10Y: Inflation Could Creep Back Up as Seaborne Trade InterruptedCBOT: Micro 10-Year Yield Futures ( CBOT_MINI:10Y1! ) Maritime transport is the backbone of international trade and the global economy. Over 80% of the global trade volume in goods is carried by sea, according to the UN. Therefore, whenever a major trade route is blocked, shipping time would be lengthened, which pushes up freight cost, and ultimately, the prices of merchandise. Suez Canal Blockage, March 2021 Traffic jams at sea are not rare. On March 23rd, 2021, a 400-metre-long container vessel, MV Ever Given, got diagonally stuck inside Egypt’s Suez Canal. Transport was completely blocked in the all-important 193-km narrow waterway for six days. Suez Canal is one of the world's busiest shipping channels for oil, refined fuels, grain, and other trades linking East to West. It moves about 12% of the global trade. Holding up traffic there could cost $9 billion per day, according to data from Lloyd’s list. Direct impact: The Baltic Dry Index (BDI), a benchmark for the cost of shipping goods worldwide, traded around 2350 before the blockage. It shot up to 3170 (+35%) by May and peaked at 5530 (+135%) by October. While canal blockage was not the only cause, it exposed weaknesses in global trade and triggered a chain reaction in price hikes. Influence: In February 2021, US CPI was well under control at a 1.7% annual rate. It jumped to 2.6% in March. By the time BDI peaked, CPI was at 6.2% in October. But it did not stop there, US CPI topped 9.1% in June 2022, 15 months after the blockage. Panama Canal Drought, August 2023 to Present The 65-kilometer-long Panama Canal connects the Atlantic and Pacific Oceans and is a key shipping hub for trade between North and South America to Asia and Europe. It links about 5% of global trade. In 2022, more than 14,000 ships passed through the canal. The Panama Canal is experiencing a severe drought now, resulting in a shortage of fresh water for the operation of the locks. This forced officials to slash the number of vessels they allow through and has created expensive headaches for shipping companies. Before the crisis, 38 ships a day moved through the canal. It’s now down to only 22. Canal authority now hosts special auctions to allow winner to cut in line and move his ship ahead in the queue. It is reported that shipping companies paid up to $2 million for this privilege, which is on top of the regular canal fees they paid. Direct impact: Unlike the Suez fiasco, drought would last for months. It’s estimated that daily passage could move up to 24 by January 2024. The canal would still be running at 65% capacity. This means that global trade could be slowed by as much as 2%. Red Sea Under Houthi Attacks, October 2023 to Present The Bab el-Mandeb Strait is between the Horn of Africa and the Middle East. It connects the Red Sea to the Gulf of Aden and the Arabian Sea. This waterway is used by container ships and exports of petroleum and natural gas from the Persian Gulf. Approximately 12% of the world’s trade, which includes 30% of all global containers, move through the Suez Canal. That then feeds through the Red Sea and Bab el-Mandeb. The Yemen-based Houthi militants have threatened to attack any vessels that have ownership ties to Israel or do business there. Overall, 13 vessels have been attacked at Red Sea since the Israel-Hamas conflict broke out in early October. On Saturday, MSC, the world’s largest shipping carrier, said that its ships will not transit the Suez Canal due to security risks. Shipping giants Hapag-Lloyd and Maersk also paused travel through the Red Sea a day earlier. Direct impact: The collective vessel market share of MSC, Hapag Lloyd, and Maersk is approximately 40% of global trade. The decrease in vessel transits by these three giant ocean carriers will be a financial hit to Egypt, which owns, operates, and maintains the Suez Canal. Egypt has already seen a hit in tourism due to the conflict. Impacts from Panama Canal and Red Sea Crisis The combined trade volume passing through Suez and Panama canals accounts for 17% of global trade. Any interruption, either man-made or by nature force, could reduce global goods supply and add to the price tag on store shelves. The long wait time at the canal and the extra weeks it takes for using alternative route both increase overall fuel consumption and other expenses. Even though crude oil price has been falling, freight shipping cost are now on the way up. This is like a tax on the economy. The impact on such a global scale could reverse the trend of cooling inflation. If recent history repeats itself, we could see US CPI creeping back up in the coming months, following a surge in the BDI. Trading Opportunity with CBOT Micro Yield Futures Last Wednesday, the Federal Reserve decided to keep the Fed Funds rate unchanged in the 5.25-5.50% range. While Fed officials put out inconsistent statements about what they would do next, investors overwhelmingly concluded that rate cuts are coming soon. On Thursday, both S&P and Nasdaq made 52-week high, of 4,738.57 and 14,855.62, respectively. The Dow reached a new all-time-high record of 37,347.60 on Friday. According to CME FedWatch Tool, the first rate-cut could occur in March, with a 69% probability. By the end of 2024, there is a 98% probability that the Fed Funds rate would be 4.25-4.50% or lower, indicating investor expectations of 4-7 cuts of 25 bps each. (Link: www.cmegroup.com) In the Treasury spot market, 10-Year yield was quoted 3.928% on Friday. This represents 132 bps below Fed Funds, and a 10Y-2Y spread at -51 bps. In the futures market, CBOT Micro Yield futures ($10Y) January 2024 contract (10YF4) was settled at 3.927 last Friday, in line with the spot market. If our analysis on pending inflation rebound is proven to be correct, the Fed would start cutting rates later than the market expected, and not as much as the Treasury market priced in at the moment. Each Micro 10Y Yield contract has a notional value of 1,000 index points, or $3,927 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $320. If the resurgence of inflation spurred by global supply chain disruption makes the Fed to maintain its hawkish stance and continue tighten the monetary policy, the rates will stay elevated. A trader with a long position will gain if 10Y yield rises. While a rate hike raises Treasury yield, the postponement of an expected rate cut also has similar effect. The forecasted low yield would now be revised up. As a result, the futures price, which is the 10Y yield, would go up, rendering a profit for the long position. On the other hand, if 10Y yield continues to fall, the trader would incur a loss of $250 for each 25bps cut. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com BLongby JimHuangChicago2214
