Archive for the ‘forex’ Category

Kurb Forex Intro Video

Tuesday, January 26th, 2016

– Hi this is Matt from Kurb and I’ve been trading currency for almost 18 months now and what I wanted to do was to post a video taking a perspective from the beginning of my personal journey into forex, foreign exchange trading, currency trading – because it’s where I hope to make significant investment returns for a long time to come, but I also want to be involved in the culture, mix with other traders, share analysis, pass on my insights and begin to explore where I could fit into the space providing media and education around currency trading.

– I got my start the day of the scottish independence vote. I saw a tip that as Scotland would stay within the United Kingdom buying pounds was the hot trade, and as another friend who also was in small business had encouraged me to set up my first trading account with CMC and I had put $20 in it, I thought I may as well buy some pounds and see what happens. Within a few hours I had turned my $20 into $100! An hour later it was gone. But I had seen what was possible and I was hooked!

– I had to learn a few things – currency is traded in “pairs” – I wanted to buy pounds to go up, but they had to be traded against another currency to go down, such as the US dollar, Euro, Yen, Canadian, New Zealand, or Australian Dollar – these are all major currencies which mean they are actively traded each day. you’ll pay two costs based on which currencies you choose to trade, the brokers cost, which can vary depending on the time of day and the availability of a certain currency. But you also pay a carry cost, and that’s the interest you pay on the money you’ve borrowed for each day you hold the trade if you are choosing to hold trades overnight.

– This is where I got intro to the basics of how retail currency trading – that is small guys like me and probably you – works, that is firstly leverage. For every $1 in my account I can borrow $500 to put down on a trade. That means with $200 in my trading account I can leverage $100k to put down on a trade, so if the currency goes up 1% In a significant move following some major news, I take a 1% profit on $100k that’s $1000! But if I’m wrong about how the currency takes a piece of news, I can just as easily lose money and if that money isn’t in my account, the broker will make a margin call on my trade and sell my position leaving me with my money gone.

– That’s why most traders work with stops. They set their positions to sell automatically as soon as it reaches a certain loss because there are so many different strategies based on complex mathematical formulas as to what might be expected in currency moves and there is a wealth of sources on that, but the fact remain that most strategies work on the idea that you never win every trade, it’s that you profit mre from the trades you win than you lose on the trades you lose money on. Once a trade loses a certain amount of money, you know it’s a loser. Better to cut your losses.

– What attracted me to currency trading over other forms of investment such as stocks, is that stocks crash in nightmare panic scearios and lose hue amounts of value. Currencies merely rise and fall in relation to one another, often swinging in value as it forms larger swinging trends and these patterns become predictable enough to not only make trades on, but have nowhere near the potential of stocks to completely lose their value – even in extreme events currencies usually only lose 1-2% of their value day on day. Although this can be dangerous if you’re highly leveraged, this makes it so much easier to commit to a long term strategy following relatively predictable ups and downs in the market.

– This is where we get to the nitty gritty of trading, there are hundreds of sources that will take you through the strategies involving complex maths or speculating over analsis of financial news – you can follow the news of financial announcements that often move the market such as monthly inflation or unmployment figures or regular announcements where reserve bankers announce changes to interest rates which also are felt keenly on the market. But the most important thing about trading and to the success of a trader is your psychology.

– Trading is not gambling, if you have a system and you follow it. The moment you stop following your system and begin to take hopeful chances ou have become a gambler and you are no longer assured success because you have abandoned the fundamentals of your system. I have a system and let me tell you what is clearly obviou to me now – if you knew the secret of making money in trading you would not give it away so do not be tempted by silly ads and schemes that promise you profits. My system works because its based on decisions I make that cannot be replicated by a formula.

– so this was just first video on forex for kurb, sharing a little of the knowledge I’ve built up, no one can know what the future could be for kurb forex, but I have a system. I am confident in it, I have tested it I have made money, lost money and made it back again. What I am doing takes months to work – in my case it will have taken years but I am well advanced in my journey and I am looking forward to providing more content for you helping you to understand currency trading, how it works, and how people like me and you can make our money.

