Transcript of WARNING: Rate Hikes Incoming
TraderNick
0:00The 10-year government bond yield just0:02crossed over 5%. Now, why do you see0:05every channel on YouTube that's in the0:08trading space talking macro, talking all0:10about this level? Well, it's for a very0:12good reason. We know that the US is in0:14$40 trillion of national debt0:18and the higher our borrowing cost goes,0:21I mean, you can kind of picture how this0:23would look on an individual level. If0:25you have a ton of debt and then your0:27borrowing costs went up significantly,0:30you'd be in a lot of trouble, right?0:31It's a painful situation. You already0:33have a bunch of debt and now you have to0:34pay more on that debt in order to0:37sort of administer that debt. That's a0:38challenging situation. And so, I think0:41that it is worth mentioning that the0:4410-year yield is making this kind of0:46move and this is sort of suggesting that0:48the idea is the Fed's going to have to0:50raise rates. They're going to have to0:51keep rate hiking in order to0:55basically keep this from going out of0:57control, right? Keeping inflation under0:59control is mission critical to the1:01Federal Reserve right now because if1:03inflation blows out with the all the1:04conflict in Iran and we see diesel1:06prices flying and all these things going1:08on, if this keeps putting pressure, you1:11very well could actually lose control1:13and the trust of the bond market and1:15yields could soar even more1:17aggressively. So, the Fed's in a1:19situation where they almost have to hike1:22interest rates to respect what the bond1:25market is saying. And what I mean by1:27that is the bond market is saying,1:28"We're only buying US national debt if1:31you give us more yield because we're1:33more concerned about inflation and1:36uncertainty." So, to quell that1:38uncertainty about inflation, the Fed1:41practically has to hike rates.1:43And this was made even more challenging1:45yesterday. We talked about the PMI data,1:48flash paint PMIs yesterday came in red1:50hot both on manufacturing and services1:52PMI numbers.1:54The economy, at least forward-looking1:56right now, looks to be steamrolling1:58ahead. And so, there is not only the2:00supply based inflation due to oil2:02prices, which if we pull those up here2:04to get some context, we are seeing a2:06little bit of a rebound, but on a2:08overall basis, we're still kind of in2:09the middle of where we have been with2:12oil prices throughout the conflict here2:13in the Middle East. So, oil prices are2:15elevated and the economy is still2:17chugging along at least on an output2:20basis from an aggregate level.2:23I always have to preface that because2:25someone will always comment in the2:26comment section say, "Nick, the economy2:28is not good. Things are terrible out2:29there for consumers." And trust me, I2:31know. We can see this in the data. If we2:33take a look at economic data, go under2:35economic growth, and pull up consumer2:37confidence, I am not ignorant to the2:39fact that consumer confidence is down in2:42the gutter. And depending on who you2:43ask, they might say, "Well, that tells2:44you the economy is bad." Well, for the2:46consumers and for everyday people, yes,2:48that is true. But, from an output of the2:51overall US economy basis, it is hard to2:54make the case that economic data is weak2:57in the United States. PMIs, which are a2:59forward-looking indicator of the3:00economy, which asks purchasing managers3:03about their hiring habits, consumer3:05demand, or product demand, sales,3:07hiring, etc. All these different things,3:09it's strong. It's in the mid-50s, right?3:11So, what the Fed is looking at here with3:13this narrative around rate hikes is we3:15can afford to rate hike to try and get3:18inflation tampered down. While3:20simultaneously, the reasons that we can3:22do that are because the economy is in an3:23okay spot from an aggregate basis.3:25Again, not saying it's fair, not saying3:27everyone out there feels great about the3:29economy, but saying that the economic3:31output at the highest level is still3:34pretty strong. And so, what is this due3:36to precious metals, currencies, indices,3:38etc.? Well, the dollar is red hot. And3:42right now, this seems to be the3:44prevailing trend in markets. The dollar3:46is strengthening because we're sitting3:48on a situation where Fed's going to3:49likely hike rates, and economic data3:52still generally seems to be holding up3:54fairly strong. And obviously, a stronger3:56dollar is not ideal when it comes to3:59precious metals. What we can see here is4:00that my gold trade continues to sort of4:02be this really back-and-forth chattery,4:06you know, chart. And it looks4:07increasingly likely that I'm going to4:08get stopped out of this