Toil and Trouble

Dollar weakness continues to dominate the global currency markets, will the seasonal trend of global accumulation of the greenback pre-election change the course of the decline? The FED printing presses are at full tilt so who knows..?

Pulling back against the weakness

The weeks still continue to test my strategies and resolve as a trader. You either have already developed a mental toughness to survive or you need to. Dealing with the inner turmoil when things aren’t going to plan is where you need to be on high alert to making decisions on the spur of the moment. It is very easy to do and often (if you are lucky) a confirmation that you have made a good decision when in fact all you were was just lucky. If you make that call, get unlucky, then that is when you can spiral out of control.

As a discretionary trader I plan trades based on systematic entries and the statistics of past outcomes to provide a level of probability for the trade idea. The markets in 2020 will be remembered for testing every trading idea I have ever come across and executed.

Working through sustained and deep drawdowns despite all of the macro and fundamental data being in your favour defies the logic, the intelligence and eventually the endurance you have invested in the time putting it all together. Oh and it costs money!

I have been working my plan to pull back into the green and on every occasion of just about getting there the market draws away from me, literally within a few points…. So the evolution continues to play out with my trading plan and strategies are scrutinised as objectively as I can manage under the circumstances. Each time we should continue to chip away and the evidence of growth is beginning to show its tender shoots of promise.

As we move into Quarter 4 my intention is to eliminate direct USD exposure before the crazy lead up to the US Presidential elections and have positions in cross pairs which can be hedged out nearer the time. The investor value at risk for my Darwin WET has been much too high and I will attempt to bring that back down in the next 3 months.

With Covid, US Elections, futile FED and ECB battles of inflation management, potential regional unrest with Turkey(as well as a failed Lira which Europe has exposure) Brexit and more economic/political pressures for the Euro looming on the horizon we will have to be patient for trade ideas to play out long term and mature in our outlook when trading or investing in such an arena.

April Close +3.4%

April close returning 3.4% for WET

The plan for April was to track and trade EUR crosses which worked out pretty well for the month with some early results in for EURUSD. I traded only a couple of pairs to limit risk exposure while the markets establish obvious zones for me to assess. So margin use for this month has been conservative.

The huge expansion on EURUSD has set my levels further out than I have ever traded within but this presents me with more opportunity to plan set ups. My current level high of 1.12 takes me back right to Sep 2018 and the sell side level at 1.0627 goes way back to Feb 2017. So until these break I have plenty of price lattitude to play with.

April closed as another profitable month returning a 3.4% on my Darwinex Asset WET. Slightly lower than I anticipated given that my underlying strategy returned 7.83% to my account. This is where the risk manager throttles in or out for the investor and I think it could be accountable to the intra day trades I take on mainly GBP. These trades often have a lower take profit and because of the short timing are inherently more volatile compared to my longer term trades.

I am working on the intra day plan to add bigger take profits to hopefully fill in these risk management interventions.

All in all it has been another great month and May is already lining up on my charts for set ups. I’m looking forward to the next 4 weeks of potential.

March Close

March 20 Result 10.37% Return

We entered March not fully comprehending the magnitude and global economic ( and soon to be political) shock of the Covid – 19 Pandemic.

With carrying a position into March our moderate February drawdown of -0.77% should have realised into a small but quick profit for early March. However as you can see it pulled us into significant drawdown of -9.52% on the 9th March when the market closed.

I entered into recovery mode which began to take effect after our ultimate zones had been established and the market slowly began to seek equilibrium. Institutions desperately trying to find balance and slashing interest rates across the board made for volatility never seen before. Part of my strategy encompasses intraday trading if conditions meet my requirements, which they certainly did during the last 2 weeks of the month. This helped contribute about 50% to the overall recovery and profits added to the month.

April is currently positioned well and I will be trading predominately EUR crosses but will be scaling back on some opportunities. This will probably reduce the April return but will provide a cushion to build on the March performance.

I will update the investor account in a later post to demonstrate how Darwinex pay performance fees and also what the plan looks like for April in more detail.

Take care out there.

Pre March Close Update – All Positions Flat

Trading through extreme markets

The chaos unleashed last week in the markets have hopefully found a base level. The institutional levels have been reset and hopefully I can plot to trade these uncharted expansion zones.

It was a difficult period to trade through, my plan does require self discipline but this helped me navigate through the anticipated drawdown of almost 8% on my Darwin WET. The biggest challenge was a EURCAD position which pulled me into the wrong side of the market with an unbelievable depreciation of the Canadian Dollar in a rapid amount of time. Ditto with the EURUSD taking out all of 2019 positions and some. Just staggering to witness.

Whilst these positions can cause short term concern it is important to acknowledge the importance of these equity swings in my plan. They provide further opportunities and confirmation of new alpha zones for me to trade into. So in summary the EURCAD trade ended up being very profitable after the peak drawdown.

I plan to continue to trade intraday on GBPUSD and add further long term positions in EURUSD, possibly EURAUD/GBPCAD next week with an eye on early April profits. These position trades may see the monthly return drop before month end depending on how fast the market moves next week. Or we could end up higher, I really cannot say but just trade what I see.

Take care!