MY BIG SHORT Will Happen NOW. Full Trade Analysis!
Summary
TLDRIn this trading strategy update, the speaker outlines a big short trade idea on the Mexican peso, contingent on the upcoming election cycle. The approach involves analyzing retail sentiment, a smart money index, a forecasting model, and valuation against the US dollar to determine market bias. The speaker emphasizes the importance of risk management and timing, using technical analysis on supply and demand levels to pinpoint entry points for potential trades in both futures and the forex market.
Takeaways
- 📈 The speaker is discussing a big short trade idea on the Mexican Peso (MXN) that they anticipate will happen soon based on a two-month-old strategy video.
- 🎯 The strategy involves going long on the futures market and shorting the USD/MXN currency pair in the Forex market, as they are inverse pairs.
- 📊 A two-step mechanical process is used: first, fundamental analysis to get a bias, and second, technical analysis for market timing.
- 📉 Retailer sentiment is a key indicator, with the speaker noting that they are currently very bearish on the MXN, which the speaker interprets as a bullish signal for the trade.
- 📝 The speaker uses the 'Campus Smart Money Index' to assess the bearishness of retailers over time, finding they are at a six-month, one-year, and two-year extreme.
- 📅 A forecasting model suggests a potential bottom in the market around the 14th of the current month, with an expected rally until mid-August.
- 💰 The valuation model indicates that the MXN is long-term undervalued against the US dollar, which is a bullish signal for the MXN.
- 📌 The speaker emphasizes the importance of not relying on a single indicator and using a combination of fundamental and technical tools for confirmation.
- 📉 Technical analysis involves identifying supply and demand levels, with the speaker looking for the MXN futures to hit a specific weekly demand level before entering the trade.
- 🔍 The speaker discusses the differences between adjusted and unadjusted continuous charts, noting the importance of details visible in futures charts that may not appear in the Forex pair.
- 🚫 The speaker warns about the risks of trading, emphasizing proper risk and money management, and not betting the house on any single trade.
Q & A
What is the main topic of the video script?
-The main topic of the video script is a trading strategy focused on a big short trade idea involving the Mexican peso (MXN), particularly in relation to the upcoming Mexican presidential election cycle.
What is the proposed trading action in the script?
-The proposed trading action is to go long on the futures market and short in the Forex market for the Mexican peso, based on the analysis of the market conditions and trading tools discussed in the script.
What is the significance of the retail cut data in the trading strategy?
-The retail cut data is significant because it provides insight into the positioning of retail traders in the market, which the script suggests can be used as a contrarian indicator to identify potential market turns.
How does the script suggest using the retail cut data?
-The script suggests using the retail cut data to identify when retail traders are at a six-month, one-year, or two-year extreme in their bearish or bullish positioning, which historically has been a sign of potential market reversals.
What is the 'Campus Smart Money Index' mentioned in the script?
-The 'Campus Smart Money Index' is a tool used in the script to measure the positioning of retail traders and to identify extreme positions that may indicate a potential market turn against the retail sentiment.
What is the role of the forecasting model in the trading strategy?
-The forecasting model is used to predict potential market movements and to identify potential bottoms and tops in the market, which can help in timing the entry and exit of trades.
How does the script discuss the importance of valuation in the trading strategy?
-The script discusses the importance of valuation by comparing the Mexican peso to the US dollar, suggesting that being long-term undervalued may indicate a potential bottom and a good entry point for a trade.
What is the significance of the supply and demand analysis in the script?
-The supply and demand analysis is significant for market timing, as it helps identify key levels in the market where price action may reverse, providing potential entry and exit points for trades.
How does the script differentiate between the adjusted and unadjusted continuous charts?
-The script differentiates between the adjusted and unadjusted continuous charts by highlighting how they present different perspectives on market levels and price action, with the unadjusted chart showing more detail and the adjusted chart providing a cleaner view for timing trades.
What is the potential risk mentioned in the script when trading the Mexican peso?
