EURCAD Just Keeps on Giving

Entering 5th month at these levels

Since entering this zone post Covid reaction in March we seem to be in a Pivot zone for the 5th rolling month. Bias is presently neutral for me but I have plenty of scope to continue to trade this pair for the rest of 2020.

From April onwards you can see price settled approximately 60% of the time returning to below 1.5300.

Will we see this gradual squeeze upwards since May continue to find stable support above the 1.5300 level? With levels pegged at 1.5500 and 1.5000 there remains a lot to play with..

June Wrap Up 0.73%

June 0.73% Return

We finished June on a 0.73% return on a fairly flat but stable month. I had 6 trades close for the month and have 7 trades which are rolled over into July so we should see a pick up in volatility for my Darwin asset WET early on in the month of July.

With the VAR 6.5% changed implemented by Darwinex at the beginning of the month I decided to segregate my intra-day trading into another account and focus on building a much higher capacity and scalable asset class to handle bigger investments without slippage issues. I can now easily adapt entries and exits within a reasonable margin to accommodate much larger positions.

The underlying strategy produced 4.36% so the new Darwinex VAR model is having an effect on return is it is good that they are offering 3x leverage to compensate giving investors the option of exposure.

July is looking good and I have quite a few options to trade in the planning phased pending execution probably early next week since we have early NFP tomorrow and the US markets closed on Friday.

Happy Independence Day!

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.

Demo Investment Closed in Profit

16% Return

The simulated investment in my Darwin asset has closed today with a 16% return over a 4 month period.

Investment & Darwin WET Performance

The above shows the investment period and the performance of the Darwin WET. If you had invested when the Darwin was still calibrating at the start then this would still be underwater, so a money management strategy is important with an entry and an exit to be given consideration.

I’ll be posting another demo simulation with two other Darwin Assets from different managers using an averaging model to experiment with a theory. Update to follow…

Performance Fees

The above image shows the performance fees due to be paid; because I closed this investment prior to the high water mark payment been due Darwinex retains this fee.

Fees paid are $36.04 + $295.18 for this investment period. Ask Darwinex about other fees which may be due including any other commissions or currency exhange rate differentials.

Crystallized Profit

So after 4 months the demo investment in WET has crystallized with a $10000 investment at a nett profit of $1324 or 13%

As with any investment this could have gone the other way and a max 10% loss I had in place could have been -$1324 depending on how the asset performs and how you handle drawdown. Please read through my earlier posts and ask yourself, how would you react when your investment is going down (which this did)?

Watch out for my next post with a new demo investment simulation model using real time trading records!

Easter Update and Reflections on Drawdown Recovery

Darwin WET drawdown recovery since inception

April seems to be shaping up nicely with my intra day-strategy taking advantage of the available volatility. Also some EUR short trades came in earlier than I anticipated which gives us a nice “bounce” to set up further positions which may lead us into a shorter term drawdown next week.

This position in EURUSD is building nicely with an option to part hedge which I have in place should the set up require it. There are many obvious key drivers to the market at the moment but I am encouraged to see very clear levels and zones set by the interbank market to trade with.

The plan this month is to build into predominately EUR positions both short and long. Continue to trade daily swings within my zones, predominately GBP pairs whilst we have good average daily ranges.

Drawdown

I’d like to talk about the journey of my Darwin Asset, WET. Before the asset is available to be presented to investors it has to trade and build enough history for Darwinex to apply its proprietary investable attributes/risk manager.

During this phase the Darwin WET went into pretty much immediate drawdown caused by a combination of me having to learn the calibration of trade sizes, number of pairs and the “positive/negative excursion cycles” my strategy is exposed to during various market volatilities. It is one thing trying to simulate this in a backtest but quite another to trade live and have to “forward” test.

My lesson learnt from this is that a large part of my trading plan requires very strict criteria to be met prior to the entry, this part can be measured quite effectively by mechanical means, however the actual trade management also has an element of discretion. This cannot be back tested in my opinion.

