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Warning: Beware of a New Year Whipsaw
I published this article five years ago and repeat the warning each year. This year is no different with price action over the past week full of false starts and whipsaws. This has been helped by a near crisis in the Middle East but also by a market that came into the new year short dollars that have been squeezed by a lack of followthrough.
So this is where we stand now as the market moves each day to restoring liquidity. It may not be until next week when the market starts trading with a full deck. I would be remiss if I did not put in a plug for the Amazing Trader and the AT Ladder Strategy as they make sense of price action and offers trading opportunities even in times of false starts and whipsaws.
Warning: Beware of New Year Whipsaws
January 6, 2015
While this year may turn out to be different given key events later in the month (i.e. ECB meeting and Greek elections), I would be remiss not to give a warning to beware of a New Year whipsaw. I have seen it happen too many times as this is not a typical week and how markets end it may be more important than how they begin.
I can sum it up by posting a trading tip I wrote around one year ago. It was the first one in my series of forex trading tips and I am reposting it now given the time of the year.
As a rule I am wary of start of the year moves and there are times I do not look to trade until a full week is in. One reason may be muscle memory from a long time ago where I got caught in a whipsaw during the first week and it took a long time to dig out of that hole. I have seen too many start of a New Year false starts not to keep me cautious betting on early trends continuing. So my Tip of the Week is just to be aware of early in the year moves and keep it close to the vest until full liquidity returns to markets.
This can also occur to a lesser extent at the start of a new quarter and after summer ends.
Jay Meisler, founder
Global Traders Association
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