Forex Hedge Projections and Predictions

Thursday, July 9th, 2015

I am just runnign forex notes here at the moment because I have had to accept the model I have been working off that I was so confident in, has not delivered.

I accept this is mainly because I took some massive deviations when presented with challenges, and I was haphazard with my hedging being that I was inexperienced and was still testing my ideas in a challenging live environment.

What have I learnt?

You have to be dispassionate about the market and how your system tackles the inherent uncertainty. You are foolish to not read the news, but you are equally foolish to believe it.

When the Euro dived off what I thought was the map, I was so afraid it would continue to dive that I hedged recklessly, despite knowing that generally the harder the spike, the harder the bounce – however in a spike, you never know where you are on that curve.

My belief that the euro would resume falling was informed by the certainty of the news, and yet, it rose to just about the edge of what I perceived it could realistically bounce too after reading doom and gloom.

I did not think that 3 months later I would have spent weeks and weeks above 1.10. That was not the outcome I was expecting. And yet even if I had played it differently, it only means I would have caught maybe a grand or two profit as it withdrew – marginally better off albeit, I’d still be where I am.

When I began increasing my margins, I bought a lot of australian, especially vs the pound and euro, and those positions got destroyed. Just the AUDGBP alone has cost me thousands – huge reckless position placed only 6 weeks ago are costing me $140 each, they are 4% away now, huge mistakes. These are the testaments to our mistakes now, again we believed the resistance would hold, but when it broke, it fell apart completely.

But what about the numbers? What have we learned here?

We’ve learned that as a margin spreads out and ranges push them further apart, the deficit really grows. We were pushing out new ranges, and seeing new possibilities for worst case debt projections.

Our initial projection was to have 600k on the board and never run more than $60k debt. Now it’s over twice that, but so much of it is hedged, so I assumed I could build up from that base of hedged debt.

But it wasn’t perfectly hedged. I binged on the US dollar when I was in trouble and desperately needed to hedge but then over the course of a couple of months the reversal began and the tide went out on me, and my USD pairs became wedged precariously at a point where they would not fall but hung dangerously on the edge.

Although it’s the falls in the NZD that I have counted in again and again, I think we have to see the AUDGBP disaster as the latest chapter of the process of having my range pushed out again, requiring again more margin to fill out to get the same result, and of course always carrying and extra few grand of debt than I could have expected, however, each time we push out the range, it becomes much less likely it will happen again. It will happen again, but it’s less likely to be sooner, and we may be better prepared to absorb it.

At some point we must get past $15k, at which point we will try to add $100 margin – $50k – with every $1k of equity we add so that we’re somewhere around $3500k

But every $50k probably carries the potential for $3k+ loss even when hedged properly, or $5k+ if the hedges slide to the edge. On my journey to $3500 margin, I could easily find myself flirting with $105k debt. Yet it would clearly take weeks, and this is the move to $2k. Could I make $15k before positions swing 5%? Since it would take weeks to build up an extra $500 margin, and weeks to collapse $10k of equity with decent hedges, we’d have to assume it was possible, and that equally, getting to $25k equity would allow for us to add yet another $500 margin.

at this point we’ve added another $50k to our boards on each side of each pair. $100k to the full spread.

4 out of 6 of them are already under $200k, 2 of them are under $150k, but that margin will still be spread out over a smaller area than the current one is. and placed with more care, and so a doubling, to $1400 – $3400 will happen, and then a tripling, $2100 – $5100 and that’s where we want to be by early next year.

It’s just so hard to project what it will be like until we get out in the clear again, and that’s when we’re solidly touching near $14k equity again.

Here is a breakdown of the pairs and where I see the strategy consolidating.

AUD/EUR: 80 vs 49 – we could push to 75k a piece, but we want to keep the euro side down, the carry is a shocker. So it’s more like 75/65

AUD/GBP: 102 vs 12 – same set up I would say as above, but favour the australian even harder – I don’t think it has as much room to run as the EUR pair.

AUD/USD: 90 vs 87 – so we’re holding the 90 balance hoping we can clear out the australian side and roll the $120k back so we can settle it closer to 79 rather tahn 76.5 where it balances now, but like the euro, it depends on what the aussies does once the US gets stuck in, for theres little chance of it going above and staying above 80 to last long term.

