July proved to be my most challenging month, not because of the big swing in equity draw down on the underlying strategy (-23%) but because of the speed and momentum in which it happened.
A dual result of CAD and USD weakness during the latter fortnight caused my positions to go against me just at the point where it seemed my take profits were going to hit target and I would be flat for the remainder of July (and showing a healthy profit). This is when trading longer term with discretion becomes an extremely tough endeavour and to be fair, where a trader earns the strength of how to survive and thrive or die.
The timing of the £675 billion package with a struggling dollar seemed to fuel an extraordinary buying of EU vs USD. Some 500 points from where my original area of interest in trading this pair was founded. Theories of the market pricing it in previously proved unfounded.
At 1.19 it seems but be stretched but in the back of my mind I still have the speech of Draghi’s “whatever it takes” in his 2012 ECB announcement about the failing currency. Back then it was bought from 1.20 to 1.37.
We now a very different situation driven by a pandemic stimulation package but paid for by the taxpayers of Germany and Northern Europe which is then distributed to other areas of the EU (including France). It seems that political will is once again rail-roading through constitutional and fiscal common sense to protect the EU experiment to the tune of not Billions but now Trillions… and the fight for a slice of that social pie has begun in earnest with some members lining up for a lions share. I sure am glad I’m no politician!
Plan for August
I have mapped out my areas of attack for the next 10 trading days to balance out of this negative position in EUR and CAD. Also because of ESMA rules I have had to increase my margin account temporarily to cover these positions. Once my review is completed the margin will be returned back to normal.