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Every time I open a YouTube video, that *#$@* advert pops up...
It's been around for well over a year so you might have seen it too...
"Are you concerned about the current fluctuations in the world's economy?"
In case you haven't had the pleasure, click here.
Now, when I was just starting out, I would actually pay attention to stuff like this.
I believed it was the right thing to do.
With the benefit of experience, I see how wrong I was...
So I thought I'd rip it apart.
Let's start with the first question 👇
Are you concerned about the current fluctuations in the world's economy?
"Well, yes I am actually, there's so much going an..."
Don't be! Not even a little bit.
That's what economies DO.
They exist in a permanent state of flux. If economies aren't fluctuating, they're dead.
Zero opportunity to trade anything.
PLUS... Why be 'concerned'?
Worry is going to impact your view of the world and your interpretation of everything you see, which leads to feelings of inadequacy, not knowing 'enough' and sooner or later... Fear.
Here are three pieces of advice from eToro users on how to trade safely suring a period of increased market volatility
Why should you listen to these three users?
Is there anything special about them?
We all know the stats, right? 👇
Two thirds of users are losers.
Still, let's give them the benefit of the doubt and see what they have to say
"First, monitor your positions frequently"
Especially during periods of increased volatility! If you monitor your positions frequently, what happens?
You get anxious. Your brain speeds up and the monkey mind takes over.
"If it goes here then I'll buy, but then there's that moving average, and the momentum's mixed, so maybe I'll sell here instead, but..."
Meanwhile the market's bouncing around, injecting wave after wave of information into your eyeballs for your stressed out brain to interpret, amplify and compound.
Emotions fully take over and it all goes horribly wrong.
Later that day...
Since market gaps may occur, this is a good time to review your stop loss and take profit
NO NO NO!
You define those things in advance, ESPECIALLY the stop loss!
Don't change the parameters of the bet to adjust for all of those things you should have thought about in advance.
That's the best way to be right and lose...
For the time being you may wish to trade with lower leverage or no leverage at all
OK, this isn't necessarily bad advice.
I'd probably change it to
Size your positions correctly and make sure you've taken the volatility into account
"Oh, but I ALWAYS use a 30 pip stop loss"
Don't. If you're trading with a fixed stop loss, you're NGMI.
Adjust for volatility.
For example, try using use the 20 day ATR (Average True Range) as a guide.
Then make your stop a minimum percentage of the ATR instead of a fixed number of pips.
Either way, proper sizing and stop placement should always include measures of volatility.
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Anecdotes are no substitute for hard data BUT...
Since the last Fed meeting everyone knows that employment is the key for future rate hikes.
There's broad agreement that the inflation goal has been met, and every chance that the taper will start in November as long as the next NFP is 'reasonable'.
JP Morgan's model suggests 'only' 333,000 jobs will be added in September 👇
However, the guys at Renaissance Macro have been rounding up anecdotal evidence from company earning calls.
Many say that the end of the pandemic benefits (and possibly the reopening of schools) is leading to an uptick in hiring...
Probably more than just selection bias...
Definitely something to keep an eye on to supplement the data and models.
Especially when data and anecdotes don't line up...
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Tariffs don't work, they just make you worse, but I know I'll see your face again...
That's (kind of) the conclusion of this research 👇
The Trump administration’s logic was that tariffs would hurt U.S. and other multinational corporations engaged in U.S.-China trade — and push more companies to divest from China and shift supply chains to the United States.
Tariff proponents argued the Chinese economy would suffer, giving U.S. negotiators more leverage over China at the negotiating table.
Doesn't this miss an important part of the picture?
There are two separate goals at play.
One is encouraging firms to divest from China due primarily to concerns about US over-reliance for key supplies.
The second is encouraging firms to invest in the US.
Two entirely different goals, and you can't just reorganise an entire business supply chain in a couple of years either...
It takes time... 👇
Anyhow, the paper is interesting for different reasons... 👇
China's economy looks set for sluggish growth (as the real estate bubble unwinds) & increased political risks are definitely coming into view as the CCP transforms China's economic goals...
Time to renegotiate?