Читать книгу The Foreign Exchange Matrix - Barbara Rockefeller - Страница 23

The option strike price case illustrates the most important aspect of the player groups – their positions. When the vast majority of the market holds a particular belief, their positions reflect those beliefs. If a set of factors lines up against the pound sterling, for example, a short sterling position is rewarded with every news release reinforcing the negative tone. Good news is dismissed and disregarded. Every trader is gunning for sterling. It doesn’t matter that by any objective measure on a fundamentals matrix, five factors are negative and two factors are positive.

But there is always a tipping point at which the market gets oversold sterling – something experienced traders can smell and that technical analysts can measure – whereupon a key level gets hit and a cascade of short-covering ensues. The tipping point may appear with or without a news announcement pertaining to a factor. Sometimes the factor is directly relevant, whereupon the press says “the release of the XYZ data caused the pound to firm.” In other instances, and we say it’s the majority of the time, the release of the XYZ data is just an excuse for traders to get out of Dodge. If you can’t sell it (anymore), buy it.

Hence the seeming perversity of the FX market. The objective measure would still have four negative factors versus the new count of three positive ones; it would still be net negative. Logically, we say the pound should remain in a falling trend and the factor weights do not line up to support a rise, but the market is not responding only to the factors, but to the quickly disappearing probability of making a profit from the existing short position.

This is the sense in which the market is not always right, as the old law has it. The market is always right in the sense that every trader has to accept the prices offered and a single trader cannot change the market’s mind about what is the correct price. The market can be dead wrong about factor analysis but it doesn’t matter. You have to trade the prices in front of you, not what you think prices should be.