Why is it some things in life – totally unimportant as they are – just make you grumpy? Monday just highlighted to me how utterly useless some (and I should stress the word “some”) of the retail-targeted research and strategy emails I receive are. To me, good strategy pieces tell the reader what the writer thinks will happen and why. Bad strategy pieces merely tell me what I already know.
And so to Sterling at the start of this week (and I will overlook my own prediction, in this column on January 21 2013, which said sell Sterling at 1.5850 because my rationale was, how can I put it? Irrational!)
The UK is downgraded after the close of business last week, Cable ends the week at 1.5240. It opens in Asia Monday morning around 1.5100, thus providing the first real opportunity to sell it. Because sell it is what so many strategists said was the thing to do, even though the news was by now priced in.
A bit of whippy price action ensued which saw a low of 1.5070 pretty quickly as everyone followed their strategist and sold Sterling, before the thing bounced to 1.5150. It then played around between 1.5150 and 1.5100. Now if you’re a retail trader, this has probably taken care of your day quite nicely, and I would imagine that the report from one retail-orientated strategist would have made you even happier. It popped into my inbox at 1.5145-50 and said simply, Sterling is bouncing, so time to buy back shorts. What shorts? Those at 1.5110? To be fair to the strategist in question, while Cable did drop back immediately after to 1.5120 (timing is everything pal), it did run up to 1.5200 before drifting lower.
We really wonder why people get whipped around and hit so many tops and bottoms when they are receiving utterly useless information? I checked up on several of the daily emails I receive (without asking for them of course) and just about everyone said sell Sterling when the market was around 1.5100 and buy Sterling around 1.5150. The reality of the first three days of this week is that Cable has whipped around a little, but basically hasn’t traded outside a 150 point range (and I’m from the old school where it’s not a big move until it’s done 500 points – bah!).
The type of research I unfortunately get sent is too often out of synch, reactive, bland nonsense that leads retail traders down a rocky path on a cliff edge. Good strategy needs to be proactive. If I were a retail trader reading some of this stuff I would go back to stocks and leave FX well alone.
The industry, especially at the retail end, would be well served to improve some (and again I stress the word “some”) of its output. So many words are spent preaching the gospel of educating traders that you would think some of these strategists would be told to teach people timing. By all means say “sell Sterling” but given the inevitable gap from the Friday close, would it not be better to suggest to people they sell any bounce? Or at the very least sell half what they want to at the open and leave their powder dry for the inevitable bounce.
It was like watching a cliché-ridden horror movie on Monday morning in Sterling – you knew people were charging headlong into a trap and it duly played out.
The retail FX industry wants to keep growing and it will only do that if its punters are relatively successful. Part of helping them be successful is good, informative research and strategy, it most certainly is not the rubbish that filled my inbox over the weekend that took no account of what was happening in front of everyone’s eyes. If I want a report on what has happened (and I don’t because I don’t trade PA) then I can go to the newswires thank you very much. I don’t need someone who is meant to be predicting the future, tell me what has happened in the past (unless they want to use it to illustrate a strategy of course). So much of what I empty into my email trash is merely an out-of-date rehash of a newswire story. It’s worthless.
So, message to some in the retail FX strategy space. If you want to keep and build customer numbers, improve the quality of your research. If you send people like lemmings over the edge of the cliff, they won’t come back.
And now, having managed to get this written without a single swear word (many sprang to mind during the scribing), I will get myself another chill pill and go back to looking at platforms…