 to go through, right? The importance of liquidity and slippage and I have to say this, right? I have to, have to, have to talk about this, right? So fundamentals, generally people will have their trading strategies, right? That they trade, but you need to understand about liquidity and slippage and the reason, here are the reasons why. Sorry guys, one second. Just take that off, right? And the reason why you need, this is a must, you must understand this. So the importance of liquidity and slippage, right? So iceberg orders are large, single orders that have been divided into smaller limit orders, right? So let's say for example, a bank wants to trade one billion pounds worth of, you know, pounds, right? They can't just press buy, yeah? Because there might not be enough liquidity in the market, right? There needs to be one billion pounds worth at a certain price and they must be the only ones looking to buy that. So they need enough sell orders, right? They need one billion pounds worth of sell orders at a specific price and they must be the only ones buying at that particular price to avoid what is known as slippage. Slippage being when you have multiple prices, right? Which is what happens. So if you have, if all of this represents, for example, one billion dollars worth of sell orders, yeah? It's price range from here to here, for example, right? And it's one billion pounds worth of sell orders because these guys want to buy, remember? So you need an opposite seller, yeah? That is what's known as slippage because some will get filled here, some will get filled here, some will get filled here, some will get filled here, some will get filled here. By the time they get filled, yeah? They don't want to buy up here. That's not the way the game works. That could be two, three, four hundred pips up, yeah? They want to buy at bargain prices. They want to buy down here, but they need enough orders. So what they do is they scale in, right? They scale in. They have to scale in, right? And how they scale in is basically buy iceberg orders. Yeah, that's what iceberg orders is. It's the breaking up of the one billion into, let's say for example, 10 million here, or 20 million there, or 15 million here, for example, when they put the orders in to disguise, they don't want to tip off the market because a one billion pound order is a massive order. It's going to tip off the market, right? Everyone else is going to start to buy. So they have to break down their orders and it's known as iceberg orders. So a large single order that has been divided into smaller limit orders, usually through the use of an automated program for the purpose of hiding that actual order quantity because they want to avoid slippage, yeah? Short-term price, yeah? It's typically random and this is due to liquidity and the avoidance of slippage. So what do I mean by that? A lot of times you'll see, you're here, oh, I get long on the euro, but for weeks on end, yeah, the euro might be doing something like this, right? The euro might be going to sideways. And every week, let's say for example, that's Monday and then that's Monday and then that's Monday and then that's Monday, right? At the end of every week or the beginning, I should say Friday, whatever, right? But week to week, traders will say, Leon said we should get long, right? We should get long on the euro dollar because the euro is, you know, hiking rates, da, da, da, da, da, da, da, da, da, da, da, da, right? Prices should be up here somewhere. But what you have to understand is that the banks, yeah, have to accumulate. They don't care about your track record and whether you've got to make profit this Friday or this day or you've got to pass this type of challenge, you know, the whatever challenge that you're doing from some sort of prop firm, they don't care about that. What they care about is doing their orders and they accumulate in their orders and they need to basically buy their orders, yeah, at certain prices, at certain low prices and not just one bank, there are hundreds and thousands of banks that need to do because they all see, for example, that the European Central Bank, for example, is potentially looking to hike rates. So they're all looking at buying but they need the liquidity, they need the sell orders, right? They need to have the sell orders at this particular range and at particular price for them to buy, right? To divide up their orders. So in the short term, yeah, in the short term, price is very random because of the accumulation and the avoidance of slippage that the banks need to do, right? It's their mandate, they don't want to buy up here, yeah? They want to buy at levels around here and prices around here. So, but in the medium to long term, medium, medium, your next three months, six months, you'll start to see prices look to trend. Eventually, the fundamentals will always play out, right? If, for example, because we don't know, right? If the data supports that narrative, right? Because you can have a rumor start but if the data doesn't support the narrative, then unfortunately, that is just a rumor and it might not go anywhere. But the central bank might not, for example, hike, for example, right? But the whole point in understanding fundamentals, you need to understand this is that depending on your strategy, your technical strategy, you've got like some five-minute strategy. People say, don't do five minutes, that's five-minute