Baltic Dry IndexI consider this a leading/coincident indicator. As long as the Baltic Dry Index is in a strong down channel, we can conclude that world commerce is contracting. I would not be overly optimistic about markets until this indicator shows signs of reversing down trend. Bby UnknownUnicorn131010
GET READY BDIHuge reversal pattern for BDI INDEX. End 2023 - Mid 2024 to hit 2600 points !!! RSI on the right side of the history...BLongby kyriakosvar331
BDI crashing down and then SPX to follow, repeat 2020 but worseBollinger bands are a tell of a big move coming when they constrict. They are tightening historically the most ever, yes ever. Which means whatever has caused them to get this way is an artificial market force, a lie which has delayed this move, so they overtighten. Overlaying the SPX with BDI, we see the 2020 crisis demand shock take place, first the BDI, shipping orders vanished, and then the SPX followed shortly after that. The spring effect here will be worse than 2020, down. RSI shows weakening. The 200 MA also is now resistance. Sell in May and go away is about to release its forces. Bank closings, credit tightening, credit defaults, banks loans and leases less and this Monday's numbers could be staggering, market shock, all this doesn't help shipping. Shipping is the canary to the health of the economy. One lie upon another, then another false report (CPI), all a web of lies until it becomes the truth., and you cannot keep track of them. But there is coming a day when the lies will all come tumbling down, and the truth is PAIN such as this generation has never seen. Bails outs, bail ins, bail this, bail that, print more, create more debt, inflate more, the bag of tools the FED says they have are all just lies designed to cover up the next lie. Cardinal sins are that for a reason. They upset economics it took truthful years of supply and demand to build. The reset is coming, but it wont be the one the WEF wants, or AI (The Beast) , or anyone else. Digital currencies, blockchains, none will save us. The control "they " want will elude them, and the monster(s) they create will wind up controlling them and the species. IDIOTS! Why are some lessons never learned. The problem is this one will be a civilization pivot change that will rip the hearts of all. God will be the only one who can save us, save you. Count your profits now, and party now while you still can, but the fool says it will save them from the tribulations which are about to be unleashed. Isaiah: Otherwise, they might see with their eyes, hear with their hearts, and turn, and I would heal them. BShortby claydoctor1
Bitcoin and BDIWhat is the Baltic Dry Index (BDI) and what does bitcoin have to do with it? The index is a tool for measuring business activity in the world, and actually tracks the cost of shipping in the world by different classes of ships. Why does an investor or a mid-term trader need it? It can be used to forecast the demand for international maritime transportation, as well as business activity in the economy. You can see on the chart that the index actually predicted a covid collapse in 2020, and in 2008 the index also reflected the crisis in the economy with its fall, but with a slight lag. Today we can see that the index is in a local uptrend, on the breakdown of the downtrend, after the rebound from the bottom in February, based on the past behavior of the index, we can conclude that the uptrend should continue in order to continue the economic growth. What does bitcoin have to do with it? Bitcoin by its class belongs to the risky assets, I would even say to the super risky assets. Its movements in the market largely coincide with the U.S. stock market, especially to the small capitalization shares (small cap), this class of shares grows when investors do not see threats to their investments and there is a so-called risk on, risky investments are more sensitive to the economic situation. This year on the chart we see that bitcoin supports the local growth of the index, but also with a lag, as the growth of bitcoin began before the rebound in the index. Conclusion - the BDI index, will be useful to understand the economic situation in the market, and to understand the mood of investors to choose a strategy for investment or to enter the long / medium term position. Support for the author subscribe ✅ and start rocket 🚀. Good luck and profit to all. Bby Kriptos2
BDI - smth nasty is under the hood Baltic Dry Index points to smth ugly in global trade to happen. I count move from 2008 top to 2016 bottom as wave circle A. Move from 2016 trough to 2021 peak as wave circle B. Wave circle C is ahead. Assuming C=A extension the bottom should be expected somewhere in the 140-200 range, almost 80-90% drop from the current levels. BShortby Vyaz1
Baltic Dry Index drops to 2020 levelsCoinciding with talks of recession, the Baltic Dry Index (which can be thought of as the cost of international shipping of primary goods and so an economic indicator) is approaching the lows seen during 2020. With a 60% drop left to the 1D Cosmic Channel Lite support and Cosmic Markers Lite not yet flashing the strongest support signals the prognosis is bearish with a potential reversal at 270.BShortby cosmic_indicators3
BDI BALTIC DRY INDEX Near march 2020 The globle very important indicator BDI is near the mach 2020 level therir is two type of view NEGATIVE:- This is the time to sell the all stock because the globle most of the market and indicator is negative trend Positive:- This is the time to the invest because, last time BDI near this level after this all market give rally, so this is time to accumalate the share What is your view please shareBby investingclubs4
Baltic Long Term AnalysisMinor Higher High & Down Trend till 2024 ... We will see an increase in the index level till 2000-2050 and after that going down towards levels less than 700Bby aaalli1101
BDI - HOW ITS POSITIVEThe very important indictor of the globle finacial market baltic dry index is show in the positive trends. If you watch this indictor it is very much possible the bearish market end soon. Bby investingclubs3
Baltic Dry Index Baltic dry index is lowest level since 2020,which almost COVID 19 days .If now still it's very close to that levels means, global economy is about to come recession.Bby onlyprofityou0
Not all is well with Global TradeBaltic Dry Index remains quite weak - watch 1300 support level. USO is trading at $71 while Brent is $93.47 and WTI is $88. Don't think commodity space has completed its full decline! INDEX:BDIBby henriB0
