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Hi, welcome to the Hedge Fund Forex Trading Course. My name is Manny Yankey and I'm the founder of Pipnode Technologies. If you're a forex trader who has been struggling to see consistency in your results and you want to improve and trade as a professional, then you are in the right place. So with this one hour video... | |
I'm going to lay down in this video, you are going to learn the exact process that they use to generate very high probability trading ideas. And I have a surprise for you at the end of the video. I have a gift for all of you at the end of the video. Hope you are going to enjoy this course. Take care. Bye. Hi, welcom... | |
And before we dive right in, I wanted to take you through all the topics we are going to treat in this professional masterclass training. One word of caution for you is that this is unlike anything you've ever seen anywhere on the internet. | |
This is not your usual training that you see on YouTube or social media. This is actually a very serious course. And there are so many topics we are going to treat that you will not be familiar with. In that case, what you need to do is if there's anything I need more explanation on, | |
you have to pause and then try to search for it on Google or any search engine to read more about it before you continue. So we are going to talk about topics one by one. And then the last part of this training, we are going to put everything together to form a high probability trade idea. | |
So the first thing we are going to treat is seasonality. We are going to talk about it, how it works, different types of seasonality, daily seasonality, monthly seasonality, and the cyclical charts. | |
Then afterwards, we are going to delve into fundamental analysis, starting by looking at the economic cycle, central banks and the forex market. | |
We talk about the economic news triggers, interest rates and currencies and the relationship between the two. And then we talk about a very important topic that is probably a game changer for your trading, which is information pricing. | |
Then we talk about interest rate probabilities, which is closely related to information pricing. Then we talk about how to use the normal frequency distribution to know which tradable opportunities are available when the news is released. | |
We have this economic calendar, which is a special type of economic calendar, unlike the one you see for retail traders on investing.com or Forex Factory. Then we give you real world examples of how everything we are going to treat in this course comes together to give us very high reliable trades. | |
We talk about real market examples. Like the USDJPY, which was a trade which we actually entered. So then we talk about the four-step process to finding high probability trades. | |
And then we delve more into the real market examples with gold, AUD/NZD. And then the USDJPY I talked about. So that's what this course is going to entail. You have to sit back, relax and then enjoy the ride. What is seasonality? | |
Seasonality is a tendency for financial assets to behave in the same way around the same period. So we have daily seasonality. For instance, there can be certain times of the day or certain times of the week or certain days that certain assets behave in a particular way. | |
For instance, there's this seasonal tendency for pound, the pound normally to become weak on Fridays. That's a daily tendency. Seasonality is a tendency for a seasonality. But to take you back, I want to give you an example of what seasonality is. Let's assume you are a business owner who sells umbrellas. So we ha... | |
And during the course of the year, the time where we have the most rainfall is probably in July. In that case, what do you think is going to be the month or the period in which you are going to have a lot of customers trooping to your shop to buy umbrellas? If you guessed right, it means that you guessed it was going... | |
Let's say from June entering into July, that is when you stand the greatest chance of having a lot of customers buying your umbrellas. And this illustrates how seasonality affects things. In this case, your business is seasonal. So the weather has affected your business. It's the same way for a lot of financial ass... | |
A lot of stocks are seasonal in nature due to how their businesses run and then the products that they sell. You can imagine that if you have a stock that is let's say into agriculture, a particular fruit or a particular crop, it means that when there's bumper harvests, it might affect the stock. So that's how it wo... | |
So when we go to the financial markets, currencies, commodities, etc. Bitcoin, they are all affected by seasonal tendencies. And we are going to log on to Pipnode. We are going to log on to Pipnode so you have a look at it. | |
So this is the dashboard for Pipnode, which helps us know what seasonal tendencies are represented in whatever asset we are interested in. For instance, there's, let's say we want to search for seasonal tendencies in gold. As you begin to type inside the instrument bar, it will give you options. So you select which ... | |
And then the graph is going to be populated right away. You can choose a look back period. That's from five years to 10 years. Basically, we are looking back into time to know whether, to know which times of the months or which periods of the year were favorable for gold, either on a buy or a sell. So we choose 10 ... | |
That's what I prefer to use, but you are free to choose whatever seasonal tendencies you want to. Then you click on save data, fetch data, and then it's populated. Now, you will see that the bar graph on your right is depicting, on the x-axis, you can see the month of the year from January to December. And then you ... | |
