One of the lighthearted discussions that have been going on at Currensee alludes to what traders listen to when they are trading. Some obviously prefer music, while others have financial channels on in the background. Still some prefer having the financial channels on but fully utilizing the mute button, which is one way to avoid outside opinions from influencing your trading.
Obviously, right now many of us have the World Cup matches on in the background. You can’t help it. How many times do you need to hear either, “We think there is value in the markets right now” or, “Gold, the US Dollar and the Yen are gaining because markets are risk averse!”
The one thing that you will notice about a World Cup striker is when they have a chance to score a goal, they will try without fear. Meaning that when the ball leaves their foot, it is headed towards the keeper as hard and as fast as it can possibly get it there. Sometimes the ball is shot errantly, but still, everyone knows what the objective was for the striker.
Traders learn that when an opportunity knocks, you have to be as quick to enter that trade as you possibly can. Waiting for confirmation that your idea was correct will often times cost you valuable pips, and potentially have you caught in a squeeze play. Sometimes traders will enter a trade and it will turn out to be a loser, yet still everyone knows what the objective was for the trader.
Those are two straightforward examples of having an objective and believing in it. Can we say the same about the FOMC right now? Have a look back at the FOMC statement from Wednesday: “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.” Come on, blaming Greece and others for the lack of economic growth in the US? You can’t be serious. Isn’t China’s economy bigger than Greece’s? And didn’t they just revalue the CNY because their economy is growing at a solid clip?
Unlike its peers that solely focus on inflation, the Fed’s job is to also maximize employment. How many more jobs would have been created in the US if the markets had just left Greece alone? I dare say that more jobs have been impacted by China of late than by Greece. If anything, yields are lower, which should make it attractive for those that can access credit to borrow money right now.
Traders don’t go around blaming others for their losing trades. They blame themselves, they recoup and start over. Why is the Fed blaming “developments abroad” for their inability to restart the economy and create jobs?
Many of us still point to the Fed’s reluctance to withdrawal policy from 2004 to 2006 as the catalyst that started the current recession. As outgoing Fed member Donald Kohn said recently “I don’t think we know enough at this point to answer with any confidence the question of whether monetary policy should include financial stability along with price stability and high employment in its objectives”. That is the complete opposite of trading without fear, right now it sounds as if the Fed needs an objective to believe in again.
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