position. And4:10honestly, I'm okay with it. If I get out4:12of this trade, I can reset and find4:14better opportunities out there. Maybe4:16gold is a great long-term buy at these4:17levels. I actually personally think that4:19it is. But in terms of the here and now,4:21the technicals look pretty weak. I'm4:24going to hold on to this trade, and if4:25we hold the 61.8% retracement, great.4:28But if we start breaking through this,4:29it's time to exit the position. I no4:31longer have the same conviction in the4:33short term that I do about gold or did4:35have about gold when I initially took4:37the trade, and continue to mostly have a4:38neutral reading at least within the4:41context of my strategy. Gold is4:43currently getting a minus three reading4:44within Edge Finder, which falls under4:46the category of neutral. Technicals are4:48weak. Sentiment is actually giving us a4:51bullish reading. Institutions still seem4:53very bullish on precious metals, while4:55macroeconomics are mixed to negative at4:58best. And what we can see here is that5:00it is higher inflation and higher yields5:03that are putting negative pressure on5:06precious metals, right? This is a5:07stronger case for the dollar, which is5:10in turn more of a bearish case for gold.5:12So if I get stopped out of gold, it is5:14what it is. I'm on to the next idea. And5:15as I mentioned, longer term I actually5:17think precious metals are at a decent5:20spot for accumulating, but that's a5:21different style than actively short-term5:24trading. So this is kind of5:26back-and-forth, but in one side of5:29things, I have a long-term exposure to5:31gold that I'd be willing to add to from5:34a passive sort of sitting in the5:36portfolio perspective. But from a5:38trading perspective, I have no5:40short-term interest in adding new fresh5:43long positions to gold. And to even go a5:45little bit further, I want to show you5:47something. If I flip open here our5:49metals only view, I'm actually getting5:52more of a bearish reading now for5:54precious metals. Specifically, you can5:56see silver is getting a pretty bearish5:58reading. A minus five score with6:00technicals pointing bearish, inflation6:02data also weighing heavy on the precious6:04metals. But, the question is would I go6:07shorting silver as we speak? Well, not6:09quite. I think technicals are still6:11holding up nicely here. We're in a range6:13for silver. But, if we were for example6:15to lose support and start making a more6:18substantial flip to the downside, then I6:21would be more interested in actually6:22looking for short trades, maybe riding6:25this thing back down to the lows. Now6:26again, I know this is a bit of a6:28shake-up and change in my narrative,6:30but I actually think it's a I've6:32mentioned this often. I think it's a6:33strong thing in trading to actually be6:36able to acknowledge and react to new6:39information and flip your bias when6:42necessary, as opposed to sticking6:45staunchly and stubbornly to one point of6:47view in markets. Right now, it looks6:50like things are changing. The dollar6:51looks strong, and it looks like the Fed6:53may be on a more than one hiking spree6:56here.6:57That said, there's a big question mark6:59in all of this, which is if oil prices7:01come meaningfully lower and the Fed7:03feels less pressure to hike rates, we7:06could see them go on hold. And so, I7:08have a lot of back and forth narratives7:11going on here. On one hand, it's like,7:13all right, economic data seems to be7:14strong. Fed looks to be wanting to hike7:17interest rates, yields are moving7:18higher. But, if oil prices crash lower,7:21a lot of that data could flip, or at7:23least on the yield side, yields could7:25cool off, inflation expectations could7:27come down, and the Fed could go more on7:29a rate hold situation again. But, if I'm7:32following the trend purely, overall, the7:35situation in the Middle East doesn't7:37seem to at least right now have any sort7:39of solid grounds for discontinuation.7:42And so, the path of least resistance in7:45my view is for oil to probably stay7:48right around where it currently is,7:49elevated with, you know, the possibility7:52at any moment for de-escalation or7:54escalation to take place. Oil has been a7:56really tricky place to try and trade if7:58you've been trading it the last, you8:00know, a few months. You've had these8:01really sharp back and forth moves, but8:03ultimately we've really just gone8:05nowhere other than giant swings back and8:07forth. So, if anything, I lean just8:09slightly bearish when it comes to8:11precious metals right now, but when it8:13comes to gold, I'm just going to hold8:14out on my position. If this thing breaks8:17that 61.8% retracement zone, like I8:19said, it's time for me to exit