Baltic Dry IndexThe BDI or Baltic Dry Index - measures the cost of shipping goods worldwide. For 2022 - the BDI is down -34.14%. Ukraine was a large disruption for Grains - Barley, Corn, and Wheat. Factually had material impact. The index's value is generated by the demand for the raw materials and the supply of ships available to transport them. There is absolutely no shortage of Ships. Rather the Demand for Products is vastly reduced as Prices began to move far higher. 768,300 metric tons of Ukrainian grain were exported by Rail in early May. The trend towards overland has increased markedly. __________________________________________________________________ Overwhelming Price increases have dampened demand from Egypt to India as prices for Staples were extreme. Egypt is typically the world's largest wheat importer, buying more than 60% of its wheat from abroad, with Russia and Ukraine accounting for about 80% of government and private sector imports last year. 106M people live within Egypt's borders. 67 MIllion of them receive Bread Subsidies. Ripe for further disruptions to Supply and a repeat of the prior "Bread Riots" of 1977 when Sh_t went South in a very big hurry. Protests against the austerity measures in Cairo were far different then, Bread is symbolic. Contrast this with today's environment and we will see how the forced austerity becomes a hunger chant for the Ages. ____________________________________________________________________ Egypt is merely One of the Dozens of Countries that are facing Food Austerity. From Plentiful to barren, don' t believe it can't happen here, it can and will.Bby HK_L614424
BDI - Baltic Dry IndexWassup moving goods arouund... Oops, not happening. China? Nope, re-opened for 61 Hours and closed up again. No more Honey for the Money. Increasingly more stringent lockdowns... but hey. Facism rules the planet. Go get some. _____________________________________________________ The Baltic Exchange's main sea freight index extended its slide on Thursday to hit the lowest in more than six weeks, hurt by falling rates across vessel segments. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, lost 68 points, or 2.8%, to 2,342 points. The capesize index fell 88 points, or about 3.6%, to 2,369 points. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $737 to $19,643. China's coal imports dropped in May after a strong rebound in the previous month, official data showed on Thursday, as cheap domestic sources and weak demand due to Beijing's zero-COVID curbs dented appetite for overseas cargoes. The panamax index dropped 73 points, or 2.7%, to 2,674 points. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $659 to $24,064. Dalian and Singapore iron ore futures slipped as traders continued to worry about weak profits at Chinese steel mills, with fresh COVID alerts in Shanghai and Beijing adding to concerns. The supramax index lost 58 points to 2,527 points. (Reuters - Reporting by Rahul Paswan; Editing by Vinay Dwivedi)Bby HK_L61117
SO bad . BDI still look sbullishUnderstanding the "price action" it seems the FED rate hike with BOE hike is not enough to control BDi which still looks bullish in price action charts IT SEEMS inflation is not contained by these latest rate hikes so far. BLongby algomoneyfestUpdated 660
Baltic Dry IndexBaltic Dry Index over the past ten years up against Jinhui Shipping and Transportation.Bby seriousSnow769256
Baltic Dry Index vs DOW jonesBaltic Dry Index is signaling a major drop in the DOWBShortby lucky_human_foot221
By time the supply arrives.....Will the demand have dried up? Inflation is likely temporary.....deflation likely to follow. Expecting systemic crashes of all markets and excess supply sitting with drastically reduced demand Bby cantremeber0
Baltic Dry Index UpdateThe Baltic Dry Index Continues to soar following my call for a breakout at 3,200ish (July 2021). I think the BDI remains a good indicator right now for a few reasons: 1. From a technical perspective, it is behaving exactly as expected (hence the call from 3,200 - it was an easy read) 2. The breakout and move higher is consistent with a bottleneck in global shipping 3. The #bullish price action is yet another harmonious variable in my view of the global macro repricing; although I am still treating the idea of "re-pricing" as a theory. I am going to not this as a continued long until we reach the 4,700 threshold; at that point, we can reassess.BLongby ChiefMacro225
The time for more inflation or not is hereI am neutral here but this is it. i GUESS WE WILL SOON know.Bby algomoneyfest111
BDI - Baltic Dry Index I would expect the BDI to press higher and at least break out of the blue structure. We can assess further from there. BLongby ChiefMacro1
The Secrets to Forex & the Boydian Theory of CompetitionI'm assuming if you got this far, you might be smarter than the average Yahoo commentator. No need to rejoice, dear Gulliver, we're still in the tutorial. I have specifically designed this article to be long and heavy, hopefully to demoralize you out of intra-day trading. However, I know that for those who live outside the expected plot, demoralization doesn't work. It's expected that dumb people will make dumb decisions. But oftentimes, smart people make the dumbest decisions. So here it is, a guide on how to make that dumbest decision a bit more survivable. Fortunately, we have the lessons of millions of losers to draw from. Corpses that tell a story. ------------------------------------------- Intra-day is a horror many glimpse but few manage to survive. The chaotic, turbulent, uncertain darkness of the lowest levels of the market are, to be honest, not for everyone. The vast majority of you reading this should not be intra-day trading. Why? Because I don't want to see your net worth (and lifeworth), sucked dry by the vampires in the hellscape. It is the hardest difficulty a retail trader can play the forex game on. You need to sink 1000s of hours into the craft, often as a fruitless exercise in geometry and color. There is no decisive path through this battlefield, this eternal competition. All edges decay. But there is a silver bullet. Just one. And if you know how to polish it, no amount of sulfur will get in your way. Part 1: It's Strictly Business The US military is a big organization, arguably the wealthiest and most powerful out there, as far as we know. A lot of people are paid to think about strange problems or prevent unfavorable events that probably wouldn't happen anyway. They are also paid to figure out how to make things cheaper, more efficient, more interoperable, more redundant, more lethal, more accurate, etc. It's not so different from your typical US30 business. You just trade the profit motive for organized violence (not-in-minecraft kind) and the shareholders for