Two Long, Interesting Years Ago

I ran across this while looking through some old files, and I found it appropriate for the end of a year even though it wasn't originally composed for such purposes. On November 8, 2008, Barry Ritholtz asked the readers of his BigPicture blog what they were thinking about just after the US Presidential election. This was my response: (The Tuesday referenced was 11/11/08, Veteran's Day, when the NYSE pauses trading for a minute of silence at 11am.)

What is on your minds? What say ye?

Interesting question. The answer is that it's the same set of things that have been on my mind for the past several years. Mostly, I wonder how so many people believe so many contradictory stupidities and manage to avoid killing themselves while making a bowl of Froot Loops in the morning. On the one hand, the irrationality of my fellow humans is why I trade the markets, so I have mixed feelings about a sudden mass outbreak of Reason... but then again, if man were rational in all aspects of his life, I think humans would have colonized a good deal of the Galaxy several centuries and probably millennia ago. Nevertheless, I am not the least bit hopeful (worried?) that man's nature will change for the better in the next few years. (Ray Kurzweil thinks 2029 may be a big year in that department. I'm skeptical, but intrigued and watchful.)

I don't know much, and the things I do know are things that most people would rather not believe. Worse, they seem willing to bear any hardship and/or inflict any misery upon others in order to avoid believing them. Chief among these unpopular beliefs, and the main one from which they all proceed is handed down from a guy much smarter than me:

One cannot say of something that it is and that it is not, in the same respect, and at the same time.

-Aristotle

One who truly believes this is in for no end of trouble with his fellows. It means being at irreconcilable odds with just about everyone at one time or another. Consider the sum of two and two. It is always exactly four, and most people seem to agree... until it's time to talk about bailouts, taxes, 'spreading the wealth', etc. Consider the slave. A person who is forced against his will to work for another is a slave, regardless of the self-serving pronouncements of some black-robed buffoon. That will be a very popular sentiment on the floor of the NYSE at 11 o'clock this Tuesday, let me tell you.

So in the coming years, I expect to continue to be endlessly fascinated and frustrated by the behavior of individuals alone and in groups. I expect to have more proof that all governments are simply large gangs of liars, thieves, and killers with legions of apologists. (Stop at any time, as I need no further proof, thank you.) I expect to see more people getting what they deserve, along with other people getting what they do not deserve, in spite of what anyone feels or thinks about either. I expect to see low prices get lower, and high prices get higher...until they don't. In short, I expect more of the same, but perhaps from different angles, because while the landscape may look different, it is still populated by the same terrible, wonderful flawed beings. The more things Change...

Be careful out there.

-end quote-

So much action...

...and so little time to talk about it! Since my recent career change, I don't have as much free time for blogging. That will change eventually, but right now I'm not in front of my home computer nearly as much during the week.
 Yes, I was in front of the screen on Black Thursday. The volatility was truly astounding. I had around 300 pips in profit on the EUR/CAD short, which got wiped out in about 30 minutes. At one point during the wild ride, my equity was all the way back to $130... and the gains were nearly all given back. That is a hard thing to watch, but it is not unusual at all in the markets other than the fact that it happened in the space of a few hours.
 Sarkozy, that little French runt, seems to have been run over by we 'evil speculators' this week... and nothing could please me more! Of course, like all good people I despise all politicians everywhere... but when these jackals make comments specifically directed at us currency traders... I definitely bring the hate.
 It was quite a while before we got any trades this week, because the ranges were so blown-out wide. Consequently several of the position sizes are quite small. Even so, the open trades are all looking pretty good, and I should be booking some nice profits on Monday morning if nothing too dramatic happens over the weekend. (...too dramatic in the wrong direction, I should say.)

Current account equity: $119.99

Results for the Week of 5/2 - 5/9

Beginning equity: $89.86

Currency        Units   P/L    Equity
EUR/CAD     115    -1.49    88.37
GBP/JPY       256    -4.78    83.59
USD/JPY       635    -4.82    78.72
EUR/CAD      391    -4.25    74.40
GBP/USD      186    -1.87    72.48
USD/CHF      499    5.27    77.58
EUR/USD      372    7.68    85.25
AUD/USD      297    4.68    89.93
GBP/USD      151    3.67    93.61

Results for the Week of 4/25 - 5/2

Beginning equity: $91.47

Currency        Units   P/L    Equity
AUD/USD     316    -2.31    89.01
USD/JPY     207    -2.44    86.57
USD/CHF     459    0.50    86.98
EUR/USD     342    1.36    88.34
GBP/JPY     106    0.55    88.89
GBP/USD     203    2.05    90.94
USD/JPY     208    -1.08    89.86

Resting No More...