the8:20position. By the way, if you want to try8:22out the tool that I'm using here to8:23screen this data and in my view, the8:26importance here is that it is more of a8:28mechanical way of looking at the data8:30rather than trying to do it off the top8:31of my head, which by the way often times8:34leans towards stubbornly sticking to one8:36narrative. When I have something like8:38EdgeFinder, maybe one of the most strong8:41utilities of a software like this is it8:44tracks a bunch of economic data, trends,8:46seasonality, commitment of traders data,8:48crowd sentiment, and mechanically and8:51objectively tells me what the data is8:53saying rather than relying on my own8:57sort of top of my mind economic data9:00bias, right? I actually have a system9:02here that mechanically tells me where I9:05like or dislike for particular markets.9:07So, for example, what I could do is I9:09could flip this thing here. Let's go to9:11remove the neutrals. This would give me9:13a watch list of things that have9:14stronger conviction, bullish or bearish,9:17and then I can use these ideas to go9:19look at the charts and see if I agree9:20with them and potentially take some9:22trades that are based not just off the9:24top of my head, but off of a9:26mechanically algorithmically derived9:29system. If you don't have EdgeFinder and9:31you would like to try out the tools that9:32I'm showing here, then scan the QR code9:34that you see on the screen right now or9:36click the link in the description down9:37below to sign up for a free trial to9:40access our tools and try them out for9:42yourself. Most traders are trying to do9:43this off the top of their head, and I9:45can tell you that that is really9:46difficult, and often times leads you to9:49second-guessing yourself. Should I still9:51be bullish on the dollar? Should I be9:53bearish on gold at this moment? Instead9:55of doing that, I think having something9:57like Edge Finder, which monitors all9:59this stuff and generates a watch list10:01for you to look through, is massive10:04clarity in markets. So, try our stuff10:06out. We have thousands of people around10:08the world using our tools. Find out what10:10the hype is about. Try it out down10:11below. So, basically, with gold, I10:13initially got into this when this was10:15getting a bullish reading within Edge10:16Finder. It's gone neutral since. If the10:19score continues to decline for gold, or10:21we lose the 61.8% retracement zone,10:24which we are very close to doing so, I10:26have to exit the position and stick to10:28my rules. But, Nick, what if it breaks10:30to the downside, you get stopped out,10:32and then it goes to the upside? Well,10:34that could happen. It wouldn't be the10:35first time or last time that that is10:37going to happen to me. It's part of any10:40trading system. Sometimes you get10:41stopped out at the wrong time. But, what10:43I do know is that if I get stopped out,10:45that's what I was supposed to do in10:47accordance with my personal trading10:49rules. And if you're constantly10:51guessing, should I be in? Should I be10:53out? Changing your strategies all the10:55time, I can assure you that long-term10:58that is not a way to trade consistently11:01and make money in the end. Because if11:03you're constantly changing what you're11:04doing, you're not sticking to any sort11:06of system, and longevity in this game11:08relies on something systematic,11:10repeatable, approachable, and so when I11:13have this idea, if that basically11:15happens where I get stopped out and then11:17we go higher, I'm not going to be all11:20upset and change everything about how I11:22trade. I know that if this happens, it11:24wasn't the trade I was meant to be in.11:26And I can always rejoin the trade if11:28conditions change in accordance with my11:30strategy. Let's say for example, we11:32break lower, I stop out, and then we11:34start to repair and actually gold11:35momentum picks up again, and let's say11:38some of the macroeconomic figures start11:40to materially improve for gold's bias11:43within Edge Finder. Well, I could11:44potentially re-enter the trade, and it11:46is what it is, right? Sometimes you're11:48going to miss a move. There's also the11:49situation, let's just be open-minded to11:51this, where the macro for gold is no11:54longer as attractive, and price fails to11:57hold, and we actually tank back down to12:00this year's lows. Again, there's a lot12:02of people out there who have commented12:04all over my YouTube channel saying that12:06will never happen. Gold's going higher.12:08It's not going back down. This is it.12:09Last chance. All the time you get people12:12who have these absolute narratives12:14within their trading, and I always12:16encourage people, or I should say I12:18discourage people