citizens. Powerful men who are responsible for other people are rarely different, despite what the movies and media might tell you. The front of the shop might look different, but don't be naive Kay, the survival motive is the same. So what risk management or market lessons can we learn from this controversial type of big business? What about those guys that think about strange problems? Every once in a while, someone comes up with an interesting idea. And no, I'm not talking about what you or your fellow estronauts think about on discord. Part 2: Patterns of Conflict Col. John Boyd developed the OODA loop theory from a basic white paper called: 'Destruction and Creation' and various presentation decks like: 'Patterns of Conflict.' And while I have an autistic tendency to make military-to-market analogies, it's not important to dive too far into these. Basically: risk and strategy development are cutting edge in the military domain, where the stakes and budgets are highest. And then, oftentimes, it trickles down into lower stakes arenas, like markets or sports. I could write a book on it, but alas, I have better ways to make money. Now, his works were publically obscure but privately influential, eventually their reach extended from military strategy to business and market strategy and even to cybersecurity and legal strategy. Boyd's cycle time management, his observe-orient-decide-act or OODA loop, in particular. It is a simple concept at first. It's so simple it doesn't really seem like an 'invented' idea. It's like processing power in a computer, or latency with an internet connection. If we can do things faster... our process of development, that is making mistakes and correcting them to 'get better,' also speeds up . An AI running a neural net is similar, it makes a lot of mistakes, maybe more than a human would, but because it plays so many games at once or a single game extremely fast, it eventually evolves to defeat humans in the form of competition. If it gets fast enough and far enough ahead or interferes with the processing speed of the opponent, something magical happens. It makes moves we see as 'chaotic' or 'confusing,' which usually end up as traps or baits to draw in the opponent, in retrospect. OpenAI and AlphaGO did this all the time. Eventually the faster equation of mistakes and successes will overcome the equivalent slower equation utilized by our competitor. Three options. /1/ You can make your process faster through technology or intellect, /2/ you can slow the opponent's process down through confusion or force, or /3/ you can do both according to Boyd's theory. The first option is our limit as traders. As far as retail FX trading is concerned, that is as much of the theory that can be applied due to the lack of boutique data feeds from prime brokers and the nature of the market (and law) itself. As an institution, you can go further. You can load up on computational resources, get closer to the source of the exchanges/interbank transactions to reduce latency, scalp top talent away from competitors, produce FUD in the media (the purpose of CNBC), etc. In fact, in other markets with other tools, by applying the OODA loop you could abuse the order book and confuse and bait the HF algo strategies. Do this well enough and you just might start a flash crash. Front-running, spoofing, layering, and others were second-order techniques of applied OODA loop strategy (those 'overpowered' methods are now banned). It was a trillion-dollar lessons-learned exercise. Part 3: A Strategy for the Weak But the idea is too widespread and too evasive to be killed off by a few unethical and abusive strategies. It's like the scientific method reformatted into a competitive/survival environment. You could argue its two or more scientific methods in contest with each other, with a game theory like logic balancing outcomes. A competitive decision cycle. Virtually every successful business uses a derivative or parallel version of cycle time management. A parallel version of it was developed as the Shewhart cycle, and inspired production theory in Japan that would eventually revolutionize manufacturing for a globalized, value-added world. And of course, it wasn't just tested in the field of profit, but in the field of battle, where competition and risk management is a matter of life and death; which are very expensive affairs. It would underpin the design logic of all future combat aircraft. It led to the swift and decisive victory in Gulf War I (the only swift and decisive victory any conventional military had after WWII). It was built and inspired by the central lessons of thousands of years of warfare 'upsets.' It's success, its value, is self-evident by it's wide adoption in competitive fields and by competitive entities. It's now synonymous with the idea of a "lean victory." When we talk about the resource called Time and the resource called Information, the OODA loop is about managing these to competitive excellence while disrupting your opponent's management of those resources. So why wouldn't we also apply it to trading? Part 4: Fast Transients Personally, what I like the most about this theory applied to markets is its crossover with technology. Competition normally happens at the speed of thought, and technology is a type of thought machine (it translates thoughts). Technology is inherently synergistic precisely because it improves calculation time, observation time, and the overall speed of the cycle itself. Technology is always improving these things, so the theory gets stronger over time. This is also why, for your intra-day future, you need to have time and/or money set aside for R&D, so you will be on top of new indicators or trading technologies. It's also why, in the long run, using algos to assist in your trading efforts will likely be very important, primarily for intra-day. I use a comprehensive algo-run dashboard to manage my intra-day positions. I spend a lot of time on counterparty analysis*, it's the 'unit of analysis' in a market competition from a scientific perspective. It's what shapes my broader market theories that manage my portfolio beyond forex. Reducing it down to something simple, how the human mind works in a competitive environment, the psychology of profit-seeking. Is what I have been mentioning throughout the entire series. Who is buying this shit, why is someone selling me this shit, what are these boomers thinking, how are they making money, what is influencing their decision-making... Etc. But technology changes that. It's another brain, another filter. The market war is far less human than it once was, but the biases from humans are still plugged in, the humans in the loop. Or, are they? *(and if you followed