MY BIG SHORT Will Happen NOW. Full Trade Analysis!

Summary

In 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.