Friday-Sunday Position Closed

Weekend position closed. Opened friday shortly before close...

Don't Like Gold Short Term

I think we're going to see Gold fall. A lot of people who have buying for last 5-6 years did so because they saw the state deficits/spending were just not sustainable. But look at Europe now. They're adressing it country by country and getting it down. Seems to be going pretty well. France, Italy, Spain are taking it a lot less tragically than Greece did. I'd want Gold if there was panic and civil wars across Europe. Important banks going bust. But these PIGS are going to turn out to be angels in disguise. They gave us a good fright. Now they're putting on more than just lipstick. That's why when I look at a Gold chart 73-10 I think: This is not where I'd want to be invested for next 10 years. Look at the nice pullback at the turn of the eighties. We're due for a pullback to 1000 pretty soon. I can't imagine spending cuts in the US will incite mass protests crippling the country due to the very capitalistic nature of the system. And it certainly helps looking at international companies and seeing they're yielding nicely. So maybe state spending cutbacks will reduce it slightly. Emerging markets will compensate.

Small Fish

The current totals for the day below. Two trades.

The last trade was a reaction type entry. Just feel EURUSD is going to stabilize around 1.22-1.24 and therefor feel comfortable owning it around 1.22.

Another Small Winner After A Large Paperloss

At the roulette table once again. Risk reward of my last trade can't have been very good. I was in the red by -1000$ 1hour after the US close. Went to bed watching some "King Of Queens". Always a soothing proposition. Woke up pretty early this morning to find EURUSD at 1.2222 again. I was rather surprised I had wondered whether we'd be below 1.21 to be honest. Even the S&P Futs up by 6 then. Now EURUSD 1.2282 , Futs up 8-9 points - pretty big moves.

I had formulated a plan to buy 1 lot every 50pips on the way up. But after having 100 pips on the downside that changed. Shouldn't have really. When everyone else is scared of doing something, it should give a favourable risk reward.

The chinese looking at their eurozone debt exposure (source FT) is about as relevant as all the talk they were behind the move in EURUSD to 1.50. The media talking of the chinese is usually a good sign a major top or bottom will be put in - at least that's what I'm starting to think.

Anyhow. Got out of my EURUSD trade with 17pips profit. Account now 1k in the green since last May. 

Weird how the USD was weak last year with equities going up and now weak with USD being strong. Well it's a bit counterintuitive to me. S&P Futs and EURUSD trading in tandem is something someone needs to explain to me...

Interesting Bloomberg Interview With David Bloom HSBC

I had Bloomberg -"the pulse" - on in one of my screens (kind of picture in picture). Instead of the by-now-boring economic non-event Oil-Spill they're beating to death every 15minutes, they had two currency strategists on. One from UBS and one from HSBC.

Now it seems UBS had a EURUSD target of 1.50 in DEC. Now they have 1.15! The guy from HSBC however has 1.30-35. The fun part was the guy from HSBC saying that UBS was just swinging with the market changing its mind. He made the point that both currencies are "bad" because they both have debt-problems in the background. But he thinks the US is worse off because they're doing absolutely nothing to adress the problem. His conclusion the EUR will get back in favour and just swing around like a pendulum. The UBS guy thinks the EUR is fundamentally flawed, then the HSBC guy cut in and said: "That didn't stop you having a 1.50 target last year did it..." It's rare you see the guests have a go at each other. The UBS guy just calmly said that one has to follow the money/flows/liquidity.

I personally also believe the USD isn't really a safe place long term at all.

PS: Bloomberg TV is a pain in the ass 90% of the time though. Why do they give "breaking news": Timothy Geitner has landed in London. I mean who really gives a shit. It's what he says or when it starts that is of interest. They are so effing superficial on these channels 90% of the time.

Too Human For Trading Big Time

My god do I look stupid now. Less than 24 hours ago selling EURCHF at 1.4349 (now 1.4200) and EURUSD 1.24088 (now 1.22). That means my premature closing cost me 4.5k on EURCHF and 2k on EURUSD. Job well done eh *rolleyes*.