-The potential risk mentioned in the script is the difficulty of timing the bottom of a falling market, often referred to as 'catching a falling knife,' which requires skill and carries the risk of entering a trade too early or too late.
What advice does the script give regarding risk management in trading?
-The script advises to practice proper risk and money management, emphasizing that not every trade will work out as planned and that it's important not to risk more than one can afford to lose on any single trade.
Outlines
📈 Mexican Peso Trade Strategy Update
The speaker introduces an update on a big short trade idea for the Mexican Peso (MXN), expected to unfold in the following week. They reference a previous video detailing the full trade strategy and encourage viewers to watch it for context. The current focus is on a long position in the futures market, effectively shorting the USD/MXN currency pair on Forex. The speaker outlines a two-step process starting with fundamental analysis, emphasizing the importance of being fundamentally biased before entering any trade. They discuss retail cut data and the importance of trading against the retail sentiment, which is currently very bearish. The speaker uses their 'smart money index' to show that the retail positions are at a six-month, one-year, and two-year extreme, suggesting a potential rally similar to historical patterns.
📊 Analyzing Retail Sentiment and Forecasting Models
Continuing from the previous paragraph, the speaker delves deeper into the analysis of retail sentiment, using their 'smart money index' to argue that the current bearishness of retailers is at an extreme level not seen in two years. They highlight historical rallies that followed similar extremes, suggesting a pattern that could repeat. The speaker then introduces additional tools for confirmation, including a forecasting model that predicts a market bottom around the 14th of the current month, followed by a rally until mid-August. They also discuss the importance of the valuation model, which indicates the Mexican Peso is undervalued against the US dollar, supporting the bullish case.
📉 Technical Analysis and Market Timing for MXN Trade
The speaker transitions to the technical analysis aspect of the trade, focusing on supply and demand levels. They mention the Mexican president elections as a contextual factor for the trade idea. The speaker compares unadjusted and adjusted continuous charts for the Mexican Peso futures, noting the significance of certain levels and how they have been historically approached and penetrated. They discuss the challenge of timing the bottom of the market, emphasizing the importance of risk management and not relying on any single trade for success. The speaker also explains the concept of a 'carry trade', highlighting the positive swap rates that can be leveraged for passive income in this trade.
🔍 Detailed Level Analysis and Entry Strategy
The speaker provides a detailed analysis of entry levels for the trade, using both weekly and daily charts. They discuss the importance of having the daily chart covered by the weekly chart for timing the trade and highlight the differences between the Futures and Forex charts. The speaker points out a significant gap in the Futures chart, which they believe is likely to be filled, providing a potential entry point. They also discuss the importance of not relying solely on supply and demand levels without fundamental backing, using the Forex chart as an example of how levels can fail without proper support.
🤑 Risk Management and Trade Execution Strategy
In the final paragraph, the speaker emphasizes the importance of proper risk and money management, reminding viewers not to bet their entire capital on any single trade. They outline the ideal scenario for executing the trade, waiting for the Futures to hit a preferred weekly demand level while the Forex pair is at a corresponding daily supply level. The speaker provides guidance on where to place orders and how to set targets, reiterating the importance of not being overly precise when entering a trade, especially when 'catching a falling knife'. They conclude by wishing viewers good luck and reminding them that every trade is just another part of their trading journey.
Mindmap
Keywords
💡Big Short
💡Trade Idea
💡Mexican Peso (MXN)
💡Fundamentals
💡Retail Sentiment
💡Smart Money Index
💡Valuation Model
💡Supply and Demand
💡Technical Analysis
💡Risk Management
💡Carry Trade
Highlights
Introduction to a big short trade idea potentially happening next week, with an emphasis on the need for an update video.
The importance of watching part one of the video series for context on the big short trade strategy.
Discussion of the Mexican peso (MXN) election cycle and the proposed trade of going long on futures or shorting the USD/MXN currency pair.
Explanation of the inverse relationship between the currency pair in the Forex market and the underlying Mexican peso futures.
Emphasis on the necessity of a fundamental bias before entering any trade, illustrated with past examples.
