Updated: Feb 28, 2021
One year has passed since since February 2020 and what a year it has been.
There's been ups and there's been downs.
Volatility has been through the roof so we wanted to share with our traders and community the progress not only I've had, but our traders too.
One of those ideas was USD/MXN during February of 2020...
The idea started off by analysing the economics using the global macro strategy we follow here at Logikfx.
Fundamental Analysis Forex
Throughout the USDMXN idea, I went through some key fundamental analysis points going over:
Gross Domestic Product (GDP)
Stock Market Analysis
Commodity Market Analysis
And finally the... macro currency strength meter
After the analysis I came up with the conclusion that USDMXN was looking like a great upside move... I was bullish.
This fundamental forex analysis really helped me filter out the market noise that I may have had trading using just technical analysis by itself.
I had the fundamental market direction and I was ready...
All that was left was to analyse two more factors:
Sentiment Analysis (COT REPORT)
Technical Analysis Forex
One of the main themes throughout the USDMXN technical analysis was the blatant uptrend that had been going on over the years.
I'm a simple man when it comes to technical analysis or price action... if going up I am bullish. If going down... I am bearish.
However, there were a few key areas on top of the standard price direction I considered.
One of them being "Support and Resistance" levels.
These were the support levels shown in the red lines above.
The good thing about the analysis was that I already filtered out the market noise using fundamental analysis.
I knew that... I only had to look for long positions and technical analysis that agrees with a long side move.
That's when it kicked in... saw majority of technical signs were bullish and took the trade.
After the technical analysis was in my favour I had one more step... analysing the hedge funds positions aka the Commitment of traders COT Report.
Sentiment Analysis Forex - COT Report
Forex traders way to analyse sentiment of the market is not looking at your brokers sentiment gauge or the sentiment meter you seen online.
The true way to analyse sentiment in the market is conducting COT Report Analysis.
The COT Report is a powerful and underutilized tool used by Forex traders to track what different market participants are doing.
When I was analysing the COT report for USDMXN I was looking for two main signals.
USD Hedge Fund Sentiment to be long
MXN Hedge Fund Sentiment to be short
Hedge funds were buying the US Dollar...great!
Mexican Pesos on the other than... they were also buying it!
So, in the end the sentiment of the market kind of cancelled itself out but slightly in favour of US Dollar due to the sheer open interest (amount of positions) they had in longs.
Great... the fundamentals were bullish, technical analysis were bullish and sentiment was semi-bullish.
Now the final step I took was to enter the position!
Using ATR to set Stops and Profit Targets
One of the main principles I had to follow was to make sure I set my stop losses and profit targets properly using the ATR calculator. This basically made sure that I wouldn't be stopped out straight away, a rookie mistake for most!
After placing the price data into the calculator it gave me a few key numbers which were interesting.
The average monthly volatility over the year was about 4% each month.
This mean my stop would be 4% wide.
The exchange rate sat at 18.7516... that meant by stop would be 17.9933!
My profit targets on the other hand would be at least 12% of the current price.
This would equate to a profit target of 21.0266!
Fast forward a few months and... BOOM!
Prices soared to over 25.5000! That's over a 30% gain!
These are the type of positions were about at Logikfx, big swings rather than lots of little trades. The opportunities may not come very often but they're are enough every year to make it worthwhile.
The start to 2021 has been amazing... lots of volatility in the markets and our traders utilising our strategy and technology have been paid dividends!
Just check out the forum to see for yourself.
Hope you enjoyed the results we had last year this time and maybe I'll see you in the community soon to join in on the fun!
Global Macro Strategy Forex Course
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Global Macro Strategy Technology
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