I know it's no use regretting trade decisions. It's very hard though when looking at market action. I'm just too human for trading.

A Morning Waking Up To 7k Loss And 50% Margin Used

The above is what I woke up to on Friday morning. My 4lot size exposure - very unusual that I get sucked into positions of such a large size - showing me over 150 pips in the red. A total of over 7k USD. The margin used was showing over 50%, something I don't think I'd had since last summer.

I felt sick, annoyed and stupid. I thought how is this possible that when I had my strongest conviction it goes against me so quickly. It was painful as I had just comeback to breakeven on my account after 8-9 months of being in the red. Knowing that you've destroyed so much in such little time is a blow to the stomach.

What did I do when I saw the over 7k loss? I thought of increasing my position further for a second. That idea was quickly scrapped as the weekend was coming up and I'd get a margin call if I increased any further. So I just watched in horror. I didn't want to close, but I was very very close. I think if EUR had kept moving up I'd have closed out with 8-9k loss. Or maybe I'd have just frozen and been liquidated automatically.

By friday evening my margin used was fluctuating between 30-34%. I transfered another 2-3k to the margin account so that I could carry the trade over the weekend. I got an automatic email from my broker shortly after 22.00CET alerting me to the fact that I was on level 1 of 3 margin call levels. That email just being a warning that it's getting tight regarding my account. I hated that as it reminded me of my "Maximum Pain" day. It was like a replay. This time I held tight (a bad thing to do really) - like a stubborn mule. My rational was: If all the shorts got blown to bits like me Friday morning CET and market is flat to lower vs the highs there's some hope I can see some extension of post-squeeze pullback.

As you have surely seen from the action today EUR is off and I've closed my position at a tiny profit even though I feel very strongly about EURCHF retesting the lows in coming months. But I just can't control myself as I should be able to. After being so deep in the red and then coming back to very light green, it's really really difficult for me to hang on to a position. It's so classic. Letting losers run and closing out winners quickly. I thought the first part of the week had shown me I could let winners run better after all, but I'm sure my instinct is just a real problem.

Final P&L is +536$ after -7'700$ at one point. It has proven that my account is at risk as a whole. The account size is the stop loss. That's scary.

EURCHF - SNB Intervention surfing

Sold some EURCHF, kept going up, sold some more - then it came back to entry of 1st lot. I got out and of course it keeps going down as I write....

But, today is definitely a good day! It's best when a central bank is screwing around as it gets all those quants and algos on the wrong foot? I always trade best when it's humans messing around !

How Surreal! Close @ 1.22887 :: ECB is starting intervention?!

Incredible ... EURUSD shoots up, I don't know what the hell is going on. But I decided to close my "oversize" position!

Nice move! Jesus!

God must be on my side in 2010 ;) Or the ECB is starting intervention?!

EURUSD Stuck Long - Entry Price 1.22219 - 2lots

Interesting sideways action just 40pips below my entry. I had gone in with 1 lot at 1.22689. It fell to 1.2160 - I bought some more at 1.21749. It jumped right back to breakeven yesterday evening - even a 100$ profit. Since it has collapsed back down but seems stable. Showing me 890$ unrealised loss.

Are they going to shake me out by riding it down to the big big 1.2000 ?!

But unbelievable how it keeps knocking its head at exactely my entry price! (see below) God must know I'm long :( .... ;)

Are Finance Ministers Idiots?!

EU ministers thrash out details of loan scheme

Group vows to establish global tax on financial transactions

Read the above headline on in the FT. In the article it quotes ministers who think Hedge Funds, Speculators are to blame - and to be punished with a tax on financial transactions - for the girations in the CDS market. "Group vows to establish global tax on financial transactions" <-- Yeah, that will really really help *rolleyes*

Actually this article is better to link to as FT has subscriber-only access:

http://www.guardian.co.uk/business/2010/may/17/hedge-funds-eu-regulations

But after months of threats and deliberations, French, German and Spanish leaders within the EU are expected to push ahead with a directive which is aimed at clamping down on speculators who they believe contributed to the global credit crunch and more recently pushed Greece to the brink of collapse.