EUR/GBP: 115 vs 40- 100 balance. Having successfully dug out the hedge at this point we are looking to fall back and set things up, we can lean in and se we head out. Good model here.

EUR/USD 155 vs 237 – as described, the euro will be at $200k by 1.05 or 1.15, ready to defend, this is the art of hedging.

GBP/USD: 73 vs 147 – i believe when and if the USD comes back we will do well and this really is about keeping the balance we can do 110, we can do 120. we’re at 1.57 now, between 1.47 and 1.64.

We will now have $15k to add to each pair but where will that go down? I’m not confident on anything really right now, I least confident in AUD and NZD but they have the best carry by far and so it evens out. Euro still has the worst carry and much uncertainty. So I favour hedging first.

It comes down to the model.

If having a $2500 margin spread can get you into $80k+ worth of debt, then a $5k spread, you have to be ready for $150k debt, ready for another $60k debt to carry, so even at $2k a week, that’s 30 weeks before you can take that kind of risk BUT it suggests you run the whole spread, when in reality, those places where the euro is high and the aud is high and the usd is low, well, we’re not going back there. It’s more like $30k debt to carry, because we won’t be carry it all across the range.

***

Another setback. Each of these recent setbacks are just making the hope of clambering ahead to a better position further and further away.

The situation with a number of pairs is that if I continue to be pushed I will have to return to full hedge, which means effectively choosing which side it will swing, and now, having a hard hedge up against it.

More hedging means more money down. More money down means higher carry trade. Risk is bubbling up and I need to ask questions about where the real dangers present themselves to me.

40 AUD/EUR: 87vs 47 – I still don’t want to hedge this. It’s rotten carry. If we support the euro, add to gbp as well.

77 AUD/GBP: 109 vs 32 – On the edge and causing me big problems, I will have to build the hedge while hoping it backs off sooner rather than later.

71 AUD/USD:102 vs 31 – so now we’re on the edge, we have the hard decisions to make, but we know which direction its tipped to take so we must hedge to protect ourselves. Time for bigger numbers

77 EUR/GBP: 114 vs 37 – leave room for the euro jump, then stack it in for the dip buy.

68 EUR/USD 163 vs 231 – here you can see already we are forced to hedge to heed off uncertainty. When you reach a risky equity level, you must protect it.

In fact it becomes indicative – what if EUR jumps to 1.14+, I have to hedge in, jumping above $200k, then i get caught, and it starts heading down? I have to go to $300k on the US side, then it turns again, but the money is closer this time so it’s not so dangerous, but I’m sitting there with $500k on one pair – only $100k more. that’s $200 margin.

We still have to be careful and run a line from 1.11 because with the euro it is important we get out.

But the gap means it’s less of a risk and in itself counters the EUR/GBP they both have a 75k gap.

52 GBP/USD: 92 vs 144 – This is a critical pair because when the US begins rising, we want to see gains, we want to see our unhedged gaps tip back. this is one we’re waiting for, but it is also tipped to really drop long term, so there will be times where the US will go back to how we’ve seen it, huge hedging moves.

Now I can see that 3 of my 6 pairs are on the edge, no wonder I am feeling under so much pressure.

But also I’m seeing how in the last 2-3 weeks I’ve taken on the hedges or big positions that were poorly placed on AUD/USD. EUR/GBP, and the far side of GBP/USD, we are waiting for all those pairs to come back, and other than the last one, they just might not,

The pound rolling over the aussie has caused me a lot of pain, as it has jumped 6c without me really being able to hold onto any big gains the other way. I believed I had the depth to soak up a winding down of exposure on the british side, and I got stung badly.

WHAT WILL HAPPEN?

The euro will continue to drop, the USD will continue to rise in the longer term. At the moment the GBP is stronger and the Aussie the weaker, sometimes even weaker than the euro, but over the months, as we’ve seen, the euro will get weaker and fall into definite last, and then the australian will catch up and overhaul the

We don’t want euros. expensive and going down. We can’t really risk aussie now, but when the signs are there, go in. We can’t really risk GBP, we buy the dips but we’re held here in position. With USD, we can’t buy unless we see the move.