With the recent downgrades of European debt, we've had some motion in the markets which has caused some trades to get triggered. Most everything is looking profitable except the USD/JPY short, and we've yet to get a EUR/CAD trade since last week's range was so wide. 'Tis only Wednesday, and anything can happen... especially with the many moron-gorilla governments throwing their evil weights around. Here are the open trades so far:

Short 106 GBP/JPY at 143.69 with stoploss at 145.85
Short 203 GBP/USD at 1.5345 with stoploss at 1.5458
Short 316 AUD/USD at 0.9224 with stoploss at 0.9296
Short 207 USD/JPY at 93.35  with stoploss at 94.46
Short 342 EUR/USD at 1.3268 with stoploss at 1.3401
Long 459 USD/CHF at 1.0819 with stoploss at 1.0719

Can we say "Looking for Dollar strength?"

Current account equity: $105.04

Markets at rest...

Last week ended up shaping up very nicely, even with several losses. The standout performers were short EUR/CAD and long USD/JPY. The winning trades outweighed the losses... and that's the plan! So far, there have been no new trades opened. Last week's ranges were quite wide in several pairs, so it can take some time for the price action to work its way towards the triggers.
 Being flat gives one some time to relax... there's no hurry, since new positions will doubtless be opening soon and the hand-wringing can begin anew.

Current account equity: $91.47

Results for the Week of 4/18 - 4/25

Beginning equity: 80.66

Currency          Units    P/L      Equity
GBP/USD        271    -2.05    78.61
GBP/JPY         136    -2.19     76.43
USD/CHF        382    -1.93    74.48
EUR/CAD        178    -1.79    72.77
AUD/USD        715    -3.96    68.80
EUR/CAD        379    10.98    79.65
USD/JPY         551       9.25   88.90
EUR/USD        469       1.77   90.66
USD/JPY         172       0.81   91.47

Thank You, Bank of Canada!

The micro-mis-managers of the Loonie today signaled that they'll be raising interest rates, and traders are taking the opportunity to bid up the CAD. The Canadian currency has risen over parity with its beleaguered southern counterpart once again. Let's see if it can stay there. I am no fan of fiat currency in general, but I will say that the Loonie is a somewhat less deeply flawed currency than is the US Dollar.
 Seditious musings aside, let's look at how this turn of events has affected the account equity...

As of last week, we were short the EUR/CAD at 1.3643. It was only about 19 pips from being stopped out yesterday morning, but is now sporting 215 pips in profit. Nice!

Two additional trades have triggered since the last update, and both are doing well...

Long 715 AUD/USD at 0.9238 with stoploss at 0.9182
Long 551 USD/JPY at 92.60 with stoploss at 91.87

Also, the long USD/CHF trade was stopped out at 1.0627 for a loss of -$1.93 or -2.53%.

So far, things are looking pretty good... which is always subject to change.

Current account equity: $92.32

Starting The Week Off Right...

...with some losses. That's what we get paid for in this game. It doesn't seem like it, but the only way to win is to take the losses when you're supposed to. It's hard... which is why the winning traders are so rare.

So far, I'm holding on to one carryover short in EUR/CAD from last week. Two trades were triggered and stopped out as follows:

Short 271 GBP/USD at 1.5212 stopped out at 1.5287 for a loss of -$2.05 or -2.54%
Short 136 GBP/JPY at 139.43 stopped out at 140.91 for a loss of -$2.19 or -2.72%

The third trade, long the USD/CHF at 1.0680 is sitting with a 36 pip loss, and will be stopped out if we get down to 1.0627.

Here I am, at a new equity low for the campaign. Nothing to do but press on...