Read that quote above and you feel like shorting EUR even at these levels. These guys really don't get it.

I've been watching the action in the CDS market. And there's nothing inplausible or immoral about what's happening. Why wouldn't anyone buy protection when a country like Greece has lied about its accounting and is seing massive strikes and demonstrations? Why wouldn't people sell EUR if there's a real risk of contagion? And now demonize and tax the people hedging their portfolios? 

Finance ministers are politicians just looking for scapegoats for their own (or predecescors) shortcomings. No tax on transactions is needed. It's pretty disturbing that these morons think that they can somehow hide the ugly truth that a lot of EU countries just have been fiscally responsible the way a 5year old is responsible when given pocket money and sent past the sweet shop... They need to realize that they can't spend money they can't repay. Isn't it incredibly irrational to want to punish people wanting to protect themselves against this accident happening in slow motion?! 

Current account status: -1.8k (year-on-year)

Biggest mistake of the week:

I'm always buying into dips of a major downtrend.

Biggest gamble of the week:

Doubling up into an accelerating down day. (That's also a mistake I guess.)

What should be happening:

Selling EURUSD every week, doubling up every week. (We've been going down for 4 weeks I believe. Ha! Trust me to come to that easy conclusion when we've lost 2500 pips in recent months!)

BTW: Just as I was writing this I had to sneeze. As I opened my eyes I heard a splattering sound on the floor. I'm glad I didn't sneeze at the screen. Who'd have thought so much "stuff" can come flying out one's mouth when sneezing. Quite fascinating (and a bit disgusting). Reminds me of the time I was in the supermarket and an old lady sneezed infront of the fruit... :S Always wash fruit from the store!

Picking A Level And Watching It Accelerate Away From Entry

One of my classic trades *. It falls by 75-100pips. I hop on. It looses another 75-100pips. I double my position. The pair makes a comeback and I net a profit (59.1pips) on the 2nd lot and take the loss (-13.9pips )on the first.  *just sometimes I don't get off so easy!

Good thing I was watching Kick-Ass when I put the trade on. It kept my mind off getting too frustrated. I did get annoyed and double up, but then I kept my eyes on the movie 97% of the time. Maybe it's best to just watch currencies out of the corner of ones eye and do something else with ones mind aswell. 

Won't work for scalpers I guess. But for swing-bounce-whatever trading style I have it's quite useful. But the moment my position was showing me -880$ wasn't cool. But I've gotten use to watching something go against me. Second time in a row I've cheated fate. Mustn't overdo it. Otherwise I'll be writing about a 6k loss in the not so distant future!

Crisis could still become a blessing in disguise for the Eurozone

A positive spin on the austerity..... And a falling EURUSD is good for european equity markets in price terms as it becomes more interesting to large US funds!? (Just as the weak dollar never hurt the Dow etc for long)

.............................................

A blessing in disguise?

With luck, the crisis could still become a blessing in disguise for the Eurozone.

(1) The periphery is now delivering some long-needed fiscal and structural reforms.

(2) Europe's fiscal surveillance tools are evolving in a way that will make a repeat crisis more unlikely.

(3) Continental Europe is getting a headstart on the fiscal adjustment that other parts of the Western world will likely have to tackle as well in the years ahead, in our view.

Additionally, Britain has now ended up with the Conservative-Liberal coalition that is so familiar to the continent. London may now move to a sustainable fiscal stance, that is to a fiscal stance much more like that of Rome and Berlin, in our view.

source: BofA

.............................................

The Potent EU Package - A Safety Net

What I think is one of the most important points of the recent package, below quotes from a Barclays Capital report:

[...]what markets feared before last weekend and why the large, initial EUR110bn bailout package for Greece had not addressed those fears. Bond yields actually rose on news of the initial bailout for Greece, including yields on the other  countries considered vulnerable (Portugal, Spain, Ireland and Italy).[...]