Basically, you can see that when you put the cursor on whatever bar, you see the month against it. So, for instance, January is bullish. The green bar stands for bullish, meaning that around January, prices of gold tends to go up. And then the red bar stands for bearish. | |
It means that generally, over the past 10 years, the prices of gold has dropped around that time of the year. However, it's worth noting that the fact that this bar is showing as green doesn't mean we just have to jump straight into a trade to buy gold. No, this is an idea generation process. | |
So, we are putting bits and pieces of information together, just like you would prepare a meal. Let's say you want to prepare soup. You would need probably chili, you need other veggies. It's the amalgamation of all these ingredients that make the soup worthwhile. So, it's the same with this. We are putting bits a... | |
So, for instance, if you want to trade in December, this green bar is telling us, it's giving us only one hint. That this is a check. This is a good time to buy. But, of course, we'll have to check for the other factors. So, then what we do is that we scroll down to this cyclical chart area graph, which is showing ... | |
So, for instance, in December, we can see that it starts off a bit bullish. And then from December 30, it begins to drop down and then drops all the way to December 15. And then from December 15, it goes up. So, this gives us a cue that probably the best time to actually buy gold with minimal drawdown is to wait unt... | |
And what we do is that we scroll down to the calendar widgets and then we choose, sorry, we choose the actual dates that we are investigating. So, December 15 is going to be our start date and then December 30 is going to be our end date. | |
So, once we choose the start date and then the end date, it gives us, you see that it gives us a different graph here. And what this means is that if you had bought gold on the 15th of December every year since 2014, by the time we get to December 30, when you check the price of gold, | |
when you check the price of gold on December 30, you would see that the price of gold is higher than what you bought it for on December 15, which means that you can actually sell gold for a profit. You bought gold and then gold has increased in value. So, you would have made money 10 years straight. You didn't have ... | |
And things like this don't happen just in a vacuum. It's happening because there are certain factors, unseen hands that push the price of gold around this time of the year. Once again, you don't have to just jump in to buy because of this information. We are going to add other factors from the fundamental side, etc.... | |
This is a continuation on the topic of seasonality. So, now that we have established a trend around December, what we need to do is that we have to continually try to fine tune the pattern so we have the best pattern possible. How do we know we have the best pattern possible? We have the best pattern possible when w... | |
We are able to find a number of positive years that's higher than nine or able to increase the average profit for the period. Or yet again, try to find a pattern with a higher Sharpe ratio than 1.17. So, how do we do that? We do that by trying different dates around the date we have found. So, we could try 14th and... | |
We click on apply and then see if anything is going to materially change. Now, we see that the Sharpe ratio has even gone down. It means that this is bad. This is not better than 15th to 29th. So, then we can try another dates combination. Probably 15th as a start date, 28th as an end date. | |
And then we click on apply to check once again. Now, what we are getting is even worse in terms of the positive years. It has now reduced to 8th. The average period has reduced. So, this is not really a better pattern than 15th to 30th. Let's try one more time. Let's try 16th and 29th. Okay. | |
So, 16th and 29th. Now, the number of positive years has shot up back to 9. And then the Sharpe ratio has also gone up than the 1.17 we initially got. But you will see that the average profit has reduced. When you are presented with situations like this, you have to decide for yourself. If you are someone who valu... | |
For instance, with me, I value Sharpe ratio more. So, a pattern like this, 16th and 29th, will be my ideal entry point. Because the Sharpe ratio is the highest around these date combinations. Once you have found a pattern that you like, you have to go ahead and then store the information. There are so many date pat... | |
So, you need to have a sort of system that sort it out for you. And then tries to help you remember which patterns are starting next. So, what you need to do if you find any pattern that you like. For instance, with this, I like it. So, what I do is. I click on save. | |
Then, it asks me, the software asks me whether I want to save. I can click on save again. But before that, there is this notes section where you can enter. Basically, type anything that you want to type. Of course, you want to type something that's related to the pattern that you have stored. Okay. | |
So, this instrument here is FTSE 100. Not good. Okay. FTSE 100. So, you just go ahead and then you click. Save. Then the pattern is saved successfully. So, to find the pattern, you go up here. You click on this. Patterns on the top right hand corner. And then you'll be brought to the portal where the patterns... | |
So, you'll see that on top, we have patterns that have already started. Patterns that have already started. Patterns that started before the current date that you are watching or you are using pep node. So, 13th. I'm shooting this video in November. And October is already behind us. | |