Analysis of retail cut data to determine market positioning and sentiment, highlighting the importance of understanding the extent of bearishness compared to historical behavior.
Introduction of the Campus Smart Money Index to measure retail investor positioning against historical extremes.
Observation that retail investors are currently at a six-month extreme of bearishness, suggesting a potential market rally.
Historical evidence presented to support the idea that rallies often follow retail investor extremes, with examples from past trades.
Use of a forecasting model to predict market movements and potential timing for the big short trade.
Discussion of the valuation model to determine if the Mexican peso is undervalued or overvalued against the US dollar.
Evidence that the Mexican peso is long-term undervalued, suggesting potential for a market rise.
Combination of fundamental analysis tools to confirm a bullish bias on the Mexican peso.
Transition to market timing using technical analysis, specifically supply and demand levels.
Consideration of the Mexican presidential elections as a factor in the trade idea and its timing.
Technical analysis of the unadjusted continuous chart versus the adjusted continuous chart for the Mexican peso futures.
Identification of key supply zones on the weekly and daily charts for precise entry points.
Explanation of the concept of 'catching a falling knife' in trading and the associated risks and rewards.
Importance of proper risk and money management when trading, with a reminder not to bet the house on any single trade.
Use of the snap mode in technical analysis for precise entry points on the Mexican peso weekly chart.
Discussion of the potential for a carry trade due to positive swap rates, allowing for longer hold times and passive income.
Target setting based on mechanical levels, with examples of one-to-one, two-to-one, and three-to-one targets.
Identification of a significant gap in the Mexican peso futures that is likely to be filled, providing a potential entry point.
Comparison of the Futures and Forex charts to illustrate differences and the importance of using both for confirmation.
Final strategy summary: waiting for the Futures to hit the preferred weekly demand level and then entering the Forex pair for the short trade.
Closing remarks on the importance of not treating any single trade as a special case and maintaining proper risk management practices.
Transcripts
ladies and gentlemen welcome back to my
big short trade idea and this big short
will most likely happen next week if
everything goes as per plan and that's
why an update video is needed an update
video from which video well let me show
you quickly again if you haven't if
you're not up to date if you didn't get
the mammo here my big short will happen
in two months here's my full trade
strategy and obviously I did this video
two months ago and this is part one and
um if you haven't watched part one then
it's obviously time to watch part one
first before we now dive into the real
trade idea to understand why we are or
why am I so bullish on the Mexican pzo
all right so it's the Mexican pzo
election cycle so we are planning to go
long the futures or in other words short
the USD Mexican pay so the currency pair
because the currency pair in the Forex
Market is the inverse pair of the
Futures but as always as you know me we
have to analy the underlying asset which
is the Mexican pay of Futures so that's
why here it's the inverse pair of the
currency pair in the Forex market so
here we need to go long in the Futures
market and short in the
Forex market so we're going to go
through now my two-step mechanical
process as you know we start with the
fundamentals because we have to be or we
have to get fundamentally biased to get
into any trade and you have seen that on
the USD Swiss frank you have seen that
on Silver and and on so many other
trades that I called for you guys here
on YouTube and
we going to look at the retail cut data
first and this is the raw data and we're
going to look into the index in a second
but we can see already here on the
obviously Mexican P weekly
chart that the
retailers are here right now and they're
compared to their previous Behavior
they're already getting very very
bearish again I want to stress this is
not sentiment this are these are three
positions in the market so they are
positioned short in the market so now
the question is now how bearish are they
compared to their previous behavior and
therefore I need to look at my index
because this is way more important just
to know okay they're bearish no I want
to know how bearish they are compared to
their previous behavior and you have
seen that on the on the silver chart on
the silver trade and on the USD swis
Frank trade how important this data is
because because we want to trade first
and foremost we always want to trade
against the retailers we don't want to
do what the retailers are doing and if I
look at here
my campus smart money index and I I put
in here the data how I can I can look at
the weeks the look back on the weeks
because here I I I entered 26 which