[...]

c) Greece’s bailout package made markets look even closer at Portugal, Spain, Ireland and Italy, and they concluded that those countries would need similar bailout packages.

With regard to concern c), the EU’s mega package provided perhaps the most potent answer. As we calculate below, the EUR750bn more or less matches the combined gross financing needs of Greece, Portugal, Ireland and Spain for three full years. Therefore, it would allow for the replication of Greek-like packages, allowing these countries, in principle, to remain out of the market for two to three years. This would seem to substantially reduce the immediate threat of financing crises. [...]

That said, it seems as though people now waiting for an escalation of the crisis could have to wait quite a while. That in turn should lead to nervousness about the short term plausibility of shorts in banks and in general. Therefore the market could start ticking higher if global growth news keeps coming in on a positive note...?

They go on to write however:

This weekend’s news did not alter the challenges that provided the initial reason for this report – namely, the massive fiscal adjustments needed (in particularly in face of reduced growth prospects and very elevated REERs) to successfully turn around these countries’ adverse debt dynamics. The aggressive EUR750bn support package and the ECB policy actions announced last weekend can go a long way in addressing the financing and liquidity-related issues, thus lowering the risk of self-fulfilling dynamics, but it did not ease the task of successfully turning around debt dynamics. Going forward, we think this is likely to shift the market’s attention to the actual implementation of announced fiscal measures and also to the growth performance. In response to them If these developments on the implementation and growth fronts surprise on the downside, the strongly positive market reaction to the EU’s mega package may not last.

But if this graph stays the way it is, i.e. flatlined on low levels I think we really could see a rally in equities....

B EURUSD @1.2637 // S EURUSD @1.2646

Small trade. No patience holding on though. 

My FX Trades Jan-May As Of 2010-05-11

Thought I'd check my trade history for this year on FX. Not much been going on as you can see:

Since my starting the FX in May '09 I'm down about -2.3k. Looks like I've had a "perfect" start to 2010 making close to 3k $. Starting to get hungry for more $$$$ now! But it really is good that my account shows my since "inception", otherwise I might tend to think I'm doing better than is actually the case.

The standout was April 1st, when I was on the right side of SNB intervention. And I made a decent gain this Monday.

On a sidenote: It's really a shame my broker doesn't calculate all the PIPS historically, not just per day and trade.

Global Growth Momentum vs Wall Of Debt & Spending Cuts

I was speaking to an old school friend yesterday evening who had bought into options of a large bank mid-last week. He told me about the positive surprise when he looked at the Monday open. For a while he thought his eyes were playing tricks on him. The market moving with such a big percentage move early morning CET was something he'd not ever seen. His option which was out of the money (worthless) Friday suddenly moved back into the money. As he'd already written off this particular investment Friday afternoon, the feeling of joy must have been similiar to mine on my EURUSD position. I had also come to conclusion that it was just a question of how large the loss would be.

The big difference though: He didn't feel the need to sell the options yesterday, telling himself maybe we'll see another 3-4% move and the option will double-triple. I couldn't have done that. 

I am wondering at the moment whether the currencies situation is clouding my judgement on the valuation of the market, i.e. whether selling into the strength of banks Monday was a mistake. 

Yesterday on Bloomberg TV Mike Holland (Holland & Co.) said that this european "TARP" is a game changer for sentiment (equities at least). Thursday destroyed sentiment, Monday rebuilt it. Which leaves us neutral I guess? [Edit: Actually on second thought: It leaves us back in down trend, just not panic downtrend] There is still some decent probability, according to Barclays, that the global growth momentum will compensate or even outweigh the negative from the spending reductions of the PIGS. (I wonder how US, UK spending reductions, debt reductions will be possible though without reducing global growth!)

However EURUSD is a different matter. The line of finance ministers: We'll do everything to protect the EUR is just noise. The market is showing us (1.27) that with this liquidity and long term debt problem, the trend is down. They sold into the strong upmove yesterday quite fiercly. On the chart it looks like it failed horribly to break out of down trend in my view.

