The 100-Pip TraderQ: In the beginning we talked about how you focus primarily
on technical analysis. However, over the past few years have you
incorporated any aspect of news in your trading?
A: On a weekly basis I actually draft what I call “crib sheets” or
“cheat sheets” about economic fundamentals and I’ll take an 8.5
by 11 sheet of paper and I’ll write out major economics statistics
from around the world. I accumulate that information using free
resources on the Internet or paid resources like Bloomberg, and I
keep a regular accounting of statistics from all over the world.
Then I laminate those cheat sheets and I actually take them
in with me into the shower in the morning and I’ll just put them
against the wall and, because they’re laminated, they stick against
the wall and I just memorize and track economic statistics from
around the world. So that when I’m taking longer-term trades, for
instance, trades that are going to last from a day to as much as one,
two, or three weeks, I understand the underlying economic funda-
mentals. For instance, I might understand that inflation and wage
increases are still really strong in Australia, which might lead the
Australian central bank to either increase or keep their high base
interest rate. I might understand that, at the same time, Japan has
an economy that is finally coming out of a deflationary period, and
that interest rates are possibly going to rise over the next 18 months.
I might understand simultaneously that economic data coming out
from the U.S. shows that the Federal Reserve is likely to pause on
interest rates and then go into a cycle of loosening monetary policy.
If I understand those background economic fundamentals, it gives
me a little bit more information on why I’m taking the longer-term
trades that I’m picking. I generally never take a longer-term trade
or a shorter-term trade solely based on any type of economic fun-
damentals, meaning it won’t be the reason I picked the trade. But
it could factor into how long I stay in the trade. It could factor into
whether I feel more confident or less confident in a trade. Oil is a
perfect example, I track oil and I watch the Canadian dollar and its
response to oil prices. So I may use fundamental analysis as part
of the picture. But I never exclusively use fundamental analysis to
make a decision about a trade.