from thinking that12:20way. Always keep an open mind. Markets12:23are crazy. They are very volatile. They12:25could be all sorts of things. And they12:26could at any point crash down in gold.12:29Like if if the Fed goes on a we're real12:31serious about inflation, we're going to12:33hike, hike, and hike again,12:35guess what? Gold's probably going to12:37shoot lower here, and it will be uh12:40better to keep an open mind rather than12:42a stubborn one. That said, my line in12:44the sand is the 61.8% retracement zone.12:47If this stops out, I take a small loss,12:49and I move on. And let me reiterate how12:51important that last thing I just said,12:53small loss, is because I personally am12:56going through a drawdown that I am12:58sharing transparently here with YouTube.13:00Let me show you a little bit more about13:02that. Most traders don't realize that13:04having a brokerage with good trading13:06costs can make or break your long-term13:09trading results. In fact, things like13:10slippage or spreads can seriously cost13:13you more than you may be realizing when13:16trading with brokerages that widen their13:18spreads dramatically. And I want to make13:19sure I reiterate that you can literally13:21go from a profitable trader to an13:23unprofitable one just by high trading13:26costs with the brokerage you may be13:27using now. And so, I wanted to tell you13:29about today's video sponsor, which is13:31BlackBull Markets. BlackBull Markets is13:34a New Zealand FMA regulated brokerage13:36offering Forex, metals, and crypto13:38trading with over 26,000 tradable13:41instruments. They offer CFDs on so many13:43different products, and they keep their13:45spreads rock solid even during volatile13:48market periods. 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And if you create and14:42deposit a $10,000 plus account, you get14:45lifetime access to the Edge Finder and14:47gold VIP. With this unique and14:50limited-time offer, you can get access14:51to some of our products here at A114:53Trading completely for free, but I'm14:55paid for by BlackBull Markets. It's a14:58win-win-win scenario. You get a great15:00brokerage and free tools, the brokerage15:03gets access to a new client, and on our15:05side of things, you support our channel15:06with this sign-up. And a bit of a15:08disclaimer, please do your due diligence15:10and make sure that this brokerage is15:12good for you before proceeding with the15:14offer down below. The full terms and15:16conditions, as well as disclaimer, can15:18be found on the page linked below.15:20Thanks to BlackBull Markets for15:21sponsoring today's video. Now, back to15:23the content. So, yesterday I made a post15:25across my social media about how I am15:27personally going through a drawdown15:28right now. And feel free to skip this15:30part if you don't care so much about15:32trading psychology, but I think it's15:34maybe some of the most important stuff15:35to understand that realistically, no15:38matter what strategy or approach you15:40use, whether you're a fundamentals15:42trader, a technical trader, a day15:43trader, a scalper, a swing trader,15:45pullback trader, momentum trader,15:46breakout trader, reversal trader,15:48whatever you trade, smart money concept,15:49whatever whatever system you trade, this15:53aspect of trading, which is inconsistent15:55returns, periods of lackluster15:57performance, are inevitable. Instead of16:00trying to avoid them, I think it's16:01important that we realize not that we16:04should avoid trying to get a or, you16:06know, drawdown. It's going to happen to16:08all of us, but rather, how do you16:10stomach, survive, and prepare for the16:12next drawdowns when they're going to16:13happen? Well, let me just read this post16:16here and we can go through it. The last16:17several months have been a pretty16:18lackluster period in my 10-year trading16:20career. And I wanted to share some of my16:22thoughts as I go through this drawdown16:23period. For context, this is my um16:26performance here year-to-date. So, I had16:28a really strong period out of the gate,16:30traded a lot of commodities. I'm still16:32trading a lot of commodities, but I had16:33some really good catch uh runs on gold16:37and oil. I shorted silver in February16:40and March, and gold also. I shorted them16:42during that period of time. And I was16:43long in January. It was picture-perfect16:46out the gate this year. Since then16:47though, I've pretty much embarked in a16:49really grindy downward trend in my16:52equity curve, losing about 6.6%16:55in terms of my overall16:58uh equity. Not fun, but 6.6% is fairly17:03committal. Like, it's not that bad. That17:04that is a modest drawdown. That being17:06said, what's maybe the most challenging17:08part is that it has been