So, the pattern started on the 13th of October. That's how can you see it on top. And then the patterns here to start your guests are good. That's my patterns ahead of the current date that you are using the system. So, I'm in November. I'm shooting this video in November. So, you can see here the patterns are he... | |
Now, the brilliant thing about this software is that there's this timer here that sorts out the dates. So, you ideally want to sort out the dates in ascending order. Assuming there's this pattern that's starting, let's say, 20th of November. You will see it on top of this USD South of Canary pattern. | |
You see it on top and then you see five days remaining because the current date I'm shooting this video is 15th of November. So, it helps you keep tabs of which pattern is about to start so you don't miss out on any excellent trading opportunities. So, that's how pep node works. And then, you can also choose the num... | |
It's going to show you everything. It's going to show you all the patterns to the number of rows that you choose. And then, if you want to go to the next row, you use the arrows here, either to your right or the left. And then, you can examine all the patterns. The economic cycle. So, this image you see here is in... | |
You see, in life, things never stay the same. With this wave, when we are on top, it means that the economy is very good. And then, when we are at the bottom, it means that things are pretty ugly. And the reason why this is very important to know as a trader is that at each point of the cycle, what news becomes impo... | |
Usually, around the peak, when we want to see whether we are entering into a recession, we want to know the strength of the labour market. So, our employment figures take centre stage and become more important. In the same vein, once we hit a recession, we turn our attention or our focus to a different economic data ... | |
And in that instance, we also look at a different economic data set. This is very important because it helps us narrow our focus. There are millions and zillions of economic data points hitting our screens every day. And not all of them are relevant at that particular point in time. So, knowing what economic needs ... | |
It's important that we know how this economic cycle works and then know how to apply it into our trading lives. One excellent video I'm going to suggest you watch is a video made by billionaire hedge fund manager called Ray Dalio. Ray Dalio. The title of that YouTube video is How the Economic Machine Works. | |
Make sure you go find that video. After that, you will begin to see trading and investing in a very different light. Central banks and the Forex market. Central banks play a major role in determining what the price of a currency is going to be. They do this through pulling levers. | |
And for most central banks, they have what we call the dual mandate. So, the mandate is the responsibility that has been stored upon them. And it has to do with providing the maximum jobs in the country for the citizens. And then on the other side, making sure the price is fairly stable. And this is what we call th... | |
So, when it comes to maximum employment, if they realize that employment is slacking in the economy, what they do is that they cut interest rates through conventional monetary policy. And then by so doing, the cost of borrowing becomes lower. This has a ripple effect on businesses because now businesses can go to the... | |
It will help you expand your business, employ more people. And the ripple effect of this is a lot of employment gain in the economy. Now, it gets to a point where too much employment becomes a problem. Basically, people have a lot of money to spend. They are buying houses. They are going on trips, vacation. They ... | |
And this makes, this can turn into a problem for inflation. So, inflation means that prices of goods are rising too fast. So, in that case, then the central bank has to step in again and then reverse the action that they took earlier, which was cutting interest rates. So, this time they increase interest rates and t... | |
Once they begin to increase interest rates, people can't even repay their loans. So, if you can't repay your loans and you're a businessman, you probably have to fold up your business. If you fold up your business, it means you are going to lay workers off. Workers are unemployed, so they don't have money to spend. ... | |
So, in so doing, the central bank, in trying to manipulate employment and then price stability, they cause significant movement in the forex market. Whenever they are cutting rates, you would see the currency of that particular country fall in value. And whenever they are increasing interest rates, you would see that... | |
Let's talk about important economic news triggers. When it comes to economic news, not all of them are created equally. There are some that are much more important and then there are some that are less important. And the first four, that's retail sales, gross domestic product, employment and inflation, all fit into ... | |
So, when a central bank decides to adjust interest rates or review interest rates, they take into consideration the first four. Okay. Now, the central bank is the ultimate decide of which economic news takes more importance at a particular time. | |
So, with these days, especially after the 2007 financial, global financial crisis, the central banks are much more open with the economic news that they find very important. So, they tell us through their press conferences, which economic news is more important and all that. | |
So, they tell us that markets are aligned with the central banks and their policies. Now, interest rates are the main economic mover of Forex markets. There are other things that can move Forex markets. But when it comes to the economic movers, interest rates is the biggest. And the graph after this slide would sho... | |