trading work with fundamentals. If you're trading every single five-minute supply and demand zone or five-minute support and resistance level, of course not because on a daily timeframe chart, this could represent 200 pips, yeah? And it can blow through your levels, right? Your five-minute levels are nothing to the bank who want to basically buy when the prices are going down, right? So in a selling environment, yeah? They need to accumulate, they need to do what? Buy, right? So when someone is selling and in the downtrend, they're doing the accumulation, yeah, they're buying in a selling market in the same way when prices go up, it allows them to sell, yeah? When the other side of the market is buying, that's what liquidity is, yeah? And I'm gonna show you an example of this as well, like I said, on the Euro dollar, but you need to understand this. You guys understand, by the way, you guys get that, yeah? Short-term price action can be very random. Yes, it might look like there's a support levels and prices are bouncing off it perfectly and stuff like that. Fine, I'm not saying that, that's not what it is. But if you look out and just zoom out and look at the bigger picture, this accumulation can be a week, it can be a month. Nobody knows, like no one knows, yeah? It's all right not to know, do you know what I mean? I know a lot of people, a lot of trading so-called gurus will tell you that they know what's coming, they don't. Right, they don't know, especially if you're just looking at random short-term price action. Yeah, they don't know what's going on because ultimately the banks are using minor support and resistance levels to chop traders out, to draw them in, left and right and they just hunt for the liquidity left, right and center, it's their game. And they don't care about your targets and your time and whether you wanna be profitable this week or this month, it's their decision to fill their book, exactly the liquidity pools, whatever it is that you wanna call it. Yeah, it's the avoidance of slippage and we have no idea on how long that's gonna take. Yeah, but eventually it will go in its direction. Yeah, so all we do at Trading 180 is look to buy at levels, right? And then look to that bargain zones and then look to the medium to long-term type trades. And of course they can work out in the short-term as well. Trades do definitely work out in the short-term all the time. In fact, the group has had a very, very good week. Marianne can attest to that, the New Zealand dollar, everyone's been buying the New Zealand dollar and have done very, very well over the past few weeks. But that must be explained, that has to be explained. And if you can understand that, it's not every single day you're gonna get a trade, it's not even every single week you might get a trade, some weeks you might not get no trades, some weeks you might get 10. Nobody knows when the trade is going to come, but we have to just take the right opportunities and the best opportunities and really good opportunities don't come around every single day. I can promise you that in a way if you understand fundamentals. Anyways, buying the rumor, right? And what is priced in? So ultimately fundamentals is all about buying the rumor, this is what we do. We buy the fundamental rumor, because you've heard buy the rumor sell the fact. Buy the rumor sell the fact is basically the rumor starts early, yeah? There's a rumor that central bank is looking to high crates at some point, yeah? The financial institutions will know this well ahead of time because they read the central bank statements, they understand inflation, they understand GDP, they understand what the central bank is gonna do, yeah? Because again, they understand the rules to the game. So they buy down here, right? They buy down here and they've been accumulating. All the retail traders will say, oh, that's a choppy market, prices are trending down in a five minute chart, I'm going short, da da da da da da, right? Not understanding that, in fact, the rumor has been starting and by the time the rumor comes out, they've made their money. That's basically what happens consistently. They're not looking to buy on Forex factory, yeah? On the day that there's an interest rate hike, that's not what they're looking to do. There's no way they're looking to do that. Yeah, exactly, it's already been priced in. What has been known about it has been priced in. If price was down here, they're pricing in that hike. So by a week or two before, it's already priced in, yeah? Yeah, so you're buying with fundamental analysis, you're always ahead of the curve. If you know what to look for, if you know what you're doing, if you know the rules to the game, you're always ahead of the curve, always. That's just by the very nature of fundamental analysis. You're not coming to the market thinking to yourself, all right, tomorrow they're looking to hike rates because you would have known this from weeks and months ago. Yeah, months ago. Anyways, buying the rumor. So let's go through an example. How will you know where the scenario is priced in? Again, you will know that if you understand, if I would say that, well, put it this way, the closer to the fact is that it means that it's already been priced in, right? We look to buy, and I say we, I look to, I've been buying the New Zealand dollar for probably maybe about a month or two ago, right? I was buying the New Zealand