Читать книгу The Foreign Exchange Matrix - Barbara Rockefeller - Страница 22

Let’s take the actors, or agents as academics might call them. How you interpret FX market developments depends on what sort of trader you are, so it is important that we consider how various actors think.

Let’s say, for example, a key technical level is being hit – but it’s Friday at 3 pm. The FX market’s reaction to the key level is entirely different from when a key level is hit at 8:30 am on a Monday morning. More nuanced than this, a key level being hit at 3 pm in London on any day is different from the level being hit at 3 pm in New York. In the London case, traders still have several hours to see what the New York market will make of the development. If New York responds predictably to the key level, London traders have a new profit opportunity, although it means working late.

The New York traders do have an overlapping time zone – New Zealand opens around 3 pm New York time, Australia opens around 5 pm and Tokyo opens around 7 pm. But these are much smaller markets than London and New York, and New York traders have different work habits. They arrive at work early to partake of the London and European action, rather than staying late to join the Asian markets. The importance of the key level is far lower in New York at 3 pm on any day than at 8:30 am on any day.

Now consider which group of actors cares the most about a key level at any time of day – technical traders. After all, with algorithm-trading and pre-set electronic entries and exits, the trader doesn’t have to be physically at the trading terminal to respond to a technical event like a key level. If the key level is a match of a past benchmark high or low, or a round number, or widely publicised (like a Fibonacci level), then non-technical traders know about it, too. If the technical group responds as expected, the non-technical groups feel compelled to react, whether defensively or opportunistically.

In other words, the sets of players are interactive. Because we have so much news and chatter in the electronic age, we are all getting a great deal of information about the other players, and we are getting it 24 hours a day. A good case is when the FX newswires have reported where a big buy-side client has an option strike, often a round number. The existence of the option and its strike price is a mechanical aspect of the market and not strictly speaking technical, but the strike level is almost always set by technical considerations. It may be just past a moving average, a historical benchmark level, or some other calculation.

The financial institution that wrote the option will have hedged at least part of its position (although not all, or it wouldn’t make a profit on the transaction), but still probably prefers not to have to pay up, while other market players know that a failed test of the level opens the door for a big move in the opposite direction of the strike. This is a case in which the widespread knowledge of the option strike is the top factor and it would take a big event in the macroeconomic world to overwhelm it.