So, you would see that this is a relationship between the AUD, which is the Australian dollar, US dollar currency pair, and then the interest rate differential of the Australian dollar and then the US dollar. So, you would see that with the red line, which is the interest rates, it tends to move in tandem with the cur... | |
So, if it's going up, you'd see the AUD, US dollar also going up. And if it's going down, you see it's also going down. It has a positive correlation. Now, this is not a perfect relationship, but you can see that generally the relationship is very strong. | |
So, this shows you that if you're able to master what is going to happen regarding interest rates, then you would be very profitable or you'll become very good at predicting the direction the currency is going to take. There's a very important concept in trading. And this is what will help you know how interest rates... | |
It is called information pricing. Information pricing is the view that markets are forward looking. So, when you say markets are forward looking, it means that well before an economic event happens, markets try to move well in advance before the news happens. That's information pricing. | |
So, if markets are aware that X event is going to happen next week, then markets would adjust the price of that currency one week before the event happens. Okay. And this is an example. | |
The red line, the red vertical line you see is the meeting day whenever the Bank of Canada decides to cut interest rates. And the graph is the USD Canadian dollar currency pair. And what tends to happen is that 30 days before the bank cuts interest rates, the USD card pair tends to go up. | |
So, on the day when the news is announced, 30 days after, the USD card doesn't move up. It doesn't move down. It's just stuck in the range. So, this shows us that indeed markets are forward looking and they move well in advance before the actual move happens. | |
For a retail trader who doesn't know this concept, after you buy or you sell after the meeting, you expect the currency to move and it doesn't move. You might even go opposite of what you are expecting. And then you think that the market is being manipulated. Markets is not manipulated. It's just that you don't und... | |
Whenever we talk about market being forward looking and we show this graph to our students, the next logical question they ask is that how is it that some people are able to know what the central bank is going to do or what is going to happen several days before it actually happens? The answer lies in the next slide. ... | |
Now, this data is a proprietary form of data that you don't get in a lot of financial news outlets for free. The only one you would get for free, the interest rate probability you could get for free is on investing.com and it's only for the US dollar. With all the other central banks, you are not going to get it. | |
You actually have to subscribe to a paid service to get this data. Now, what this data does is it shows us the likelihood of a central bank performing an action in the upcoming central bank interest rate meeting. | |
So, for instance, if the probability is 100% today and the meeting is going to happen next week, it means that markets are certain or guaranteed that next week, X or Y event is going to happen. Now, what tends to happen is that assuming this interest rate probability we are seeing is for the federal bank, which means ... | |
So, as the number moves from 0% all the way to 100, you see a corresponding move in the US dollar. So, if this moves from 0% to 50%, you see the US dollar also move 50 pips, gain 50 pips. | |
And all this is happening before the interest rate meeting because markets are certain that on that day, the central bank is going to act. So, assuming the US dollar moves 100 pips, let's say one week before the central bank meets. And then on the day of the central bank meeting, we have the interest rate probability... | |
We also have your US dollar moved 100 pips. What do you think is going to happen on that day if the central bank increases interest rates just like the market was expecting? Nothing is going to happen because markets were already aware this was going to happen and they have moved well in advance. So, nothing is goin... | |
What do you think is going to happen if the central bank decides not to increase interest rates? Bear in mind that markets were anticipating the move in the interest rate. So, they have moved US dollar by 100 pips to the upside. And then on that day, market is disappointed. Central bank doesn't increase interest ra... | |
If you guessed that the US dollar is going to reverse the 100 pip move up, meaning that there's going to be a sharp reversal. So, US dollar is going to be weak by 100 pips. So, it corrects the mistake that was prized in the information, then you are right. That is exactly what's going to happen. | |
So, on that day, if the central bank decides not to cut interest rates, it means the markets were wrong in adding 100 pips to the value of the US dollar. So, then that 100 pips has to be reversed. So, you see the US dollar fall by 100 pips. If you have understood this concept well, then you are on your way to becomi... | |
How news creates tradable opportunities. Now, when it comes to economic news, it is not as simple as expecting a value and then when the value comes below or above, then you sell or you buy. It has to happen in context. So, assuming this graph you see here on the x-axis, the numbers here, let's assume that this is t... | |
So, on the left hand side, we have 700 and then on the right hand side, the extreme right, we have 1600. Now, this normal frequency distribution graph, you see that within, around the middle area, the green side is deeper. So, 34% on the left, 34% on the right. You see a line of symmetry, that is on 1150 on the x-ax... | |