dollar. Not saying that every single trade was a fantastic trade because I don't know where the exact turning price was, but that's not necessarily the job of me. The job of, for me as a trader, as a technical trader, not necessarily fundamental to my technicals, is to limit my downside, but when I'm right, make money. Yeah, we had a trader, RM, this week who made an 11 to one trade on the New Zealand yen trade, an 11 to one trade, right? And he held it for what, two weeks, two to three weeks. Yeah, he didn't know whether it was gonna turn around there, but the point is, is that when we lose, we lose small, and when we win, we win big. And when we win and we wear in a trade, we ride that trade, right? We can add in to that trend. It's not just one trade you're taking because many times, a lot of times, and I'll show you one here, you can see the trend coming, right? You know the trend is coming and you're just adding in on pullbacks, yeah? So anyways, this was Euro dollar, right? What we had, 21, cool. I should finish this in about 10, 15 minutes, right? So buying the rumor and what is price, the answer, Euro dollar, September 2020, yeah? September 2020, right? We had, in fact, let me just zoom out a little bit, right? So we are around here. So we had a shift in the fundamentals, yeah? So this was September 2020. And for us, it was around about the 1,1950, yeah? At that time, we had September the third, yeah? So you can see that September the third, let me just zoom in a little bit so the guys can see September the third, beginning of September. There was an article in IMG that said FX, the dollar bear trend has only just begun. The fiscal policy paralysis and a change in monetary policy strategy from the Federal Reserve make the case for the dollar bear trend extending well into next year. We revised up our end 2021 Euro dollar forecast to one, two, five, boom, right? They speak in our language, right? They understand, we understand why, you know, the Euro dollars should go to one, two, five. Monetary policy, yeah? Cool. So what happened? Did the dollar go straight up, straight away? No, the market saw this. They don't want to buy the dollar at highs, right? They want to buy the dollar for cheap. So during those weeks, September into October, right? Into November, who was doing the buying? Who was doing the buying, yeah? That week in history where you saw that massive, you know, one, two, three, four, five, six candles, yeah? Many traders would have been like fundamentals don't work. Why is the Euro going down? Because the smart money are buying for cheap because they understand they got the projections because ultimately where did price eventually go? They had to take their time in accumulating and buying. We don't know how much they're buying, right? It could be a billion, it could be five billion, it could be a hundred billion, no idea. But the point being is that when you know the bargain, yeah, when you know that price is expensive and you know you can scale in and you know you can, you know, you might lose a trade or two, cool. But when you win, you're winning way bigger, way more, yeah? All these pullbacks were absolute bargains, yeah? And then look what happened, yeah? Then we come to, so by the end of the year, prices went to the one, two, three, 50. So close enough to the, to that one, two, five target. Of course, the banks aren't always 100% correct but they were correct enough in the direction eventually for prices to go higher when they were accumulating. So all that we were doing at the time was looking to buy at certain areas, the euro against the dollar and short the dollar. And that's it, ride the trend up. Then in February, or sorry, January and the January February, right? There was a shift in the fundamentals. So let's go to the next slide quickly, yeah? So just in case you guys, you know, generally think that I'm just talking, right? This was, this is a live screenshot of the group and you can see Leon wrote 27th of January, 2021. So I'm gonna read this to you. Let me zoom out a little bit, right? I'll read this to you. I said, hi everyone. On the 27th of January, 2021, I've been reading a few articles and there seems to be a bit of a shift between buying euros and selling the dollar in the short term, yeah? It looks like Europe is lagging behind the U.S. in terms of the vaccine rollout, right? The vaccine rollout, if you understand that it was a GDP play, right? So GDP was directly correlated to the amount of people that were getting vaccinated, right? If an economy had a strong vaccine uptake, meaning more people were taking the vaccine, then the idea was that they would recover sooner and GDP could grow, lockdowns could be lifted and GDP could grow faster. This was the trait that we were trading, yeah? So it was all about GDP. So rollout, therefore projections for GDP will also lag. So let me just read that again. It looks like Europe is lagging behind the U.S. in terms of the vaccine rollout, therefore projections for GDP will also lag. So for the short term, by the way, short term one to three month time period, right? I'm looking to see if there are any buying opportunities for the dollar as long as the data supports my bias. So the data to look for is growing GDP for the U.S. dollar and lagging for the euro, right? Pointed it all out. The ECB are potentially being forced to do something about the unwanted strength in the euro. So again, remember