At a time when most markets are being starved of yield and Treasury notes returns and mortgage rates are at record lows, the buy-and-hold investors would long for 2% to 3% annualized returns from CD or near-term exposure. How ironic then, at a time of famine in regard to return, that the average trading range on equity futures on a 24-hour basis is running at 2%. Each day, global markets are selling resistance and buying support in an algorithm-based pattern that refuses to allow exposure to develop beyond one session and just will not allow a mid-term trend to form, at a percentage rate that most would accept as a 12-month return. Intra-day volatility is strong, mainly because of low participation levels but in the new generation of global market trade, volume analysis means absolutely nothing, especially when a mid-term trend is not in place. The higher-than-average participation on the days of heavy short price action indicates fear is prevalent, as the near-term tail wags the long-term dog, and sets a self-fulfilling pattern that will be very hard to break. The last decade has been a traders market in regard to beating alpha, and the buy-and-hold portfolio that seems so last decade has been replaced with the get-in-get-out-get-done mantra. The cost of intra-bank trade is allowing the automated trade process to bank at will, and is not allowing the algorithms to leave an intra-day move of more than 1.5% unchecked; if it moves, the algorithm will close it, long or short. In the trading environment that has been cast out of a dot-com bubble, a housing crash, a Fed inspired economic revival, a sub-prime contagion, a credit-crisis, another housing crash, multiple stimuli packages, another Fed bail-out, a reality check in regard to leveraged greed and unrealistic expectations over a 10-year period, the forex market has been a shining light. As a market of need, not equity greed, forex trade has moved along in quiet fashion, following the daily schedule of greasing the wheels of global commercial trade and hedging the overleveraged positions that the computer coders created.
Buy-and-hold has never been a pre-set criteria for currency trade; instead the forex market tracks like a laser guided missile the movement in risk and demand markets. When global markets trend, forex traders bank less often and allow runners to run, and when volatility hits, forex trader's bank early and often. There is no tail wagging the forex dog; currency traders have a unique market that follows without expectancy. As a commercial grade asset, foreign exchange trading has come of age, it is accepted as an integral part of a balanced portfolio, and will continue to hedge and trade risk in whatever environment the over-leveraged, high-frequency trading algorithms choose to put in front of it. A 2%-to-3% volatility? Put a forex leash on it, and look to bank a good percentage before the computer coders get the chance to steal it back. Whenever the trends form, which they will just as soon as the economic outlook becomes clear to all, forex traders will adjust quickly, and let some runners run.