So when euro drops we make money on the usd, but the euro holds against the gbp, and the gbp goes down against the USD, and the Aud has already sold off against the USD, so it hold against the gbp, or even gains some, and teh aud gains against the euro.

But we can’t buy any of this because the USD isn’t rising, the gbp isn’t falling, the aud is still falling and the euro is definitely refusing to budge thats where the problems has been.

NFP and Forex Event Risk Hedging

Sunday, April 5th, 2015

Having just come off the non farm payrolls or nfp reports which are a major “event risk” I am getting more insights and it appears although I am out of the dangerzone and yet my profits are not improving greatly, I am starting to get a few new ideas.

As usual with an NFP which is the job figures for the US, or a US fed rate decision, the market always reacts very strongly and you get some massive movements that make you quake a little.

Especially when you see the number and it’s way out as it has been the last 2 times, and you know things are about to get crazy. Last time it was way over expectations, this time way under, so the USD started rocketing down.

This would have been good news, except I massively shorted the EURUSD to protect myself against any sudden moves downward by the euro.

But I realised the Euro hedge I have which about $40k out of balance is actually also hedged against the $31k I have against the USD in CAD and NZD.

I had hedges on the USDAUD as well as the USDGBP but they were smaller and biased against the USD, so when the USD started dropping, my equity rose by about $1000, making it a good day.

But what it means in terms of the bigger picture of hedgind, it means if I am concerned about the USD falling, I can buy high interest NZD against it – it doesn’t even have to make money! It just makes nice interest, and protects me should the USD keep falling, as it will be made up for by a spread across 5 currencies which means it doesn’t have to be all hedged into the euro, and when the euro falls again, there will be the chance to regain the equity.

The USD falling of course does present the opportunity to get in even deeper, but the rumblings have begun, if it moves beyond $1.10, it may be off to spend some time in that range, in which case we certainly will be building up the hedge. When these things unfold, we buy NZD as well as EUR, to keep the huge USD hedge from gobbling my equity, because I’ll be taking profit on the NZD side knowing when the USD rises again, the euro will fall, but because I havent invested deeply, I will get equity back on the USD side. the NZD side will fall but there’s not nearly as much falling there even though it’s hedged. So what you end up with is stuck with NZD rather the EUR. Both are picked to fall, but the NZD pays great interest, and doesn’t have a sovereign risk that could see it quickly bottom.

There is more chance of getting my money back suffering less with the NZD, and what’s more, if I’m worried about makingmy money back when the euro finally falls, than lean in to the NZD euro also, that way you’re hedged again, also, again, on a great interest rate, on a currency set to benefit greatly if there’s a serious problem with the euro.

We are steering away from the euro knowing if there’s a problem we already have USDEUR, and we chose to go with NZDUSD and NZDEUR rather than buy more EURUSD in an attempt to hedge the big long USD position we already put out.

I started playing with the options and saw that you could set and change the default stop loss or take profit. One of the main reasons I dont use these is because it wastes too much time when im trading quickly setting these. Now I can do it by default, my thinking was in how often I am finding meagre profits when I awake, wondering if the market didnt roll up and down and end up right where it started, not unlikely. If i had take profits, it could have bounced up and down, taken all the profit, and I would have done very little.

It frustrated me to think if the market jumped suddenly, my profit would trigger and yet my losses would continue but the market jumps unexpectedly far less than times I am not watching the screen and I am perhaps losing profit, especially during the day when things are so slow, I may easily go an hour or two without checking. Often these are little ripples, often it seems, the profit is just easing away the moment I notice it jumped up, these are the little day moments I want to grab. Especially trading tight during the short but slow and choppy day movements, and looser at night so I get better profits when I sleep, but also, it means a nice spread of short and longer profit takes should there be a jump – knowing, that by it’s nature, every jump in fx eventually has its retrace and the retrace is the main thing I’m fighting.

Too often, I miss the chance to take good profit before the retrace kicks in and I find myself selling at exactly the wrong time, at the top of the retrace before the continuation begins extending again.