GME, you would see the idea of punishing siloed short counterparties independent of absolute stock valuation has become popular in the retail world) Today, just like your social media, the market is filled with less-than-human entities, monsters... vampires. Not just because of technology doing the thinking and trading, but because of how it influences the human mind to favor commodifying everything and thereby justifying dehumanization. It is a very dangerous process at the forefront of our increasingly unsatisfactory and disenfranchising materialism-driven world. I'll talk a little about that in the last article where I explain the Pigovian-like risk you inherit as a trader. Part 5: Entity List Now, unfortunately, because trading is a many many player game, and most of the biggest players have fiduciary responsibilities (on paper, which isn't worth much these days), it is hard to take full advantage of Boyd's method unless you have access to higher market-level data and access to massive resources like a corporate entity. For the rest of you, you will have to translate the competitive environment into units of analysis or battlefields to survive. Sessions become battlefields, newsflows become battlefields, pairs become battlefields, etc. You will compete against entities in these battlefields. The moment you enter into the market, this plane of materialism, you are in competition with these entities, both real monsters (other real players), and synthetic monsters (algos, AI, MM). Risk management is impossible without accepting this truth, that you will always be in competition in the market, no matter how large or small or where you positon may lie. You can't hide from the fight, you can't wish it away, you can't pray its fangs are small. You can only prepare for limited certainty and adapt to unlimited risk in the long run. That way, when you do get scared, it'll be over the size of your new house instead of a strange French accent over the phone. Intra-day is the application of everything laid out so far, with the addition of the Boydian time cycle method and important psychological revelations about sessions and open interest. This method pushes your trading timeframe into as short of a unit of time as reasonable, or fast enough to be competitive against your peers. The better application of your time resources. It also demands the observation/gathering of information resources as widely and as quickly as possible (Boyd's rapidity and variety). And ultimately the processing of these two resources synergistically. This is the rapid transient mindset. It's increasing your initiative as a capability. You wouldn't spec a character in a turn-based game that gets fewer turns. You want more turns per encounter. In this sense, the familiar forex conclusion is something like a fractal. Where you are looking for a similar occurrence but on a smaller timeframe, allowing you to act earlier and more often on information. But that isn't entirely accurate. I used the classical mechanics vs quantum mechanics example in the 3rd article. Classical is more structured and stable, while quantum lives and dies many times before producing something significant (or maybe its really a matter of frame of reference). The point of intra-day is similar, you want to take advantage of the uncertainty, the volatility, as possible preparation for a long-term outcome. You want to think of these timeframes (15m, 5m, 1m, seconds) as FASTER, not smaller or lower. Think faster. Everything is faster, and that includes you. If it sounds hard, it's because it is. You're only human after all. Part 6: Entropy Investments You are looking for the possible start of a CPG/EX/FLOW/SEA event, AS EARLY AS POSSIBLE. That is, on the higher timeframe the process will play out, but the purpose of moving to faster timeframes is to jump in on these 'potential beginnings' because if you jump in the potentials as early as possible your risk/reward is highly dysgenic. In other words, you will have a lot of losers, which is a good thing. Remember, openAI plays more games and has many more stupid lost games than a normal player would. Let me explain this in a way where risk management meets my energy ecosystem concept from the prior articles. With an equilibrium system, you will have a higher loser frequency of trades (the number of trades) with small individual account loses, while earning a lower winner frequency of trades, but the ones that win will win big. In equilibrium, it will all balance out to a net account zero before fees and commissions between traders with edge and those without. However, markets allow competitive systems within the master ecosystem. With competitive edge, you will have a high loser frequency of trades, with even smaller losses, while maintaining a few very big winners, similar to the 90/10 rule in boomer investing. In other words, your trading system must facilitate an environment where you can lose many of your trades while still capturing significant moves on the few upside wins you entertain. That is the endstate I have found to be most valuable for intra-day trading. It's the silver bullet of return patterns. You can have a small account size, your downside risk is smaller (compared to long-term trading), and your upside potential tracks daily volatility more effectively than long-term trading ( we will talk about specific RR ratios and RoR based on Monte-Carlo simulations in the next article). The closer your trading system tracks volatility, generally the more profit you will make IF your strategy is competitive. Inversely, what is more predictable = is less competitive, and the potential for edge generation is harder to fulfill. Remember, the Ecosystem Tycoon stands still and dips his hand into the flow of cash transactions. You will profit most where the flow is strongest (the most volatile and liquid). For instance, if USDJPY starts the week at 110.00 and ends the week at 108.00, it moved 200 pips on your competitive long-term tradng strategy. But with intra-day, it may have moved from 110 to 111 on Tuesday and then down to 108 by Friday. That volatility (400 pips worth) can be turned into more profit, AND, with proper risk management, involves lower account risk per trade. Despite the pair pip movement outcome being the same as the weekly long-term strategy (IE, where it started on Mon and ended on Fri). Note that the long-term account risk differential with intra-day can be reduced with currency options and futures, which we will visit in the next article, but it is hard to replicate the gross available pip totals from intra-day trading because European options were designed for multi-day strategies, along with other issues. Capitalizing on volatility