Current account equity: $72.32

Results for the Week of 4/11 - 4/18

Beginning equity: 90.50


Currency    Units            P/L         Equity
USD/CHF        263       -2.00      88.38
GBP/JPY        101       -2.58       85.80
USD/JPY        597       -4.58       81.22
AUD/USD        292       -2.12     79.02
GBP/USD        402       -4.25      74.78
EUR/USD        428        6.03      80.66

Freakin' Greek Week!

So those profligate Greeks are getting their bailout... seems like they announce the same thing every few days, and it's an excuse to run the Euro up a few hundred pips. The open trades were looking great going into Friday morning. Things just got worse from there especially with Sunday evening's blowout rally in EUR. Sometimes it's just my turn to be on the wrong side of such moves... but it still isn't any fun. What had been looking like a nicely profitable week turned into a marginally losing week. Bummer.
 We have the holdover GBP/JPY short from last week. It's not looking too healthy, but it hasn't been stopped out yet...
Otherwise, here are the trades that have been opened so far:

Long 263 USD/CHF at 1.0614 with stoploss at 1.0534
Short 379 EUR/CAD at 1.3643 with stoploss at 1.3755
Short 428 EUR/USD at 1.3612 with stoploss at 1.3711
Short 402 GBP/USD at 1.5406 with stoploss at 1.5511
Short 292 AUD/USD at 0.9291 with stoploss at 0.9363

Nothing to do but keep taking the trades as they come...

Current account equity: $89.57

Results for the Week of 4/4 - 4/11

Beginning equity: 96.48

Currency   Units               P/L     Equity
AUD/USD       431       -2.45    94.01
GBP/USD       312       -4.86    89.14
EUR/USD       583       -5.36    83.83
USD/CHF       242       -2.29    81.58
EUR/CAD       612       -4.83    76.75
AUD/USD       861       7.80     84.55
USD/JPY       234       1.44       85.99
GBP/USD       222       3.62      89.61
AUD/USD       222       0.89     90.50

High Drama in Cable

Boy if this isn't just an awful looking trade so far! The entry got triggered and the trade was profitable for less than 5 minutes. It came within 4 pips of being stopped out. It headed back towards profitability, and has now gone back towards getting stopped out yet again. Will it survive? Stay tuned...

Current account equity: $108.73

So We're Taking 2 in the Aussie This Week...

The strategy I trade can sometimes throw curves... We had a somewhat small range of 140 pips in the AUD/USD last week. That makes the breakout points rather close at only +/- 42 pips from the open. We got triggered into the short AUD trade a little after Midnight EDT, and then we were promptly stopped out about 17 minutes later. Then about 2.5 hours later, the long trade got triggered. I don't have anything set up to alert me while I'm asleep that trades have occurred. I could, but I'd rather have the sleep. I don't worry about situations like this, because it is rare and the effect of these sorts of happenings will tend to get smoothed out over the course of thousands of trades. Actually, the 2nd trigger in this strategy has an edge as well, and you could design a profitable system to take both trades. You'd have to do it consistently to extract the edge... not just when you happen to trigger into it like I just did.

 So here we are with the first realized loss of the week:

Short 431 AUD/USD at 0.9165 stopped out at 0.9221 for a loss of -$2.45 or -2.54%

 Next, we have several trades which have triggered and are sitting with a mix of profits and losses:

Short 612 EUR/CAD at 1.3556 with stoploss at 1.3635
Short 583 EUR/USD at 1.3445 with stoploss at 1.3528
Long 861 AUD/USD at 0.9249 with stoploss at 0.9193
Long 242 USD/CHF at 1.0677 with stoploss at 1.0577
Short 101 GBP/JPY at 142.23 with stoploss at 144.61
Short 312 GBP/USD at 1.5135 with stoploss at 1.5290

Only USD/JPY remains to be triggered, and we're about 30 pips from shorting it. Anything can happen... it's the currency market, Baby!

Current account equity: $105.52

Booking Some Profits For a Change!

It's not always pain and misery... just most of the time! We may have seen a near-term top in the US Dollar. 3 of this week's winning trades were bets against the Greenback.

One can never know, but hopefully we've seen the equity lows for this trading campaign. An equity reading of $74.72 represents a $125.28 realized loss, or -62.64% drawdown from initial equity. That is much more than most people can handle emotionally. It is easy to be sanguine about such fluctuations in equity when they are not dealing with life-altering amounts of money. Will it be so easy to weather these storms when we're dealing with a few more digits to the left of the decimal point? Going from $200,000 to $74,720 will probably feel a lot different... but then again, perhaps not, since the buildup to those levels will likely take a few years. We shall see as time goes on.

