“If they actually did this the markets would crash. Do you think it was luck that got us to the best Stock Market and Economy in our history? It wasn’t!” Do you guys use Twitter? “We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of ‘rip-off USA'($600 B/year), 16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot….” Does this ring a bell?
Maybe this? “As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work ‘brilliantly’ with both, and the U.S. will do great…” It is extremely unique how and in what ways we have seen tweets from President Donald Trump affect the market almost immediately after he posts them and what that does to our trades. This is the type of phenomenon that we have never had to deal with before, it is something completely new for traders.
There’s been a lot of complaining all over social media about something that we cannot see coming and we substantially have absolutely no control over. Something that has the ability to pop up and ruin our wonderfully perfect technical trade almost instantly. We will try to focus on this from the politically agnostic stand of point because our number one goal should be finding ways to make money from the forex market. But this whole thing with President Trump’s tweets is pretty eccentric to anything we had to deal with before because it is constant and it is highly unpredictable. We never know when it is going to happen but we can surely anticipate that markets are going to freak out. So why this is happening? How could smart investors with all that big money be so foolish and react to something like this? Especially when most of the words from tweets end up never really materializing. It is perfectly normal to wonder about that. There are a couple of factors in play here.
Firstly, if we give the opportunity to big banks to manipulate prices a lot in a hurry, they are going to take advantage of that opportunity every single time. They don’t need to explain to anybody why they did what they did. This whole interesting moment with the huge central banks we can see only happening some of the time when we see big moves after a Trump tweet. Secondly, we have institutions. For example, hedge funds play a significant part in this because they have a lot of money and when they move, they move all at the same time. Proprietary trading firms are an example of institutional trading but to a much lesser degree. Typically they don’t have the amount of money at these hedge funds have, and their traders don’t all move in lockstep.
There has been a rumor among traders that some of these hedge funds have algorithms that are able to comb through Twitter mainly when Trump tweets something and they are targeting for certain words or a certain combination of words that will automatically trigger their algorithms to go long or to go short on whatever instrument they’re trading. It is the ultimate front-running tactic. The financial game is more about survival than anything else and these funds and firms are finding ways the keep their heads above the water. We can’t be mad at them, it is pretty innovative and it’s working. So the two main types of entities that can have a big impact on the forex market all on their own are the big banks and larger institutions, they play instant reaction games and they are both involved in this little amusement with Donald Trump’s tweets.
The question remains, what we the small retail traders can do about it? Is there any recourse for us? To be honest, there is nothing we can do to counter this phenomenon. We are just going to have to deal with this new normal. We are not going to be able to change the way we trade at all to adjust to something like this. It might be better not to worry about it. On one hand, this could make the price of a currency pair go up or down, so it is going to make a mess sometimes because we are going to be emotionally invested in those times where this external factor out of nowhere came and messed up our trade. On the other hand, there is a 50% chance that it could propel our trade even further. We have been seen some people who are complaining and the ones that benefited from these tweets.
There will always be the factors that we can’t control and they might negatively affect us but we mustn’t allow things like this to get us down. You guys don’t worry about the things that you can’t control. In forex trading, It’s always going to be something, either the markets are too crazy, it’s too dead, we have now this Trump tweets, it is always going to be something that prevents us from getting the results we think we deserve. We simply need to find a way to be immune to all the financial earthquakes. In the end, our best approach should be just to trade our system and let it organically do what it does regardless of the circumstances. These external factors are not actual factors, they should have nothing to do with our constant improvement. We don’ have any impact on them and we can’t do much about that. So traders focus on the things that actually matter without complaining. The best thing we can do is to leave politics as it is and try to make our trade better every single day.