It also reminds me of the constant talk of the SNB that they didn't want EURCHF falling in an unoderley fashion. They spent more than 40bn at 1.50 and probably another 30bn at 1.43 propping it up [Edit: Now we're around 1.41]. They're doing the classic fighting the tape and doubling up into a shit position (based on fundamentals). That's why I personally have no faith whatsoever in the "we'll fend off the wolf pack" bullshit. 

It's not speculators, not hedge funds and no nasty "wolfs". It's bond portfolio managers, big banks managing risk of their positions. They're being forced to buy protection because the countries who borrowed money aren't using it wisely, on the contrary in fact. And even though many countries know they're debt is spiralling out of control, they won't be able to pass tough measures until their respective populations see that there's no way around brutal cuts. From that point of view it's good that the world gets a glimpse of what happens when you run your country into a wall of debt as it could bring back some modesty and spending discipline.

Cheating Death

I really thought I was going to have to take losses on the financials I'd bought for the 3rd party account recently. Then this morning one of them was up 8% the other 5%. I had a loss of close to 6% on the first so I've netted a 2% gain. On the second I'd bought some Friday on the close but also already on Wednesday so I made a net profit of 2.5% on the total there.

Writing it down now it seems like bad risk reward trades. I also sold into the rally this am slightly too early as it's still moving up (one now up 10% and the other 6.5%).

It's a bit like what happened to my PA on EURUSD - I got out with just under 1.29 and now it's over 1.30. So I missed 140pips x2.

But what makes me feel okay with my sales: there are several stocks I own for the 3rd party that are trading only slightly up. This must mean the fear in the market has left an offer overhang. The financials are seing a brutal short squeeze, but I sure as hell wouldn't expect that it's sustainable. But if we've bottomed that's something positive for the economy and general market. It will take good news to break the down trend (from here onward!) - I believe.

Final thought: All this money being set aside by the central banks is nice. But don't you feel like it's 5-6 big guys jumping into the water to save some small kids (PIGS) - the big question remaining, won't the torrents, tides drown the rescue team aswell....?! Then again that picture helps underscore that they have no choice but to instinctively jump in and try. Their "lives" would be ruined if they "lose their children" anyway....

Close 2lots @1.28953 +28.9pips (after -340pips! THU)

Wheeeeeew. You wouldn't believe the anxiety I'd endured Thursday afternoon CET - 1.2525. Then to get out just now 23:05CET Sunday @1.28953 is such a relief. Especially as 29 pips on 2 lots.

Below what the fx plattform I use was showing me at 23:00 and then 23:05.... 

Not Following Intuition And Even My Weird Dreams

It's funny how I got stuck with my long EURUSD position. I had watched 1.30 break coming from 1.325 in less than 48 hours. So when I saw 1.2950-65 I thought nice bounce surely waiting here. I bought and was able to sell within several minutes for 11 pips profit. Then I watched it patiently. It dropped to 1.2920 and I decided to go long 1 lot. Within a short time it fell though 1.2900. I left it. When it got to 1.2820 area I thought : fantastic opportunity to ride it back up. My thinking: 1.32500 to 1.2820 in 48-72 hours on EURUSD is a move that needs a countermove.

As I was buying, and unknown to me, the CDS market was coming apart with sovereigns deterioating across southern and eastern europe. 

So I was long going into the Aussie/Asian session. I drifted off, just waking up a few times checking my screen hoping for 1.29 so I could knock my averaged down lots out. I would have even sold 1.287. Then I had a strange dream (Wednesday-Thursday night). I dreamt I was selling 1.2865-75 level and no longer had to worry about the position. Then I went to sleep and woke only in the european session. By then the EURUSD was in the 1.27s I believe. In the afternoon it crashed though 1.27 to 1.26 and even 1.255 briefly.

It was so annoying. My subconscience wanted out in the night and that dream put my mind to ease so I missed the exit. It's funny how that happens. We can know something doesn't make sense to be holding onto fundamentally (i.e. sovereign spreads had been increasing all weak) and yet being sucked in by price - what I think of as the sales reflex - taking advantage of something suddenly being cheaper.