But it was only when the NFP kicked in that I realised it wasnt just about when I wasnt watching and couldnt trade.

Because on an NFP or US fed decision, I can barely trade in the first half an hour, the system gets so clogged – by people who are all trading on auto, naturally – Usually for the first 5 minutes I can only watch the carnage, at which point I may be able to start forcing a trade in maybe one every minute or two, while scrambling to take a few choice juicy profits while the numbers jump from side to side.

When the profit takes are already there, I don’t need to close positions, they will close themselves, I can focus on buying knowing that no losses will close when it does its crazy swing in the first few minutes, but all profits will be taken.

My profit jumped $15 in the first minute of the NFP as all my little regular positions Id built up in the last few hours trading with the take profit on all closed out with profits, something I never could have done with the system clogged and the price jumping up and down regularly.

Whats the point in having a skyrocketing position if you cant grab it before it starts falling again, while youre trying to throw down new positions based on the data read?

Better to grab the profit and if the price keeps falling, as long as you have a strong hedge, the momentum will fade and once the dust settles you can begin to clean up your hedging configuration.

Which inspires different trade set ups based on your hedging position.

Then I started to think, what if I had followed the implicit suggestion at daily fx of going long AUDUSD and short GBPUSD knowing those combos would make immediate leaps to the other side of it’s range if the data favoured, but struggle to move quite so much in the other direction if the data was unfavourable.

In this case it hammered the USD and the AUD went flying up, even hammering on the GBP.

It seems that I am learnig the deeper level of hedging and that is indirect hedging, seeing what they talk about on daily fx, that even though the USD was the currency hit, it still opened the door to the AUD rising against the GBP, and I believe the EUR was up on the AUD, and also gave the GBP a good smack, because the drop in the USD pulled the price pressure of these two which have been getting a kicking from the USD much longer than the GBP has.

I am starting to understand.

It has only just occured to me. Hedging with a stop loss around a big event risk is guaranteed money, unless it’s a fizzer, but we know the big movers like nfp can shift a market 1-2% in 10 or 20 minutes, and 1 or 2 events of that magnitude happen most weeks.

USD, AUD, GBP all have jobs figures, GDP figures and interest rate announcements every month. The trouble with the euro is that it’s made up of different economies and though the german is the biggest, it can’t really move the market 1% in a short period so that we can be reasonably sure that we can exit the game with a good result.

Next week there is AUD and GBP rate decisions and also a Canadian jobs figure. CAD is not a currency I hedge, but it does raise the idea of testing out fundamental trading on event risks – it is essentially gambling, but with very good odds on the pay out. It could go either way, but losses can be limited, and profits maximized, so we have to be in, even if it is only $5k with a $5 stop and taking $20.

What would stop you hedging specifically for the event? Nothing. It makes perfect sense.

Part of the delight of hedging is that on top of my usual day to day trading, I can also set off spot trades on event risks, that means even if I lose $10-20 on one side (while making $50-200 on the other) that loss would be covered by the movements in my normal trades anyway.

Even if we get a massive jump, our hedges will be further protected by the fact this will provide some extra doses of capital.

This as well as doing carry based trades. There is lots of fun to be had using money to make more money!

So you set two lots against each other – this alone requires $500 to be leveraged and therefore removed from your equity – with a .5% profit and say, a .1% loss, one of them hits the stop, you lose $100, bang, then rolls on to take your profit of $500 – you have profited $400 provided it doesn’t knock one stop out, then swing back and knock the other . . .

So what are the risks, there is “slippage” where low liquidity means you simply cant get out of your position automatically fast enough, and rather than a $10 loss it may turn up a $12, $15 loss because the robots just arent fast enouh when theyre getting slammed from a data read.

But what I see is the risk of volatility triggering the wrong stops. Last night, the swings were huge due to the lack of liquidity, it momentarily swung down as far as it ended up swinging up. To have both your stops knocked out would be really bad.

The advice given here is to make the profits stops rather than the losses. The problem is if you get a huge move, it takes the profit and then just keeps rolling. The other suggestion is to make the stops nice and big so that initial volatility won’t knock the stops until the trend emerges.