sounds nice, and operating on faster timeframes to capture that volatility sounds nice, but how do you analyze any of this? How do you find the optimal (competitive) periods of volatility, how do you track the swings for more pips, etc? You could try some thinking on your own, or you could keep outsourcing your thinking to me. It's okay, most people do it, just look at Reddit. Part 7: Openly Interested I have found through my own research that session psychology is just another way of classifying structured open interest and volume behaviors. I mentioned prior that counterparty analysis was important to understanding the market from a scientific and competitive standpoint. Open interest behavior is a component of counterparty analysis. It is the magic to intra-day that carry interest is to multi-day. Problem. Technically open interest isn't measured by most brokers in the FX market, but it does exist somewhere because forex is a derivatives market with a futures and commodity market. To understand open interest: it is a measurement for the occurrence of multiple investors or entities converting cash into new market contracts or settling those contracts back into cash. In other words, it's how many contracts have been created via cash. It's like going to the casino and converting your money into house chips for gambling. When those chips are 'created' open interest is created. So if players created 100 house chips for the day, then the open interest is 100 for that day. They will all have to be settled by close of business (brought down to 0, because chips cannot usually leave the casino). When those chips exchange hands between players, volume occurs (the occurance of transactions between players). So all the instances of one player losing chips to another player during poker count towards the volume total (which will usually be greater than open interest). Keep this explanation in mind (and refer back to the Ecosystem Tycoon article) when I explain sessions from a human psychology standpoint. Part 8: Session Psychology Each session has a psychology, this is one of the 'secrets' to forex I find to be significant and relatively underexploited despite being self-evident in the trading universe. Entities within the NA session, entities within the EU session, entities with the ASIA session; they all possess patterns of behavior that result in price action outcomes that are consistently predictable. In my review of the topics, these patterns come from psychological biases tied to civilizations and institutions. With civilizations, the majority of consumption/import nations exist in NA and EU (current account deficit bias), and the majority of saving/foreign investment/export nations exist in Asia (current account surplus bias). (Keep in mind that this is changing a bit with AUD as a vassal currency for CNH/CNY, but not just yet.) This impacts the flow of money and risk-taking behavior at the market macro level. It creates a market-driven partially by psychology at the highest level. Momentum patterns are more common during the EU/NA overlap, while ASIA is correctional (mean reversion) but often overcorrects (or anticipates) and withdraws to wait for EU to start. EU (mainly through London) fills large positions and take substantial bets on the overall market outcomes for the day (which occurs when NA comes online, or if they receive enough information about global macro to preempt NA coming online). It's like buying at par value and hoping to sell at premium. If the bet is correct, the forex pair will have a significant (usually 70-110 pip move for the day), if the EU bet is incorrect, there will be sharp reversals until NA produces enough information clarity. It's important to think in terms of cash flow as open interest and vice versa. When the NA markets open, the stock market and other major asset markets open as well, these need cash to facilitate transactions. Credit, risk, leverage, and other major financial currents move during the business day. The financial economy operates under somewhat traditional office hours and this includes the release of performance reports or audits which will influence valuation, legal events, and dealmaking. Most importantly, Jerome Powell and the rest of the Federal Reserve are awake and plotting the death of the US dollar. As a result, the movement of these markets more accurately tracks the overall economy, the underlying, and the biggest demand economy in the world. As a result, currency directional bias will usually become clearer and more stable as it now has a reliable reference point from these flows. This is partly why you see stable and smooth trends during this period. The NA session isn't just another session with its own quirks, it's the demand session of the global market 24 hour cycle. Most price action up to that session is just prediction or anticipation of how the demand session will interpret global macro events. Of course, there is still plenty of money to made during that price action\ prior to the NA session. It is important to understand that it's not as simple as LONDON BREAKOUT, though this the right line of thinking. Trading strategies need to match each session's behavior. And from a higher standpoint, that the opportunities to enter long term trend-based trades are found in the NA/EU overlap, while reversals and compressions are found in the ASIA and LON session periods. Both at the intra-day level and for your multi-day strategies. In addition, during ASIA/LON, the center of price gravity and its extremes will be more valuable; but FLOW and SEA will be more valuable for NA/EU overlap. So your momentum/breakout trading will work better during EU and especially with the NA/EU overlapped session, while your reversal or DCA etc strategy will perform better during ASIA and into LON. Now, you want to think of the transition between sessions as decision points, where the behavior of the upcoming session will have to summon the collective decision-making of market participants to decide on the course of action. So if you run a reversal strategy from ASIA/LON you can expect to hold (usually 8-12) until a decision is made on whether the price will return to the center of price gravity or if a NA/EU trend will begin (these are the 150-300% ADR events usually driven by huge macro stories like CBs/stimulus/brexit/tariffs that ride a lot of newsflow). Thus you need to be abreast of outside influence on the minds of market actors to evaluate if you close your position in that 8-12 window or if you hold for a huge reversal opportunity during NA/EU (a reversal due to the start of a new major trend). Normally, the ASIA/LON period will contain a correction related to the prior day's NA/EU session