A few thoughts after the Asian spike in euro pairs
EURUSD currently trawling along the bottom of a retreat 30 Dec
Still no confirmed explanation of the Asian spike to 1.0657 in nano-seconds but we can reasonably guess that robots got hold of stops above 1.0560 in extremely thin liquidity and equally ran into good sell interest once that ran out of puff.
Moves like this, and the flash crash on GBPUSD previously, owe a lot of their origins to the fact that algo-boxes now vastly outnumber the amount of physical traders still plying their trade. Friends of mine still involved at interbank level reckon that figure as high as two-thirds being robots nowadays and climbing.
Many retail traders have always had a pet-hate/misguided view that interbank dealers deliberately go out of their way to ruin their positions ( something, as a former interbank trader/market-maker, I've always vigorously challenged in these pages) but now there's a new hate-figure in town and those robots are far more scary given their extreme herding instinct.
I hope you were able to take advantage of the move in euro pairs whether long and taking some profit or wanting to go short at better levels with many of you I'm sure already taking money off the table.
Either way we can expect more moves of this nature as we move forward in 2017. An already fragile global economic/political outlook is being compounded by a lack of liquidity in a climate of overall falling volumes ( also a bi-product of lack of pro-active trading by human market makers, robots being only re-active).
So you'll need to factor this change of playing-field rules into your trading style/discipline. FX markets have always been fickle but now even more so. Over-analysing every move is futile so it's key to establish levels that suit you as a trader and make sure you take advantage whether at your desk/on your chosen app or not.
So beware of the robot but equally be ready to feed at the trough. As I've said here many times before, ours is not to reason why.Ours is just to sell and buy.
Robot wars- Be sure to claim your share of the spoils