Thu May 22nd - It Feels Random Out There

The report schedule looked promising - plenty of Red Reports involving several currencies. Maybe they could stir things up nicely?

Nope, not a lot of action - no range expansion and no deliberate movement.

Traders face several problems when dealing with reports. The spreads widen, brokers trigger stops, markets move large amounts in either direction (or not much at all), and when the dust settles you can never be sure whether the new chart structures can be trusted. For example, if a resistance level is smashed is it really a higher high? Or is it a probe that failed? Inability to properly define it can lead to incorrect decisions. There tends to be a cooling off period after awhile, but then it needs to be determined if they're bracing to spring into life once again or if they have died straight back to the listless chop that preceded the report.

We have to figure it out ourselves. Nobody can teach you because there is no exploitable pattern. Reports are random to us, but are big money makers for brokers and those with advance knowledge of what the report will be. I choose to stand aside. Afterwards I look for signs of life, some kind of logic telling me there's something to trade.

Today all I saw were pairs moving within their ranges. Below is EURJPY. The circled portion is the period I trade. I marked the bars which red reports occurred on.

It is clear there was some expansion on those bars, but much of the bar is explosive as spreads widen that you cannot cleanly execute at good levels. Many times you are left with where they have taken it to causing you to buy high or sell low. A trader can play for continuation (as I do) or mean reversion, but whichever style is employed you need good execution in order to achieve your strategy's goals. To my eye the moves were random. If I marked other bars as the report bars it wouldn't look any different because the reports didn't actually change anything - they had no significance because it remained in the range.

My stance on reports is that they are fine if they change the picture. Surprises cause trades to have to do something, and the flood of orders coming in usually brings in volatility and continuation. When the reports don't do what I like I have no business getting involved.

AUDCAD. I tried a buy after a report blast held and retained a bullish look. 30m shows the report blast held above previous support. The 3m held above upward MAs forming a HL. I bought @ 88 and it went up immediately, but then it stalled without filling me P1 at +6....and then rolled over.

I scratched the whole position. Looking at the move that followed it appears that maybe I should've stalked a short instead. I can see all kinds of reasons now: the move up stalled at a Fibonacci 50% level, the 30m MAs were downward, etc. But at the time I took my buy the 30m structure was not violated. There was no reason to skip a buy and instead wait for a short because the structure of higher support lows was intact.

After my buy it collapsed at 10pm forming a first LH. Looking at the 3m it went sideways from 10-11pm while still holding the support level. If I felt a short was on the cards I needed a move to the top of the box rather than selling into support (not a smart thing to do). With sufficient volatility I can figure out which way to go, but when the markets are sideways all day it is hard to feel which way they are trying to go. Lately, reports slam things around, but they hold at levels in tiny ranges forcing you to have to violate your rules if you really have to get in. My buy was fine. From the resulting move down I saw I should get short, but it has to be where there's a decent R:R and from a spot I can protect myself. No need to violate or change rules - let this period pass and wait for days with patterns that agree with my method.

Result: 1 scratch