or will have a mini-move and subsequent correction before 8. In this decade, there will be new economic challenges for the eurozone and the ECB, so the EU standalone market session may develop new behaviors and we might see more volatility. It's important to understand the shifting behaviors of these sessions as macro and geopolitics shapes hearts and minds. All this surface area can be hard to follow, so here is a summary below. Part 9: Execsum The endstate is finding and translating forex order flow into patterns, and then generating edge by reading and reacting to those order flows faster than the tail end of losers. It is pit sentiment or floor dynamics as best represented on a chart, a type of 2D battlefield. The endstate goal is an operationalized effort drawn from the Ecosystem Tycoon analogy. Here are the major themes and connected key concepts within that endstate: Open interest demand mechanics = vol & compression regime mechanics Open interest is created by outside 'viral' vectors grabbing the attention of investors (people with cash interested in the market) and when sentiment is shifted within that cohort (who are now interested in opening long contracts or short contracts) Open interest can break a compression regime by spoiling a careful equilibrium between traders currently in the market. They were formally in a balanced position until new cash tipped the scale. Open interest can create strange PA behavior resulting in new trading performance risks from high ATR and vol. OI is understandable only through the lens of newsflow and macro research related to the viral vector influencing investors; thereby making it a significant threat to technical systems dependent on historical PA information. However, at the start or end of the business day (regardless of rollover), open interest is commonly settled and the contracts are closed and converted into cash. That money or energy leaves the price discovery system and the instrument usually returns to lower volume after finding an equilibrium. These cycles are predictable and occur within the session unit of analysis. They also have different behaviors by session. These mental frameworks are necessary for effective vol capture, especially at intra-day resolutions. Tailoring or selecting technical systems to match session behavior and the open interest driver maximizes potential vol capture. Now, there are few more important tools and methods you need to have to stay true to a Boydian trading strategy at the intra-day level. Part 10: The Crafts There are other important points, particularly regarding technology and how to improve your trading speed. Follow these crafts and at the very least, you will have a chart checkered with good and bad outcomes. Instead of just all bad, like your default life setting. VPS, and a backup instance of your broker on your phone (with a data subscription). This is insurance that pays off in the long run. Now, it won't matter too much unless your intra-day strategy is fully automated (which I don't recommend anyway). Either way, phone backup is useful. Position management and style is also key from a Boyd perspective. Particularly, the importance of splitting a position up into multiple entries. AT LEAST 2; a conservative TP and an aggressive TP. Personally, I like to use a statistically derived TP (like a common ATR/momentum hit dependent on the pair, IE 9 pips on the EN versus 4 pips on the EU), I like to use a covariant-like technical target (S/R level, psychological level, the center of price gravity, etc; in other words, a combination of technical targets with similar natures) and I like to use a TIME based target (closing towards the end of a session or after a scheduled event occurs). I recommend a combination of all or at least 2 of the three. In addition, utilizing order implementation algos can go a long way in this effort. Not as important for the multi-day traders, algos increase your entry and exit optimization with technology (Boydian considerations) for intra-day trading. In fact, this was the original inspiration and justification for algos, to assit in the efficient use of bid/ask (pit dynamics) for the heavy bags of wall street. Your SL should be consistent with the session, strategy, and pair. Ideally based on ATR, but I would recommend an SL at least twice as large as your conservative TP. I will explain the risk logic of this in the next article and how it can be more profitable than the inverse. Finally, you need to be willing to use MARKET orders. There is no reason to not use market orders in the most liquid market on Earth. Unless you are trading 30 lots or more in a single order entry, you will not influence price unfavorably. In addition, if price slides or moves.. this is good, this behavior is good for your strategy, which should be based on volatility tracking and capture. Speed is paramount, you can't wait around for hours to have an order fill at your dream price level. As such, LIMIT has less value depending on your strategy, but it can serve a purpose with forward planning a large position. STOP orders make sense for SL exits but not for initial entry. If you don't want to manually close your orders or you have way to many orders to manage manually, you will need an algo dashboard or a trailing algo SL. Remember, that a third party algo is effectively a system that creates virtual orders, they are not a broker order like a market or limit until the final step of the process. You are solely liable for the operation of the algo. Other order types are irrelevant without prime broker access and are really only useful in the share market or markets with low volume and hidden LPs. Leverage should be used as a exponential for conviction. Meaning, the better your system or prediction, the more money you should be willing to risk. This will be discussed in greater detail in the next chapter, but forget everything you have heard from the webinar retail salesmen and their 2% margin religion. Leverage is favorable in forex because retail traders (and common people in general) cannot get leverage of a similar degree for other assets , or to be honest, anything else. This is very important from an investment standpoint. Your principle goal as an investor is to increase your purchasing power, and leverage is one of the best tools to achieve this. However, you must never forget the other ancient boomer wisdom. "Only 3 things can ruin an honest man: ladies, liquor and leverage." I would also note that they all start with an 'L' Part 11: Newsflow Again As mentioned in a previous article, news trading might be best achieved with binary options, but otherwise, you want to open prior and close after. At least TWO minutes of distance