The other risk other than the stops being too tight is the profit being too loose, so you get the profit shooting up, the stop on the other side is triggered, but it stops short of the profit, and then flies down again – you’d probably still end up with a profit here.

What about a second hedge, where the profits are as big as the losses on the first hedge. that is the second hedge cancels out the loss on the first hedge, leaving you with just the profit.

In an emergency where it knocks out every stop, you’d end up only taking one loss on one side. But if the stops were big on the first hedge, this could be a favourable set up, because you make a profit on a small move as well as a big move.

The only way you lose is if it somehow knocks both small stops in volatility, then knocks a big stop, before falling back before you get your profit. That would be pretty hard luck and low probability.

Perhaps you need a range of hedges.

We could chose a range 3 pairs around a currency facing an active risk, and but $15 each side of each. $90k. Each $15k is 3 lots of $5k.

one has a .2% stop / .4% take; the next a .4% stop but a 1% take, and the last has no stop or take. Or it has no take on the danger side, and and no stop on the safe side.

That means if it jumps around and then takes off, we take 1% but only lose .8%, while if shoots off, we take 1.4% but only lose .6% if it jumps around and stays still, yes, we lose up to .6% – only $30 on $5k – but in any case we still have the last set with no stop or take, floating about, and we have to decide when the best time to cut that is. usually after 5-15 minutes the clear trend is deduced and you must tap out of the position hoping that the other side will run significantly. In fact you are then just back to your classic game, buying the rise, riding the hedge as far as it goes.

But then once you add the consideration of trends and hedges you get another aspect.

You can see why this type of hedging isn’t so straightforward. You have to be very strategic and thats where it works in step with the established hedges and having contingencies.

With the USD we’d want the stops down and the profits open, whereas in profits on the EUR side we know would be limited. We also know that if it does reach 1.5% that is a massive swing and the massive profit could be taken knowing that the profit was nice, we can re hedge, and the spike would surely be mature and extended at that point.

So profit open on the USD side, loss open on EUR?

So last night my usd stops would be triggered at .1%, and then the EUR would have shot off and triggered at 1%. success! I probably would have biased towards the euro because it was hedged against so it would have been nice. But what if it was the opposite? The US stops may still have been triggered in the initial volatility and then the USD would have soared, but id have nothing on that side, so I would have eaten a huge loss. The idea would have been to put the USD stops out further in this set up becuase remember the USD can come back.

Also once the fail pattern had been established, you’d only have to buy big – real big – on the winning side to match the hedge up favourably, and possibly eject the otherside but this is ninja stuff that can’t be counted on, and I wouldn’t really want to play with until I was more familiar.

It appears that there really is no foolproof way of ensuring a profit.

I believe the 3 hedge system with consideration of trends and hedges already in place is the ticket. The only way you lose in this system is if it swings mildly, knocks both your early stops out, and never reaches the profit margins further out.

What we really have to do is begin experimenting with hedges and stops on event risks and see what the results are. We will learn soon enough if wild swings do knock out our stops.

We want to increase our capital investment so trying a few small multi layered hedges with very deep stops is a fine way to experiment as we are ready to let our hedges build up in a natural way, trying things out and being able to handle a few failures.

Forex Hedging Hammer and Tongs

Thursday, April 2nd, 2015

At the moment on this blog I am just doing forex updates for now.

If you’re not into currency that’s probably pretty boring, but well this blog isn’t really that gripping otherwise, it’s more just an ideas pad for me to jot down ideas that are too boring to go on any of my other blogs as I do maintain these blogs in order to be seen by google to be updating my content regularly with original material.

I see long term as I described when I was getting excited, that eventually my financial market capability will be the backbone of the company and that will be a done to work more on presentation.

For now it’s still about ideas.

In trading we have been challenged because after we built a huge hedge position long the USD, it cut back in. It’s not that I called it wrong, it’s that I chose the hedge to prevent disaster, I chose the insurance policy and now I have to pay for it.

The challenge I’m facing now is that I can’t quite see with any certainty how to advance my regular earnings.

