Weekly Review 16 Feb – choppy trade, down -11.5% w/w

17 February 2013

This week was not all smooth sailing like last week. This is to be expected. After a market has made a big move it pauses and there is indecision – go up, or go down? That translates to choppy, nervous trading and it is difficult to make money in such markets. I have ended the week with the account at $194,184, a loss of $25,176 on a starting balance of $219,360, which is approx 11.5% down. Attached is the updated trades worksheet.

Early in the week, I was without internet connectivity just at the time when the Yen pairs dropped 100 / 200 pips in a few minutes. This is one of those situations when I re-examine my policy of not using hard stops. My conclusion is that I should use hard stops in certain volatile situations and the second conclusion is that I should have redundant internet connectivity. I actually did not anticipate the G20 meeting to create too much volatility. That was an error. In the past G20 meetings did not have much impact on markets. But with the yen having made such huge moves recently, the markets are nervous and therefore the G20 took on increased significance. As to the second point, I have now made redundant internet connection arrangements. It will take a couple of minutes to fire up the second emergency connection if needed.

The other observation this week is about holding the USDJPY long trade through a dip of 200 pips. That is not a usual tactic I would recommend, and in the past such actions have cost me dearly. This time, I have escaped relatively lightly. But the lesson still remains, that the first loss is the best loss. Even with hedging, or perhaps due to the hedging, I am down about -180 pips in the EURJPY and -70 pips in the USDJPY. With bigger order size due to the larger base account, the overall loss is pretty significant.  Fortunately my disciplined order sizing saved me. Lots to learn from this situation, the most important lessons being i) keep order size manageable in the most extreme risk scenario, ii)take the first loss as per the trade plan. The other lesson I will probably implement in future is to stay away from the market for a few days after a big move in either direction.

Next week we will continue to have USDJPY event risk in the form of the BoJ minutes and the announcement of the BoJ head. Looking further ahead and at the bigger picture, gold and silver were hit hard this week and present a good long-term accumulation opportunity, especially around the $1520 / $26 levels respectively. The markets seem to be building up a bullish sentiment close to minor bubble levels in the SP500. I have a gut feeling that this market will go up until April and then crash quite significantly, by at least 10%, and more likely close to 20%. This will translate in the fx market as a risk off move, so we will see the USD strengthen, and also the yen will recover some of its strength. Something to keep in mind, and I’m confident my system will catch the turn and hopefully I can ride that move successfully.

Blog Wksht 2013Feb16


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