Understanding that the markets have predictable nuances does not mean they are mechanical. By using experience and discretion I am hopefully able to navigate, through drastic market movements such as witnessed recently and crucially be able to anticipate or even predict drawdown in my strategy.

By embracing what is now known as “drawdown” it is built firmly into the foundations of my style of trading and understanding your own foundations is when progress can be made towards positive consistency in trading.

Darwin Inception and Darwin Launch November19

The above image shows the calibration of trade size to account is going through corrections in September and October and now accurately tracks (and uses) my available margin appropriately.

The volatility has been a double edge sword, helping this recovery much sooner than my plan but also causing short term concern in February when the crisis hit. Understanding and having trust in yourself and your plan can and will pull you through such extremes.

Traders often build a “system” with a positive expectancy bias, I have arrived at my way of trading by surviving and understanding the negatively expectancy bias and what it means to my money management.

Built into my mindset in trading is this:

Nothing is as easy as it looks,

Everything takes longer than you expect,

If anything can go wrong it will go wrong,

And at the worst possible moment!

Murphy’s Law rules all so expect and embrace it!

High Water Mark Fee

High water mark fee at 1.46%

The demo investor account opened in December had it’s first performance fee charged to it. My Darwin “WET” had only just recovered after a drawdown but enough to be in profit and a fee to be justified. This was a modest 1.46% return and the fee is 20% of this. So $36.

Quarterly Performance Fee

Investors only pay performance fee if the Darwin is in profit and if the next quarterly watermark is higher than the last. This way the investor only pays for performance of the Darwin (Asset) Manager (Me).

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!

Mad March Mid Month Update!

So it isn’t just the Hares that go mad in March… I don’t need to write an essay on Corona virus as we all know about the crisis each and everyone of us is living through, so onto trading…

I had positions both sides of Euro at the beginning of the month, the buy side cycled very quickly with volatility reaching record levels. Obviously fuelled by central government easing the currency on the run up to an expected rate cut to -0.5% and pricing this into the market way ahead to combat the inevitable sell off, massive volumes of carry trades were likely liquidated fuelled by the race of G7 nations to cut interest first.

My first cycle of sells is likely to conclude hopefully this week and I am very comfortable with my second cycle of positions to be held until the end of the month. If they come in sooner then great but I’m hoping to add more next week if price presents itself to my levels.

The anticipated drawdown due to this move has been managed comfortably.

The development of the crude oil price war did catch me out on a CAD trade, I have an initial position that I expect to hold now for a few weeks (unless we get more surprises from the US/Canada to defend their positions). Again, this is a first cycle trade so I have plenty of capacity to add into the position when the opportunities arise and it could build into a very healthy trade.

This month is about managing margin and trading the plan. I can take reassurance that during these wild market conditions and managing live trades directly involved in these volatile moves reaffirms that my current market approach is sound. Witnessing EUR taking out all of 2019 in a matter of days was a humbling experience and one I am grateful for to keep me grounded. Many traders have bitten the dust.

February Close

What a month this has been for trading… Corona virus has seemingly played havoc with all markets and the EURO has reacted with volatility at first plummeting and right on the last day of the month seemingly supported by the major institutions. A clear sign that the market makers does not know what to do!

2020 YTD

We had hedged positions in EUR earlier in the month and caught the big swings both ways.

Rather than sit on an indicated 3% profit for my Darwin WET for the month I traded on Friday entering positions knowing we would be pulled back into drawdown for month end.

Seeing value and opportunity is more important to my trading than looking good at month end.

Feb MTD

We had a high water mark at 3% for the month and continued to scale into positions that are likely to crystallise in March.

3 month rolling performance

The underlying performance has been solid for me this month returning 7.5% on closed trades which is above my target. The strategy is proving to be robust in times of excess volatility and the money management being key to future success.

Yes, we enter March with drawdown but I’m confidently placed to capitalise on the next EUR move. I’m really looking forward to some strong trades in March.

DEMO Investment Fund is performing steadily, I would like to see a move up from the current positioning. Let’s see what the market gives us:

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£10K demo investment fund YTD