both ways. If the news is a surpise, price can move forcefully for the next 4 hours or until the end of the session. I would also recommend opening a LONG and SHORT position of equal sizes instead of utilizing a stop loss (if your account supports this capability). The idea being you would close them each in profit during the volatility spikes in price action or simply close at a later point at a net zero result if volatility does not occur. That would be the Boydian approach. IF this isn't an option due to some FIFO issue with your broker (you can always bypass this with multiple brokers), just use a smaller position size than you normally would, and increase your SL to something substantial (80 for low ATR pairs, and 120+ for high ATR pairs). I don't recommend this final option unless you are accomplished in reading and understanding the global macro eventspace. As mentioned in the Happening Default Swaps article, news trading really only makes sense for taking profit and/or exiting an older position. It is rarely wise to use it to open new positions, despite the volatility potential. You don't want to be all flow and no balance. Data feeds matter. Information processing speed, etc. You need the fastest sources of info, you need it processed (ideally by specialized experts). Processing it yourself is fine if you are very familiar with the content. You may have to pay money for this, but it will generally be worth it (especially in time-sensitive intra-day) from a risk management perspective. It's like hiring an expert. You aren't a corp, but you can get the 'consulting' value from these experts (at a much cheaper price). Dont go chasing sources that are repeating other sources, it can present added value of knowledge but it's really just disguised as redundent information. Just go directly to the source. And not the one at the center of the galaxy. Part 12: Outsourcing research A psychological edge you need to have is the willpower to conduct your own 'capex' or development on a consistent schedule. The more you do, and the higher quality it is, the greater edge you will generate in market capture knowledge. Your ability to dip your hand into the flow of cash. While this isn't limited to intra-day, intra-day is where the market evolves FIRST, and often at the fastest rate. Thus you need to mindful. Always looking for better versions of indicators you possess. Or ways to set SL more efficiently and accurately. Or selecting better data feeds or newsflow sources. Most of what we've covered so far is more abstract than the average fluoride brain would hope for. That there must be a signal service, or an indicator, or some universal function that can be realized into a specific technical system. The reality is more of a mindset and an assumption that you need to spend more resources on upgrading your 'technology' and your 'time-management.' And that the sessions themselves are excellent units of analysis to apply the time-management and decision-making initiative because of open interest dynamics. How do you study or gather information about the current or upcoming session more efficiently? How do you execute orders more efficiently? How do you become faster? The more information you have and the faster you react to it, the more money you can withdraw from the trillion-dollar liquid market bank account. To explain it in factor investing terms, the Boydian mindset is the key to vol tracking and vol capture, which is what intra-day offers. You want to ride high volatility profitably or at least react favorably to high volatility better than your competitors. To summarize the rest: sessions have vol behaviors, predictable, but not predictable enough that they aren't also competitive. Driven by vast macro psychological and market influences, these patterns will occur again and again. You can build a strategy to match each session if you trade intra-day, but you must be faster in action and faster in information processing. Your positions will live and die many times before a long term position may exist in the market, so adjust your risk management accordingly. You can use your intra-day strategy to leverage into a long term position. It's really that simple. I offered the behavior/psychological solution (the assumptions about session behavior), and a few other specific solutions to make your time and decision intersect more efficient. But there is always something better on the horizon. And you need to chase it if you want to stay competitive, and therefore maintain edge; which is your career margin of safety. You shouldn't get too greedy, because hogs get slaughtered. Unless of course, we're talking Orwell's farm. Part 13: Silver is for monsters Listen, little Helsing, intra-day trading is all about surviving the flood of spectral horrors in the night. It is the true nightmare difficulty of this market game. These vampiric entities in the market are monsters both in scale and in appetite. They operate on attrition and superior firepower; a strategy you can never replicate or use against them as a retailet. They are immortal in that regard. Some are soulless institutions, others are lifeless algorithms. And, even if your spirit is strong, your flesh is still weak. They will take everything from you, without even recognizing your face, your effort, or your dreams. Though some, I presume, are good people. I want you to remember on your intra-day journey, if you eat, eventually you get eaten. That's the rule. Ultimately, this kind of flat and shrouded market takes what would normally make someone regret or question his behavior, and removes it from the equation, masking it as invisible and out of the way. It's a distortion. It's a spiral of dehumanization. It makes it easier to ruin people, who could be as relatable as your brother or your neighbor. That is the tragedy of this efficient flat competition. You will be on the recieving end of this story more often than not. That is why I arming you as best as possible, so that, at minimum, you can defend yourself against these vampires. Your silver bullet is the applied OODA loop, the market-realized outcome of maneuver warfare, the competitive management of time, information, and decision making. In essence, it is a strategy for the weak to win against the strong. In the first place I would never recommend/promote a battle like that. I have a nonzero responsibility for your success or failure. But off the record, if you choose to play on this difficulty, I strongly recommend you wait for my final article where I discuss benchmarks and 'grand strategy' before you go all in. No need to be impatient, trust me. The monsters on the other side of the screen will wait for you.BEducationby CountofCoins2210