My last plan was that putting more money down building the hedge at every stage would carry me, recognising that this week the action is quiet and we’ve been plopped in the only part of the spectrum where we have nothing going on. Movement only knocks out placeholder positions which means we have little money circulating.

Again we have to project the worst case scenarios.

I’ve gone back to doing more research on hedging. I have finally found a few people demonstrating it.

There is one guy who suggests the system works only if you hold 2 positions each side at a time. But eventually, you’re left with one position on the far side, a top, that will never be met again for months, leaving you only ever making money on one side again.

That’s when you double down. What if you doubled on one side and halved on the other? You’d still have the same hedge.

What happens when the half comes back? double that side, half on the other. It seems like it could get crazy fast. You wouldn’t lose any money, but your margin would start growing up from underneath, squeezing you.

It might be like jenga in reverse. A house of cards hegde, that is, you carefully add hedges, never taking them away.

Now this would be the ultimate zen. You’re trying to make your account go into profit without even selling a single position except in exceptional circumstances where there is clear, continuing break downward. In this case your stop is your start.

So rather than being like my account now building towards balance, you start with balance and try to create the vent through which equity can escape. You have to buy again when you sell. But if half an hour allows it to fall another 50 – 100 pips then let it be, let that profit escape. If your profit is rising from the seething soup of position, let it be, once it starts going down, reestablish your position.

But doesn’t the opposite happen also? Revealing how it is that the losses seem to pile up – when you put more money down and it drops, then you owe more.

The thing is, because it’s so hedged up, I could push my margin out by about 4 x which would mean 4x as much money on the table and 4x the profits. Which is basically where I want to begin winding down – that the point at which I would switch my focus to working less rather than earning more.

Of course injecting that kind of money would take months to spread like this lot has. Are you expecting more or less volatility in the next 6 months? I’m am not expecting anything like what I’ve experienced in these last 2 months but hopefully it should be more interesting than last year, because as long as the moves are contained more volatility works for us.

I have my concerns though. More money on the table means more positions in loss, which means a higher accumulating loss. Not if youre hedged.

It appears the strategy is to have enough money on the table to be making good money, and only at that point can we start biasing the hedge to earn our equity back.

If a price goes up and you sell, and then you buy on the other side and it goes back up and you sell again, you have extra equity as profit when youre hedged. But the problem is, the bigger hedges further up and down, they are bigger than before and trailing bigger losses.

Those trailing losses outweigh the 50c profits you were scalping on the other side, even if you did do it 10 x in a day and that’s a fact.

The good news is that these probably won’t create too much trouble unless we see a massive shift that forces a new hedge set up, that’s where I’ll get more concerned, though 4 out of 6 of our main pairs are already hedged tightly enough that we could quickly meet perfect balance. That’s our secret weapon, using hedging to cover our mistakes.

It appears that when you increase margin, you permanently increase the risk level to further losses, but you also can make more profit long term, the losses are unrealised, they don’t accumulate, but they are free so can fall a lot. It takes some time to build you pool of capital up to a point it can handle the swings of more margin, however, you have the hedging brake escape, and as was well covered, these circumstances were exceptional and when things settle down you can afford to lean into your current range.

Again it appears the only way to escape the loss is to out grow it.

But remember when the FOMC dropped you were on $9k equity after you were determined to hold the hedge at $10k. Now youre on $12k.

We could double every position for $2400. We could do it. We’d add $2k+ next week, and the same in debt. When it’s gone up and down and up and down, unrealised loss is still sitting on top and biting into your profits, but because the difference is thousands and not hundreds, you have flexibility, you can deleverage more.

But lets say it doesn’t move back, it keeps going down? suddenly you’ve lost another $20, you only covered the initial fall.

When a position rises you make 50c or a $1 profit. when it goes down and down, your floating loss is $5-10, way overshadowing your profit. It goes up, you make $1. it floats down, and once again, your loss is showing $5-10 and yet you’ve only made $2 profit.

My euro positions crashed $30k at one point, I haven’t even made $30k in my whole time trading yet. I will soon. But not yet.

