Trading Forex With Jamie Saettele
Jamie Saettele is the senior currency strategist at Forex Capital Markets LLC and author of Sentiment In The Forex Market. His technical strategy is published daily at DailyFX.com and he has contributed to Technical Analysis of STOCKS & COMMODITIES, SFO, and Futures magazines, as well as Investopedia.com. Saettele is an active currency trader employing a discretionary approach to the foreign exchange market.S&C Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber interviewed Jamie Saettele via telephone on July 30, 2008.
Initiating a position at the extreme is best.
Jamie, how did you get started in trading?
In college I was part of a student-managed investment fund. There were 15 of us and our job was to manage a real money account. There were rules--we could only go long stocks and bond funds.
JG: Did you just pick stocks, or did you do something else too?
We had different roles besides picking stocks--for instance, we had an accounting department. My role was providing economic reports. So I was studying a lot of macro-economic topics, and I started focusing a lot on interest rates. That was how I got interested in currencies. After I graduated I wanted to find a job in foreign exchange and I found myself at FXCM, and I've been here since.
BF: Do you trade what you trade now because it is safer, or because there is a better chance of making money?
Actually, I think it is a lot harder to make money in foreign exchange. But that also means you can make a lot more of it; because so many people lose, the people who do win are going to make more money. Understanding when to trade is the biggest problem that people have because the market is open 24 hours a day. People are trying to trade all the time. Usually, that is a horrible idea. In futures -- currency futures, or any futures -- the exchange is only open for a certain amount of time. So these markets are providing a filter for when not to trade. That is not the case in spot forex. People can trade whenever they want. It is human nature to look for that action, which doesn't help us in trading.
JG: You recently had a book published titled Sentiment In The Forex Market. What inspired you to write it?
When people start out trading, a lot of them start by looking at an economic calendar, and expecting news to move the market one way or another. They do this so they can take positions based on how they think the market will react. I just jumped in and began placing trades when news was coming out, and I noticed that what was supposedly good news didn't matter because the market would go the other way, and vice versa.
JG: What did you do then?
I started reading everything I could find about technical analysis and the psychology of markets. I believe that markets oscillate between optimism and pessimism. There are tools that we can use to gauge the psychological state of the market -- where we are in optimistic/pessimistic oscillation -- and then trade accordingly. If a market is turning from a bearish extreme I look to go long, for example, until we get to an optimistic extreme.
It sounds simple, but obviously it is not, because trading would be easy if it were. Basically, that is what my book is about. It discusses different tools you can use to gauge the psychological state of the market. That includes sentiment indicators, such as the Commitment Of Traders (COT) reports, and how to create signals, and reading news headlines. In fact, I read an article in S&C published in 1989 about reading news headlines and looking for certain language to see if the market in question is topping out or bottoming in your terms.
...Continued in the October 2008 issue of Technical Analysis
of STOCKS & COMMODITIES
Excerpted from an article originally published in the October 2008
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reserved. © Copyright 2008, Technical Analysis, Inc.
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