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(VIDEO) Market Review: Trading Environment

   

 

 

Video Transcript:

Hello, everyone. It's Paul here for ValuTrades. It's the end of my trading day. I've been asked to have a quick chat with you about trading environments, in particular, understanding when your instruments or your asset class, whether it's in a range-bound or a trending environment. Both offer opportunity, but it's important to know which is the correct environment we're in and what is really the right sort of strategies and tactics to use within that environment.


Well, you know, as I'm saying this, this is the end of March, so it's the end of the month, end of the quarter, end of the financial year for certain countries. And what happens is, you know, I had a chance to look back and look at the trending environments that we had to work with in this first quarter. I suppose the, sort of, the major event that we saw was that we had a market tumble at the start of February which was primarily led by the indices, I think in particular the Nikkei fell about 8% in a single day. And those couple of days at the start of February were rather eventful, rather tumultuous. And invariably, you know, as quickly as the price dropped, it also bounced back upon all those indices. If you look at the American indices, so if you're looking at the Dow, the S&P, the Nasdaq, the Russell, you saw that they, you know, yes, they fell, but they also bounced back quickly and they bounced back up into sort of the middle of the range. 

And then for the next sort of five, six weeks over that for those three particular, the Dow, the S&P, the Russell, they really just went in a range for about five weeks, okay? But interestingly, as that was going into a range, we see in another asset class, and namely FX, there was actually a breakout and a trend starting, and in particular in the Japanese yen. The Japanese yen strengthened, okay? It's deemed to be a safe haven currency. So as, you know, as the, sort of, the funds, the banks, the traders sat on the sidelines with their index positions wondering what was going to happen next, invariably there was a lot of money that automatically funneled into the Japanese yen, and then that created a strong trend within the Japanese yen against pretty much all of the major currencies. So of course this is, you know, this is the opportunity for us to understand what market environment is, our particular asset class is, and how that has a knock-on effect into other asset classes. 

So as I said, what we saw was we saw a five, six week period of the American indexes, for the most part, just in a tight range after the tumble, whilst the, sort of, the Japanese yen was on a strong trend. We've now started to see those indices start to sort of fall down to sort of the bottom of that range, and as we go into Q2, we'll be looking to see, well, will that now generate a possible new trend for those indices as we go into Q2 and beyond in 2018.

As always, I wish you the very best success with your own trading. I look forward to speaking to you soon. Trade well, ladies and gentlemen.

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Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Malte Kaub

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