look at Myfxbook sentiment of retail traders SINCE march 2023.
All they do is trying to catch the top that is still to come and SPECIALLY recently. The ratio of sellers vs buyers is absurd right now. Every retail trader is trying to sell GJ and have been since march. 3 months! Oh and this is not a cherry picked example. Pick you pair, look at a strong trend and look at Myfxbook sentiment. Retail traders try to sell every rally and buy every sell off because "oh, there is a breaker here", "oh a turtle soup here", "oh supply and demand zones brothaaaaaa".
Now try and tell me retail traders mostly do trend following...No, they dont. Therefore, if you truly want to trade with "the big boys" you should follow the trend. With all that being said, im well aware that at one point, price will reverse. What should we do if we want to counter trend but fundamentals and technicals are in conflict.
CHFJPY
We all know CHF is the most stable, secure currency right now. It has ben barely affected by the shit show going on worldwide with geo-political events and instable economics with inflation through the roof and the interest rate hikes. Overall, great currency. But it has reach the ALL TIME high of that chart. We SHOULD see some sell off from long term buyers closing their position (totally or partially). Combine that with higher time frame traders seing that all time high and selling it. So we have profit taking on buys and new sell positions being opened. What do lower time frame traders see after that? A selloff. So now we have both longer term traders and shorter term traders beginning to see a potential reversal.
BUT here is the catch. CHF is still VERY strong and JPY VERY weak. At what point should a trader sell against fundamentals due to technicals?
Here is a CHF and JPY index chart. It represents the CHF against all other majors and the JPY against all other majors.
Now these 2 in comparison on a line chart.
We can see a MAJOR divergence. Im going to add all the other major to the chart so we can see the overall picture of which currency is the strongest and weakest.
I zoomed out on the Weekly chart back to August 2021, so we have roughly 2 years of data. We can see CHF is definitely the strongest one and JPY the weakest one. I didint include the symbol names on the chart because you wouldnt see clearly but here is a second picture, copy of the first one, with the names of all the currency Indexes.
Back to my main question. Should be sell the strongest currency for the weakest one from a fundamental standpoint because of a technical set up? Big money is to be made here if you sell CHFJPY and it ends up working, but you probably will take profits at 1:3 RR because human nature...
CHFJPY is at a major top. JPY index is at a major low. We have no data on CHF index top because it has never been this high.
One last chart comparison: currency vs world currency unit. If you dont know what it this, feel free to google it. It just adds a layer of fundamental view and true value of a currency.
Same thing here. CHF is the strongest and JPY the weakest near its all time low for a possible double bottom.
Like Paul Tudor Jones said, he made big money at the top and the bottom and not a lot in the middle. I do agree there is a time and a place to sell high and buy low. Is it the time now?
Thoughts?
1. Price is never too high to be bought and never too low to be sold.
2. Overbought and oversold doesnt exist the way retail traders think it does.
3. The most popular trading system in the retail world is NOT trend following like SMC traders and other cults have tried to sell you (not tell you, but sell you lol) and I can show it to you (see some of the pictures I will post below).
4. Reversal will happen at some point, but trying to predict it is very expensive.
About trend following vs reversal amongst retail traders.
Here is GJ weekly chart.
It has been going up since the end of march 2023. Now look at Myfxbook sentiment of retail traders SINCE march 2023.
All they do is trying to catch the top that is still to come and SPECIALLY recently. The ratio of sellers vs buyers is absurd right now. Every retail trader is trying to sell GJ and have been since march. 3 months! Oh and this is not a cherry picked example. Pick you pair, look at a strong trend and look at Myfxbook sentiment. Retail traders try to sell every rally and buy every sell off because "oh, there is a breaker here", "oh a turtle soup here", "oh supply and demand zones brothaaaaaa".
Now try and tell me retail traders mostly do trend following...No, they dont. Therefore, if you truly want to trade with "the big boys" you should follow the trend. With all that being said, im well aware that at one point, price will reverse. What should we do if we want to counter trend but fundamentals and technicals are in conflict.
CHFJPY
We all know CHF is the most stable, secure currency right now. It has ben barely affected by the shit show going on worldwide with geo-political events and instable economics with inflation through the roof and the interest rate hikes. Overall, great currency. But it has reach the ALL TIME high of that chart. We SHOULD see some sell off from long term buyers closing their position (totally or partially). Combine that with higher time frame traders seing that all time high and selling it. So we have profit taking on buys and new sell positions being opened. What do lower time frame traders see after that? A selloff. So now we have both longer term traders and shorter term traders beginning to see a potential reversal.
BUT here is the catch. CHF is still VERY strong and JPY VERY weak. At what point should a trader sell against fundamentals due to technicals?
Here is a CHF and JPY index chart. It represents the CHF against all other majors and the JPY against all other majors.
Now these 2 in comparison on a line chart.
We can see a MAJOR divergence. Im going to add all the other major to the chart so we can see the overall picture of which currency is the strongest and weakest.
I zoomed out on the Weekly chart back to August 2021, so we have roughly 2 years of data. We can see CHF is definitely the strongest one and JPY the weakest one. I didint include the symbol names on the chart because you wouldnt see clearly but here is a second picture, copy of the first one, with the names of all the currency Indexes.
Back to my main question. Should be sell the strongest currency for the weakest one from a fundamental standpoint because of a technical set up? Big money is to be made here if you sell CHFJPY and it ends up working, but you probably will take profits at 1:3 RR because human nature...
CHFJPY is at a major top. JPY index is at a major low. We have no data on CHF index top because it has never been this high.
One last chart comparison: currency vs world currency unit. If you dont know what it this, feel free to google it. It just adds a layer of fundamental view and true value of a currency.
Same thing here. CHF is the strongest and JPY the weakest near its all time low for a possible double bottom.
Like Paul Tudor Jones said, he made big money at the top and the bottom and not a lot in the middle. I do agree there is a time and a place to sell high and buy low. Is it the time now?
Thoughts?