I was saying to you that an expensive currency hurts GDP, yeah? An expensive currency can hurt GDP. And central banks, especially the European central bank, yeah? Didn't want an expensive euro because when the euro was up here, it was expensive for them, right? That's an expensive euro, yeah? So they're forced to do something about their unwanted strength, meaning that they wanted to weaken it. So I said, please see the Eurozone channel, yeah? For the latest, which means they may have to find a way to weaken the euro. The Fed has been winning the currency war, currency devaluation over the past six months, but now that is translated into potential growth for the economy. Again, as I said, a weaker currency or a devalued currency can boost GDP, yeah? It helps GDP and the U.S. at the time had been winning the currency war, which is currency devaluation, which is what you want in a recession, right? If you're trying to recover, you don't want an expensive currency. You want a cheap currency. So, yeah? But that is now translated into potential growth for the U.S. economy. So again, any positive GDP and inflation news from the U.S. supports a dollar bias for the short-term one to three-month period. Of course, this is not financial advice, just my opinion. I'll cover it in more detail in the evening's call, which I have every Wednesday with the guys. And we did record it. If you guys join, then you'll see, you can go back to that and see exactly what I said. That's proof, yeah, that I talk what I, you know, I trade what I talk, right? And that was back in January. So back in January, we were looking at this. Again, we've got a short trade. Our bias was to the short side, right? All we were looking at is short trades, short trades. Look at where the trade went. Right, that's it. The data supported the narrative to go short. That was a good, how many hundred pips? Maybe about four, five, six hundred pips, you know, to the downside. That was it, yeah. Then we had in April, yeah, a bit of a semi-convergence, right? So this was a bit of a different trade idea. And the trade idea was more to do with Euro area started to grow, right? So you had a weak Euro. So Euro area companies returned to broad both on, sorry, broad growth on vaccine optimism, yeah? So private sector, you know, with basically expansion, I'm not gonna read it, but the point being is that on the chart, we started to have what was seen as a bit of a convergence, right? So the US, you know what, sorry, let me do a different pen, a different tool, right? So the US were looking to strengthen, right? What was happening and the Euro was looking to weaken, right? But what was happening was once the Euro started to strengthen, yeah, because of the vaccine rollout, the divergence then became converged, right? So it was a wider divergence there and now it started getting smaller and smaller and smaller. And in that convergence, what you then started to see is the gap was closed between the dollar and the Euro. And the Euro went on a bit of a run matter of fact. It was definitely not what I was, you know, totally expected. I didn't think it was gonna come all the way up here, but it ended up going all the way up there, right? But that was a convergence trade because rather than seeing this, the market was starting to revalue the Euro. And the Euro started to recover and started to get a lot more expensive in comparison to the dollar. And that was what I called a semi-convergence trade because the dollar wasn't necessarily weaker, yeah? It was just that the Euro was catching up and the market priced that in. Yeah, so that was April and you started to see it here. For example, with GDP, then if you can see that GDP area and your growth started to catch up, right? Then we had in June, right? In June, what did we have? We had, we saw Fed dot plot scene shifting to 2023 rate hikes, liftoff economists say, and we also had Fed sees two rate hikes by the end of 2023. So now they really start to ramp up, yeah? And what do we see in June? Shifting the fundamentals, the dollar getting much stronger, the Euro actually was getting weaker and then we saw the beginning of this downtrend, yeah? And then the latest one, in fact. So tapering is the reduction of the rate at which a central bank buys new assets. It's most commonly used when talking about the reversal of quantitative easing. When you're reversing quantitative easing, quantitative easing is devaluing the currency. When you're reversing that, it means you're not devaluing the currency and is regarded as the first step towards winding down from a period of monetary stimulus. So in fact, you're not weakening your currency anymore. And then the final one, 20 seconds of September, and again, I had a YouTube video. Not sure if many of you watched this, but this was a live monster class on trading the FOMC. Yeah, right here on YouTube, yeah? So again, you know, when I'm talking about something, I do trade it. And what we had on the 22nd of September was the Federal Reserve left monetary policy unchanged, but there was a clear intent to dial back stimulus this year, which is positive QE tapering is set to be announced in November with the committee shifting towards a 2022 rate rise. So again, in the 20 seconds, yeah? 20 seconds, what do we see? More selling off, yeah? So the rumor still, the data still supports that narrative. Yeah, the data was still supporting the fundamental narrative.