means basically I'm looking six month
back and want to see if they're in a six
Monon extreme and you see here they're
down here they're below the red line and
if they're below the red horizontal line
it means they're are in a six month
extreme so that's great so they are
already in six month extreme and the
last time there were in extreme you see
basically here we got a nice rally here
as well this you see we got a nice rally
here as well look at this here we got a
nice rally here as well look at that one
here they w't an extreme we got the nice
rally look at this here we got a nice
rally and by the way again
2020 look at this Corona and there were
super bearish and we got this nice rally
so we as we see as you can see once
they're in a six months extreme we might
get a nice rally although again it's not
a timing tool because timing we do with
the technicals in a second but I also
want to see hey we in a six month
extreme what about one year now let me
just quickly add one year just to see
we're also in a onee extreme you see we
are also now entering a one year extreme
on the Mexican pay that's great now I'm
going to look at two years and wow we
are getting even in a 2-year extreme so
you see here there were we were already
in a 2-year
extreme beginning of 2024 but before
that the last time we were in a 2-year
extreme was basically Corona and this
was when we got this massive massive
rally so that tells me quite a lot and
now I I look at three years because
that's the maximum if you're already you
see we are we are heading close to we
not yet in a three-year extreme it
doesn't matter but if you're also in a
three-year Extreme as you if as you have
seen on Silver well then you can expect
a monster move at some point of time
because here see Corona 3E extreme this
is when we get the bottom of all bottoms
here and also here we got a three-year
extreme just beginning or not beginning
actually um in October 2023 and this is
when we got that bottom but we are in a
we are in a six-month extreme we had a
onee extreme we on a 2year extreme so
that's all amazing this tells me the
retailers will be absolutely wrong so
now let's go back here in with uh in
let's go back here and look at the
six-month extreme so now retailers are
already heavily short which tells us hey
we have to be bullish on the Mexican P
but I have two more tools to look at to
get to get like my confirmation here and
we look first at our forecasting model
here and the forecasting model you see
here basically is telling us now
tomorrow is Monday the 10th so 10th here
you see here we might so go a little bit
up then maybe a little bit lower and the
bottom of all bottoms is around the 14th
obviously you cannot go exactly by the
date but you see here what is really
more important than in this particular
week you see here we going to make a
bottom and then we see based on our
forecasting model here we see a nice
Rally or rise in price actually you see
here
until
until until August mid of August you see
here basically two months of not
necessarily a rally because we're going
to see some tops and some bottoms here
as well but we going to make the Bottom
now around the 14 15 16s whatever the
date is but it's around that time frame
and then we see the ultimate High around
mid of mid of August here so the
forecasting model is in line with the
opposite of what the retailers are doing
so that's the second rule in place now
the third fundamental rule is our
valuation model
versus versus the the the US dollar
because here we are pairing Mexican peso
versus US dollar so obviously the
valuation versus the US dollar is really
important whether we are undervalued or
overvalued right so we have to be
obviously undervalued to go along the
Mexican peso and guess what here we're
looking here at long-term valuation I
can also by the way just to show you
here my length how many candles I can go
back here I can I can switch between
short-term valuation long-term valuation
obviously if we are long-term
undervalued we might be short-term
undervalued as well because after that
big big drop we are just undervalued
versus the US dollar just makes a lot of
sense but also here long term we are
undervalued and look at this what
happens again I want to show showcase
you what happens in terms of quick back
testing what happens if we are long-term
undervalued here versus the US dollar
look at this this is where we made this
huge huge this Wick where we Dro big but
then because we were long-term
undervalued we made a nice bottom and
then we just ried you see here long-term
undervalued here as well as well and
every time we are long-term undervalued
we are getting these here close to
long-term under valuation and we're
getting these nice moves and look at
this here as well close to long-term
under Valu we're getting that here we
are uh we are long-term undervalued
we're getting this nice rally and look
at this here we just touched long-term
undervaluation we get this nice rally
here we are long-term undervalued we are
getting
a nice rally here we are long-term
undervalued we're getting a nice ready
look at this long-term undervalued we