And on the left hand side, it's 34%. On the right hand side, it's 34%. When we put these two together, we have 68%. And that area of the 68% is what we call the normal zone. So, assuming the figure that we are expecting for NFP is 1150. And then the figure that's, the actual figure that comes when the news is rele... | |
Or it's between 1000 and then 1150. It is lesser than the figure we're expecting, which is 1150. However, because it's within the range of normal distribution, we are not going to have a significant move. | |
On the flip side, if the NFP number that comes is above the 1150, but below 1300, then yet again, although the number is greater than the consensus, it is not really going to move a lot because it's still within the normal range. | |
The only time where we'll get a very good tradable opportunity is when we have this move or care outside the 68% zone. That is more than one standard deviation to the left or more than one standard deviation to the right. | |
So, assuming the NFP figure that comes is more than 1300, maybe 1400, 1500, then that is a very sharp deviation from the 1150 middle point that we were all expecting. And you see the US dollar become extremely bullish. | |
In the same vein, if it happens on the left hand side, let's say below 1000, let's say 900, 850, 750, then it's also a sharp deviation on the left hand side when we are looking at the 1150 middle point. In that case, we will see a very sharp, bearish move for the US dollar. | |
So, in the real world, when it comes to trading, you would not see this normal frequency distribution anywhere. What you're going to see is this. This is a professional grade economic calendar. Now, at first glance, you might be tempted to think that this is an ordinary economic calendar, but no. | |
The biggest difference between this and then the one you see on your retail economic calendar is the low and high, which you can see on the right. The low and the high gives us the range. It gives us the range. So whenever the data, the actual is within the range, then it's within the realms of normal data points. | |
So it means that the assets, even if it moves, is not going to significantly move to be worth trading. The biggest market opportunities happen when we have a reading outside the low and the high. | |
So if we have the data below the low, for instance, with this economic calendar, let's say we are looking at the last one, which is CPI, Y, Y, year on year, NSE, the last one. The forecast is 3.4. The low is 3.2 and the high is 3.5. If we have the data coming, that is the actual coming below 3.2. | |
That's like 3.1 or lesser, then that's a significance. That is when you see the US dollar fall in value. On the flip side, if we have the data coming above 3.5, say 3.6 and beyond, that is also likely to cause significant volatility. The US dollar is going to be stronger. This is how the professionals trade. | |
The actual beating the forecast alone or missing the forecast alone is not enough to have a tradable opportunity. It has to be put in the right context. And in this case, it is the low and the high boundaries that is used to know whether we are going to get any significant coding opportunities. This is a typical exa... | |
So before that day, which was a Friday NFP day, this is what Bloomberg put out on their platform. And this is a preview. They usually have a preview before we have a major news event. And the range of forecast was between 70,000 and 220,000, which is the low and high. | |
And going into the meeting, we knew that anything that was outside this range, outside 70, from 70,000 to 220,000 was going to cause significant market volatility. And guess what happened on that day? The actual job figure was 254,000, which was way bigger than even the highest estimate, which was 222,000. | |
It means that of all the economists that were surveyed, none of them was able to anticipate that we are going to get a figure, a payroll figure that was that big. So it caught everyone by surprise. Surprise. | |
If there's anything you're going to take from this course, it is to know that surprise is what really moves currencies. Surprise is what really moves financial markets. Okay. So anytime there's a data release that surprises everyone, then your bet is that it is going to cause significant volatility. And that's exac... | |
As the number came in, this was the reaction of the US dollar, Japanese yen. We had a sharp rise of this pair. And this is the 15 minutes chart. You can see how strongly the move went. And this move, we later closed it. And this move went all the way to 600 pips, about 600 pips. | |
And if you were a user of Pipnode, which is a web application I have developed to help retail traders like yourself, then you would have been able to catch this move and then make this number of pips. So with this out of the way, we are now going to put everything together from the seasonals, which we started in the b... | |
And then we put everything together to help you know how at Pipnode, we generate trade ideas. So we have a four step process to finding high probability trades. Now, the first thing we do is to search for and save dates with strong seasonal patterns. That is the very first thing we do. | |
And then the second thing is to find what key news events are happening within that seasonal period. The third is to gather information on what is expected by the markets and the extent of money markets pricing in. Then the fourth, but definitely not the least process is to build scenarios that offer the highest vola... | |
We are now going to delve into examples. So you know how we at Pipnode are able to foretell some of these tradable opportunities. So let's go to some actual real market examples to see how we put together this four step process to find excellent trading opportunities. So especially if you are a swing trader, you are... |
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