The Sorry State of Forex Markets

A hedge funder was lamenting that he positioned for an ultra strong Non Farm payroll number but ended up losing money too because the markets then decided to blame it on Ukraine.

Not true, I said. Because if you had positioned for a weak number, you would have been taken out in the ensuing 15 minutes after the announcement. It is the reporters who have nothing to blame it on and decided unanimously that Ukraine would sound credible enough for a story.

Let’s take a look at the AUD/USD chart which comes with a controversial Monday opening.


Traders with stop losses on both sides of the spectrum would have been taken out by the executors.

Spoke to another trader who talked about the Monday morning confusion in the actual high of AUD/USD where folks could have been stopped out at highs higher than the reported highs, the feeling is one of resignation. Because stop losses are managed by algorithms which has access to the trading positions, stop loss and profit levels of the market into consideration before gunning for it. And Monday mornings are not very liquid times.

With banks closing down their trading desks, investigations into high frequency trading funds, markets have dwindled into life support mode.

The daily Average True Range (ATR) of most currency pairs have dwindled into nothing. EUR/USD’s daily range has collapsed lower than pre crisis levels.


Low volatility environments are good because banks and trading platforms are losing out in trading income.

Wouldn’t it be a real sorry state of affairs if a last resort to income would be to continue to engineer charts like the AUD/USD one above ?

Incidentally the new trading paradigm has turned even for some hot shot traders I know. Carrying no positions because the market is positioned heavy on one side – on fundamentals, they prefer to catch the moves like the ones we see above.

Yet, the ultimate future for forex is in the hands of the programmers and the algorithms that they dream up of, trying to trump each other and hopefully evade the jaws of the stop loss programme engineer.

It should be good as long as it lasts. Until they run out of scandals to investigate ?