getting a nice rally oh and look at this
long-term undervalued we're getting this
nice rally and I could go on and on and
on and on so what this tells me is once
I'm long-term undervalued I might hit a
bottom so again I went through my three
fundamental tools to see if I'm getting
biased into that market and what we can
clear see is that hey retailers are
position short perfect we want to do the
opposite forecasting model is telling as
we might do make a bottom next week
perfect rule in place and on the last
tool our valuation model you see we
undervalued long-term even versus the
dollar and this also tells us we are
getting a bottom so three out of three
extremely biased so that's why my
fundamental rules are met so that's why
I can go into my step two which is
basically the market timing with
Technical and I'm going to use supply
and demand and by the way right we have
also president elections here or we had
president president elections and this
trade idea is also based on Mexican
president elections as you have seen in
episode one two months ago and now on
the Mexican page on the technical so
just quickly here I have you down here
to the right I have the the Forex pair
because obviously we're going to time it
on the inverse Forex pair but I want to
have I have here on the left side I have
here the unadjusted chart The unadjusted
Continuous chart at mp1 equal 103 xn
again I I've seen a lot of comments in
the previous on my previous video where
you are requesting I uh where you
requesting for me to do like a video um
on the unadjusted continuous chart so
it's on my agenda in the future 100% so
I will do some videos on that and here
to the right I have the adjusted
continuous chart at mp1 now first of all
you see and I highlighted that in my
first episode here we are basically
getting into that or into that level on
top of level here so the first one hit
you see here a couple of well weeks back
actually 2 months back and now we are we
are we are we are coming close to that
level on top of level to that dist level
here on the unadjusted chart which is
perfect here that's what I want to see
right and also you see how the chart
looks different how the chart looks just
different you see on the adjusted chart
here on the adjusted chart what is
really important to see is that this
level is basically the level on the
unadjusted chart that we already
penetrated that we hit and that we might
preach so here on the adjusted chart
that's the level that I'm looking for
now as well because we haven't hit that
level just yet all right so you see what
is really here important is that on both
charts the unadjusted chart we hit the
level and on the unjust on the on the
unadjusted chart here to the left and on
the adjusted chart we are going to hit
that weekly weekly Supply Z so be what
please bear with me because you see here
which is really important we are trying
here quote unquote we are trying to
catch a falling knife on the Mexican pzo
which is always is not easy so we are
again trying to time the bottom of all
bottoms and this requires a lot of skill
does this always work obviously not it's
not about always having
always uh winning all the time it's
about always risk reward ratio again I
want to stress not every trade can work
out as per plan so that's why we do have
to do proper money and proper risk
management all right so just to keep
this in mind that you don't bet your
house on any trade that I'm calling on
any on any trade in general now you see
here that's basically the level and you
see where we can enter this level is
basically now which looks the chart that
looks a little bit nicer for timing
purpose is here at
mp1 the adjusted chart because also here
you see the level is a little bit
smaller it's a little bit tighter and I
want to I want to time it here on the
weekly because again we want to have
like the daily covered by the weekly and
I can make here also a full screen and
show you that it's
quite difficult I want to First do snap
mode because snap mode is here really
important with the snap mode that I'm
really tight to the candle here exactly
that I have the precise entry here that
the line snaps basically to the the
bottom of that wig and to the basically
top of the body of the basing candles
that's my preferred version here on the
Mexican peso weekly Zone and if I go
quickly to a daily chart here what you
see here is basically you have a level
here that starts here so we are getting
a little bit deeper inside that area and
you have another level here so we have
that drop base rally followed by a rally
based rally so it's an overlapping level
on top of level what I'm just doing
basically here is combining both levels
trade the you see here get a little bit
deeper entry and use the whole weekly
chart for timing again we're trying to
catch a falling knife ladies and
gentlemen we you don't try to be like ex
exact precise sniper mode entry we give
price a little bit of leeway wiggle room
to move around and uh by the way this
trade is also what I would consider a
carry trade because you have positive
very big positive swap so we can stay in
this trade a little bit longer and we