 So far, only one trade has been triggered to kick off the new week. It's yet another short of the EUR/CAD... a trade which has been working since December. Let us hope that this is not the week for it to stop!

 Short 612 EUR/CAD at 1.3556 with stoploss at 1.3635

Current account equity: $98.46

Results for the Week of 3/28 - 4/4

Beginning equity:         80.82

Currency      Units    P/L         Equity
EUR/USD     356    -4.08         76.75
EUR/USD     167    -2.03         74.72
USD/CHF     248    0.34         75.14
AUD/USD     513    3.35         78.50
GBP/USD     161    3.79         82.29
GBP/JPY     141    7.06         89.35
EUR/CAD     378    2.69         92.04
USD/JPY     323    2.98         95.02
USD/JPY     173    0.74         95.76
GBP/JPY     170    0.72         96.48

Results for the Week of 3/21 - 3/28

Beginning equity:    89.76

Currency          Units      P/L     Equity
USD/CHF        410    -2.12    87.64
AUD/USD        360    -2.28    85.35
EUR/CAD        150    -2.22    83.12
USD/JPY          534    -2.50    80.63
GBP/USD         139    -2.25    78.38
GBP/JPY          134      2.52    80.82

More Pain, Little Gain...

Wow! Drawdowns like this are just awful. The unfortunate fact is that the person who wants the largest and fastest gains must put up with the deepest drawdowns. I've hit a -62% so far. Actually, it a little more than that, since the equity high was more than $200.
 Why has this been happening? Simply a lack of a trend in most of the pairs I trade. Notice that the EUR/CAD trades have been producing profits... and notice that that pair has been hitting new lows all along the last few weeks. The EUR itself has still been stuck in a range.... first breaking one way, and then turning back around to challenge the opposite side of its range... only to be rejected yet again.
 At some point, the markets will pick a direction and go... once most of the breakout traders are completely demoralized. I will not be demoralized... because I've seen this sort of thing too many times.

So far this week, we've been whacked twice already... once in the AUD/USD, and once in the USD/CHF. Four other trades are currently open... all are currently sporting losses.

Short 534 USD/JPY at 90.20 with stoploss at 90.62
Long 139 GBP/USD at 1.5062 with stoploss at 1.4901
Long 150 EUR/CAD at 1.3840 with stoploss at 1.3690
Long 134 GBP/JPY at 136.50 with stoploss at 134.82

Current account equity: $81.40

Results for the Week of 3/14-3/21

Beginning equity: $102.63

Currency        Units  P/L      Equity
AUD/USD     462    -2.63    100.00
EUR/USD     495    -5.18    94.82
GBP/USD     371    -5.18    89.64
GBP/JPY     308    -5.76    83.86
USD/CHF     281    -2.42    81.36
USD/JPY     879    -5.73    75.63
EUR/CAD     629    12.90    88.37
EUR/CAD     184    0.82    89.20
EUR/USD     189    0.56    89.76

The Wages of Growth...

...are devastating pain. It is always so hard to accept, but the price of going for the huge gains is horrifying drawdowns. I've been through drawdowns this bad before, and charged on to new equity highs. It isn't a bit of fun to go through it, however.

All the currencies have been doing a whole lot of leaping in one direction and turning back around with nearly zero net change for the week. This strategy hates that kind of action, but that's what we have.

We've already lost one trade this week... a short in the Aussie. We're close to losing another, and the rest of the open trades are looking pretty bad too. We shall see.

Short 462 AUD/USD at 0.9101 stopped out at 0.9157 for a loss of -$2.61 or -2.54%

Open trades:
Short 371 GBP/USD at 1.5062 with stoploss at 1.5201
Short 495 EUR/USD at 1.3660 with stoploss at 1.3764
Short 308 GBP/JPY at 136.15 with stoploss at 137.82
Short 629 EUR/CAD at 1.3940 with stoploss at 1.4021
Short 879 USD/JPY at 90.16 with stoploss at 90.75

Current account equity: $85.07