March profits came early. The last week of the month was pretty much a holding pattern, with only a few more positions added since the beginning of April. I managed to hold NAV to no greater than -2% of my account balance, and finished out the month at just -0.4%. Keeping NAV volatility low — i.e. less than 2% in either direction — is a mainstay objective.
Less than 1% of realized gains for the month were from position interest. (Account interest is negligible.) I expect that number to be slightly higher for April, because I expect to hold onto higher yielding trades and add a bit more exposure over the next few weeks. I also expect my realized gains for April to be less than 2%.
Currently, NAV is sitting at +0.22% and it looks like the euro trade is about to roll over in my favor. (I hope so.) I may need to adjust my strategy to accommodate positions with a negative roll, depending on whether we see a bounce in the yen this month. At this point, I’m not a big fan of long yen positions, directly or by proxy. Still not convinced that there will be a pullback in yield, so I’m holding AUD and NZD trades.
I love it when people ask me about my equity curve in FX. Especially other punters.
Them: “So what do you earn in a year?”
Me: “So far, I’m earning an average of 8%pa since inception, but that includes my time in Afghanistan from 2010 to 2012. This past year, for example, I made more than 12%.”
Them: “Oh…” [Read: Trying not to sound too disappointed.]
Hah! Let’s see *you* do that then. And while we’re at it, let’s see how the very large and in charge currency-only hedge funds did — and then let’s see what their average NAV was over time, and how it tracked their equity curve. And then let’s see from month to month how volatile their accounts were. That’s right, there is nothing to see…most of them were under water.
And those that outperformed, will do so only temporarily because they are exploiting anomalies in the markets that will soon normalize…and then they will crash. I’ve seen it happen with some regularity.
Ladies and gentlemen, I’m just fine with my paltry 12% per year, because it is robust. And it isn’t affected by high frequency trading or anything close to it.
I’ll probably hit 14% this year. That will be very nice. Thank you very much.
#LOL #youdontknowjack #idontgivea #toomanybourbonstonight
I’ve begun increasing position sizes based on account balance and NAV, and should start to see a slight acceleration in the equity curve going forward. This accounts for the above average returns in February, although it is difficult to calculate just how much. There were several short term trades contributing to gains this month. Long term positions are under water at the moment — at about -1.8%. I expect further movement to the downside, and in keeping with the Knotty Warhol, will add to my positions in higher yielding pairs at key price levels over time, capturing more yield and adjusting my cost basis to take advantage of the inevitable retracements.
Trades taken this month have been in the following currency pairs:
On the blog generally, I’ve found it difficult to keep up. Plans to include the futures and options models are on hold for now, as I’ve just started a new assignment. I will probably be posting more over the weekend on longer term chart structure and stats for futures and some equities.
EURAUD short order triggered overnight at 1.5363. First target is a little optimistic, at 1.4664. I’ve been playing around with this pair for a few weeks — moving entry orders around to find the right price. It looks like there is some potential with this one, but that’s what I thought about my CAD trades…
An emerging triangle on the daily charts has me thinking this pattern will break. This is a continuation pattern in my judgment, given that the high and low sides are roughly symmetrical, and given that volatility remains low.
I’ve entered one unit long at 1.3962 in anticipation of a choppy move higher. The bandwidth of that chop in the first few days to two weeks after completion of the current pattern should see opportunities to take profit in the 142.xx to 143.xx range, with opportunities to add at 133.xx if the first break is to the short side. The alternative scenario, if the pair breaks below and continues lower, is to scale in with the Knotty method, and wait for a return to balance in the next distribution.
This conversion from a directional play to a range play is possible because of the long term chart structure — EURJPY is currently sitting at an inflection point. If the pair falls to last summer’s range (128.xx to 134.xx), and the Knotty is fully deployed at levels within that range, I will have an average cost basis of 135.15, which should be achievable. Total risk would be roughly 7-8% on a long term position, which the Knotty is designed to handle comfortably.
So let’s see how this plays out.
Short CADJPY 93.10
Long USDCAD 1.0966
Long EURJPY 139.62
Short EURUSD 1.3529
January proved to be a little volatile. I have a gift for stating the obvious, I know.
I’m staying with yield trading strategies for now. AUD was the single greatest contributor there. Anyone trading currencies — or any asset class that offers premium, for that matter — should definitely take advantage of yield. 12% of my gains this month were from trading in the direction of higher interest rate differentials. This makes a huge impact.
My largest trade was an AUDUSD position with an average cost basis of around 89.15. Quick gains were made from EURNZD and GBPCAD crosses as well. I am staying away from the USDJPY for now. Currently short EURUSD, long AUD via USD and JPY, and long CAD via both USD and JPY. These are all very long term positions, with significant possibility for directional moves against my initial entries.
I released some AUD longs in January which contributed to about half of my gains, and anticipate holding (and building) a core position for the long term depending on the interest rate outlook. If data out of China take a turn for the worse — which is entirely likely — I’ll have to reassess. The outcome of that assessment will probably mean that I add more at lower price levels, consistent with the Knotty Warhol method.