like 4 months,17:10and I've just been trending lower in17:12equity. And again, you might look at17:13this and say, "Well, what do we need to17:15change? What what aspect is missing?17:17What did you change about your strategy,17:18did you start trading differently?17:20No.17:21Not at all. Everything remained the17:24same. Same system, same entry uh17:26entry criteria, same exit criteria, same17:29screening, just variability in trading17:32returns. And we hate that as traders17:34because a lot of us are more accustomed17:36to a day job where you show up, you get17:38paid, you go home. You show up, you get17:40paid, you go home. Trading ain't that.17:42Trading is very, very inconsistent. You17:45may have periods where you make a ton17:46and then periods where you give back.17:48And for us as humans, we don't like17:50that. That is very unnatural to put in17:53work and lose money. But that's what17:55kind of entrepreneurship and trading is17:57in a nutshell is inconsistent returns17:59and even going negative at times.18:02So, let's continue with the message18:04here. 2026 started out incredibly18:05strong. I was up 17% year-to-date on my18:07main portfolio, which is the one that I18:09show most often. I do have other ones18:11that, you know, I don't necessarily show18:12all of all over the internet. This was18:14primarily due to catching some strong18:16moves in gold and oil and the bounce18:18back in stocks in April. Since my18:19account's peak in April, I've been going18:21through a very grindy drawdown in the18:23last 4 months. I'm still up on the year,18:25but I've given back some of my gains,18:26which is an inevitable aspect of trading18:28returns at times.18:30With my trend-following plus macro18:32approach, my strategy tends to perform18:34best in trendy environments on on the18:36assets I trade most. With many choppy18:38periods since then, it's been rough.18:40Since then, however, by keeping my risk18:42small, I've been able to keep my overall18:44percentage drawdown to a modest 6.6%.18:47While this still represents a large18:49dollar amount since my trading account18:50has grown over the years of doing this,18:52the dollar amount is still not fun to18:54look at. The percentage is completely18:57manageable in regards to the risk18:59profile of the account, the drawdown19:00percentage that is. The reality of19:02trading is that drawdowns and periods of19:04lackluster performance are inevitable to19:06any strategy or approach. I would19:08encourage anyone interested to check out19:10this video, which maybe we'll drop this19:11in the19:13the description somewhere as well. I've19:14done this long enough to know that this19:16is totally normal, but it never feels19:17great in the moment. It's okay to19:20acknowledge that drawdown is not fun.19:23Even after doing it as many times as19:25I've as many years that I've done this,19:27drawdown's never enjoyable. It's always19:30uncomfortable, but it's a necessary19:32aspect of trading returns. You don't get19:34the good without accepting the bad. I19:36wanted to share this transparently as I19:38believe it may help others to know that19:39a drawdown is normal and it is okay to19:43acknowledge that they aren't fun. Keep19:45calm, manage risk, and stick to your19:47backtested system. Trading fundamentals19:49can be a lot of hard work, but we19:52actually made a pretty cool free19:53Telegram channel where we are publishing19:56constantly updates on what is going on19:58from a macro fundamentals perspective. I20:01know it's not AI, it's not written by a20:03robot, it's written by a real person on20:05our team. His name is Alan. He puts20:06together a report each day on what is20:08going on and things like gold, currency20:10pairs, commodities, indices, etc. on a20:13global financial fundamental analysis20:16basis. It's a really cool newsletter20:18where you can basically stay on top of20:19things by reading for like a minute per20:21day. If that would be interesting to you20:23to join the free Telegram channel, there20:25is a link in the description down below20:27on this video that you can join and get20:30into the action there. We also offer20:32special discount perks for our products20:34as well as for funded accounts and for20:37brokerages, etc. And we also do some20:40giveaways as well. So, definitely take a20:42second to join the Telegram channel in20:44the description down below. I also want20:45to take a second to just genuinely thank20:47you for supporting my content here. Make20:49sure to subscribe and hit the thumbs up20:50button if you have not already, and I do20:52hope that more videos in the future will20:54continue to help you on your trading20:56journey. Good luck. Thanks for watching.
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