EURUSD Long 2lots @1.2866 - Why the market will keep falling though...

It's funny how it repeats. Not history but my story. Everytime I see a 3-5% pullback I think: This is a chance to get in cheap and ride it for quick reaction. Then suddenly you have the CDS market accelerate to hell. Even the central bankers now think we're in for a repeat of the subprime freeze, just this time it's a sovereign debt freeze. Banks everywhere worried about interbank lending to italian, spanish and obviously greek and portugese ones. They can't lend and you send one country after the other into a blitz-recession as the interbank markets freeze up. Hello double dip sauce.

And even though I'd like to talk up my position in EURUSD saying it's fallen from over 1.5 to 1.2525 and is at 1.2750 now, I'm having trouble convince myself that the parity talk isn't a possibility. But it shouldn't be. Because if something leads the EU into recession and knocks holes into Deutsche Bank, BNP Paribas, Santander, SocGen etc it will definitely feed into US exports, travel, etc. And of course there's the bigger UK and US debt bombs ticking. Those go off and the EUR will look safe as Gold or at least not worse right?

Regarding my own trading. I was watching the Dow slide and the Marketwatch.com site was refreshing every few seconds with 150-200 point drops at one point (as the whole world knows of course). I was kind of fascinated, my bigger worry was the EURUSD though. I think that the general direction of the Dow and also speed probably is pretty much right. The trades going though on PG were obviously stupid but that an index is down 3-5% on the back of what is happening on currencies and of course in the sovereign debt market is quite reasonable. Anyway I watched my P&L increase to -5k temporarily and then recover to -2.5k. I'm glad I didn't buy 1.27, 1.26, 1.2550 and then get a margin call. I've even been able to hold my EURUSD position with reduced weekend margin. Just goes to show that I'm not completely resistent to learning, i.e. my past experiences.

I've been buying into stocks on the way down for the 3rd party account. I'm still overweight cash/underweight equities, but I'm starting to think it's better to cash out with 5% losses on recent purchases and be even more overweight cash. Interbank markets freezing mixed with politics is not something I like being exposed to.

Another reason for my current bearish mood. The drop has sucked in a lot of money that probably thinks: Buy the dip (like me!). And as the days go by, we have less and less reason to be long. The Dow move says it all - down 10% up 6.5% (to finish at -3.5%) then down again 1.4% means that a lot of unsteady buy the dip hands are holding shares. I've seen this first hand in a stock I'm active in at the moment. The market maker has overloaded and the big buyer I saw regularly putting in nice bids has disappeared cos he got hit on the bids too often.

As a trader on Bloomberg said: Sell into the rallies.

Long EURUSD open@ 1.29652 close@ 1.29764

See how this goes. Stable in to upward is my bet in the oz-session...

EDIT:

wow. just 5min I was able to hold it....

Spain - the fattest of the PIGS - needs EUR 280bn. Nice.

Seems that Spain is talking of needing financing to the tune of EUR 280bn. Which begs the question: What is Spain doing supporting the IMF/EU package for Greeece with more than EUR 10bn? Sounds like a sovereign ponzi scheme.  They all need the cash themselves. This game of musical chairs is not going to end without lots of tears.

Well that's the reason banks are selling off I read. These PIGS are the harmless thing though. The Gorillas are still sitting in the room, looking more and more in trouble by the minute if you ask me. 

Considering how fast ratings can deterioate, I wouldn't be surprised if we see this whole sovereign debt situation escalate. I wonder if they'll nationalise ratings agencies in the interest of stablising the market. Doesn't seem the market waited for rating agencies to call trouble recently. 

Bestcase: Portugal, Spain, Italy and Greece get support.

Worstcase: The minute one country is "saved" the next will be attacked by the market. 

EDIT. 15:24 CET - Just went long a large bank for 3rd party acc. Merger mania with continental and UAL is going to beat this greece, spain noise?! Yeah yeah I know it was y'day. But still. IB is doing alright it seems!