Just as if the market went right way one way then back, my loss would not increase that much a couple of hundred but my capital would have increased a couple of thousand. the only time we’ve seen that is earlier in the month, and yes we do appear to have more equity.

Given how long this process takes to equal it out it’s no wonder we have seen some hideous losses upfront, especially since there’s been so much one way traffic, that’s where it hurts. The euro lost 20%, you take profits of .01% can’t you see that will take 200 hits over to cover the loss? those tiny little 111 positions you take 12c profit on? Still cost $10 loss to maintain after a big run.

When you hedge, you prevent the risk of those moves costing. 111 went $10 down, but the hedge says no more. We have never proven ourselves to be able to hold our nerve there, we snatch the profit thinking it is going up or down, and really it isn’t that much.

You can risk more on your bias to win your equity back in the next move.

Bit what are my predictions for the next move?

I don’t see euro going to parity unless something big happens, I believe 1.02 – 1.03 is where it will bottom if it dips again but this may not happen til the rates are finally risen at the end of the year.

That WILL spike the USD but the move is extended, I am trying to get enough money so I can trail off the hedge as we get to the bottom with AUD, GBP, and euro, we have seen within a few cents of the bottom on each one, so the hedge we have will work but my plan is definitely pull back that as we move into it. We can’t be too daring with the USD even though we know risk aversion or the imminent rate hike would spike it, although where it is now, is likely to be where it ends up when the dust settles however many weeks it takes. Where I am now is probably the new normal for the next few months. A few cents either way for all the currencies but nothing major, so yes, turning more to where we were last year but probably more twists and turns.

That week I made $4k, that was silly, there won’t be days like that more than once every few months if not year to year. So I can pretty much start ramping again knowing that for me to need to bail out again would really take some serious market madness.

I am also becoming aware that the value of my local currency effects the trade. It is not the loss converted into my money now, it is converted into my money then. So if I bought the position when the NZ dollar was high, it didn’t cost me as much as when the NZ dollar was low.

Money starts moving like a wave. When the momentum dies, you trail off toward the shore so it is a mere trickle on the beach when it reaches the op.

So in the perfect hedge, as one side pushes to it’s zenith, you add the hedge, but not the profit side – first at half, and then diminishing, you will have to make the money back on the way up. This is where you will need some money to cover your losses. and at least I have some knowledge of where bottoms are likely to be placed.

But the point is, you can put a lot of money on the table because you’re hedged. I also believe we are in the range for the new normal, so it’s safer to throw down positions in this range because we won’t bet taking off to another part of the galaxy.

I am still worried though, I am worried about the fact that I recognise the floating loss on a position is often a lot more initially than the sum of the profits made against it the other way. And that’s something we’re living with, but as we add more margin, we take more risk, even thouh we’re within the safety of the borders.

My concern was always that I could see my equity going down $300 yet couldnt work out why. On the bright side we did watch it move significantly while the equity stayed the same. It would take seismic shifts to move our equity, honestly. It is about building up that difference with profit, if we can nudge up to $13k- $14k we’ll have some proof we can come back.

With more margin down, we will make more money, but when it’s not moving crazily in one direction and is churning over the same range, where we’re nowhere near the edge, we can build that extra layer on top we need, we have proven we can come back by hedging in an emergency and then scalping the new range until we’re safe because though there is no safety, hedging means building an extra grand or two breathing room makes all the difference.

I think when the pound drops and the USD rises I do take a hit, because I have unhedged NZD and CAD against the USD that moves much more quickly, and when GBP positions drop, they also move quickly.

USD rises, GBP drops, suddenly there’s an $800 difference even with the hedge because so much GBP is falling together. $11k it’s fallen, have I made that much off that one pair? I’m yet to make that much off any pair even on the other side of the EURUSD that fell $30k, that’s why I’m carrying loss. The GBP falls against the AUD, that’s expensive, and the EUR, with another huge hedge, expensive. But we’re still only talking $2k all up in even the most extreme position as long as we hold our hedges in.

Now it’s friday night – friday day in europe getting towards morning in New York – I am finally getting some movement and it is releasing my equity, and I am remembering what it’s like when the market is fruity. We have to wait for it to get ripe and then . . . we plant more seeds.