can make passive income with like this
being a carry
trade now so so that's on the daily so
you see the daily is clearly covered by
the weekly super important again Big
Brother small brother technically is m
so this is what I need to see and now
well again you can do your you can do
your due diligence yourself with Target
setting because it's quite simple again
we we are very mechanical so one to one
2 to one 3 to one we can all add these
lines and you see here this is a one to
one 2 to one and U 3 to one here but
what I want to show you again I quickly
go to the Daily because this is where I
saw it so you see here this is that Gap
and I think this Gap I only I'm I'm sure
I'm only seeing that in the I'm not sure
100% so let me just quickly minimize
that I want to quickly I minimize this
one here as well just want to see
quickly on the USD Mexican
pzo here the Forex pair I'm just doing
like daily yes I don't see that gap on a
daily which is great
so I don't see that gap on the daily as
uh on the on the Forex pair again this
is stuff that's why Futures are so
important this is where you see details
that you will never see on the Forex
pair so this is very unsustainable so
this Gap this over night Gap will get
filled very very likely again nothing is
for certain it's not that something
happens all the time but again it's
about probability and if you look at
that chart you don't see any kind of
unfilled gaps and you see basically also
look at this here we had this Gap here
and look what happened it just filled
that gap on the Futures and then we
continued higher and what where I just
quickly saw that as well is somewhere
here look at this here also Gap we
filled that Gap precisely and we
continued higher whenever you see these
unsustainable gaps in the Futures
they're very very likely to get filled
right rather quickly now you have that
huge monster Gap and that's where I
would expect price now here on the
Futures go down here and then we you can
place a one to two target here for
instance right um um this is where I
would say okay once we fill that Gap
this is your first profit that you can
definitely take
now on the Forex
though on the for
Forex on the Forex let me put these
charts next to each other so again you
see the Futures is super clean the chart
looks super nice very easy easy quote
unquote easy to time because of the
level structures and you see now the
Forex the weekly Forex chart is the
inverse but here it looks even a little
bit different you see here on the Forex
the level that we are going at I do like
the Futures again on the week weekly
chart to just compare it for
you that's the level you see on the
Forex we are going through that level
you we we preached that level already
almost already so we going through that
level in the future we haven't even
reached that level which is you see this
the power of future so that's the level
that we want to go that we want to trade
the Forex the level just didn't work
right if you just Ed that level based on
supply and demand and that's also
teaching Point here if you if you trade
at that level based on supply and demand
relationship just because it's a high
quality level by itself but a level by
itself doesn't mean anything if it's
not backed by fundamental tools and not
backed by by by by the Futures chart so
that's why the level just and you might
wonder why did this level why did this
level not work it meets all the rules
it's a high quality Supply son but guess
what guess what fundamental it's not
backed and also it's not backed by the
Futures and and and
now you see the level here it's
basically this one the big one but we're
going to go down to the
Daily because on the weekly on the
Futures it look looks just much better
so it's
basically here the
level right it's basically here so for
me for me it's clear here
what I'm going to do so I'm waiting for
the
Futures I'm waiting for the Futures to
hit that level I'm waiting for the
Futures to hit that
level and
uh then I'm willing to
also enter the Forex pair but only once
I basically here enter into the
preferred version this could be even you
see here l little bit deeper I guess
here because it's hard just to because
it's the opposite it looks different so
most likely it's closer to this one here
so now not to be covered by my webcam
here
so that's the short here that we want to
take order the long in the Futures so
ideal scenario is we wait for the
Futures to get into that preferred
weekly demand and then the Forex has to
be in that or it will be at the same
time in that daily level on top of level
Supply and then we can short this pair
or in the Futures go long this pair all
right ladies and gentlemen that's the
Mexican pzo fingers crossed that we are
getting filled and fingers crossed that
it's going in our way again don't bet
your house on it it's just another trade
it's just another trade in your trading
career nothing special about that do
proper risk management do proper money
management and let's see if this is
going to work out fingers crossed good
luck and talk to you soon
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