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Chinook's EUR/USD (E/$)Mumblings
- Thread starter chinook
- Start date
The EUR is showing some nuance of strength, albeit in an otherwise 'strengthless' market. I like the way the EUR held in and bounced in the face of oil having a very sharp spike to the downside. Personally, I sold a small piece of my position at what is now the low of the day thus far (1.2061 in cash). Currently I've managing to hold onto about 75% of my core position although i've been getting stopped out, resetting all the way down.
I just got out of a meeting with a very large hedge fund allocator ($9 Billion) and they say that they have huge exposure to the short side of the dollar through the current positions that their underlying hedge funds are holding. This confirms my original thinking that the real big money accounts are trading the $ from the short side (EUR from the long side), however, it probably contributes greatly to the vicious counter-trend move that we are in the midst of.
It's very interesting that someone brought up V. Neiderhoffer. He is such a great example of why trading with the long-term trend is essential. He is a 'mean-reversion' specialist. Meaning when the market falls hard (beyond a certain 'normal' number of standard deviations), he wants to be a buyer and conversely when the market rallies significantly (also beyond a certain 'typical' amount of standard deviation from the mean), he wants to be a seller. In the vast majority of cases, he will be correct and bailed out. However, his risk of ruin is quite high utilizing this methodology and in fact, it did come into play during his lifetime. He blew out his entire account and then some at what was the beginnings of the LTCM period. At the very least, if you are going to trade this methodology, you need to have stringent risk management protocols that aren't violated. His brother Roy Neiderhoffer is much more of a trend-follower and hence is surviving and thriving currently managing north of $1 Billion.
I just got out of a meeting with a very large hedge fund allocator ($9 Billion) and they say that they have huge exposure to the short side of the dollar through the current positions that their underlying hedge funds are holding. This confirms my original thinking that the real big money accounts are trading the $ from the short side (EUR from the long side), however, it probably contributes greatly to the vicious counter-trend move that we are in the midst of.
It's very interesting that someone brought up V. Neiderhoffer. He is such a great example of why trading with the long-term trend is essential. He is a 'mean-reversion' specialist. Meaning when the market falls hard (beyond a certain 'normal' number of standard deviations), he wants to be a buyer and conversely when the market rallies significantly (also beyond a certain 'typical' amount of standard deviation from the mean), he wants to be a seller. In the vast majority of cases, he will be correct and bailed out. However, his risk of ruin is quite high utilizing this methodology and in fact, it did come into play during his lifetime. He blew out his entire account and then some at what was the beginnings of the LTCM period. At the very least, if you are going to trade this methodology, you need to have stringent risk management protocols that aren't violated. His brother Roy Neiderhoffer is much more of a trend-follower and hence is surviving and thriving currently managing north of $1 Billion.
Quote from trade-ya1:
The EUR is showing some nuance of strength, albeit in an otherwise 'strengthless' market. I like the way the EUR held in and bounced in the face of oil having a very sharp spike to the downside. Personally, I sold a small piece of my position at what is now the low of the day thus far (1.2061 in cash). Currently I've managing to hold onto about 75% of my core position although i've been getting stopped out, resetting all the way down.
I just got out of a meeting with a very large hedge fund allocator ($9 Billion) and they say that they have huge exposure to the short side of the dollar through the current positions that their underlying hedge funds are holding. This confirms my original thinking that the real big money accounts are trading the $ from the short side (EUR from the long side), however, it probably contributes greatly to the vicious counter-trend move that we are in the midst of.
It's very interesting that someone brought up V. Neiderhoffer. He is such a great example of why trading with the long-term trend is essential. He is a 'mean-reversion' specialist. Meaning when the market falls hard (beyond a certain 'normal' number of standard deviations), he wants to be a buyer and conversely when the market rallies significantly (also beyond a certain 'typical' amount of standard deviation from the mean), he wants to be a seller. In the vast majority of cases, he will be correct and bailed out. However, his risk of ruin is quite high utilizing this methodology and in fact, it did come into play during his lifetime. He blew out his entire account and then some at what was the beginnings of the LTCM period. At the very least, if you are going to trade this methodology, you need to have stringent risk management protocols that aren't violated. His brother Roy Neiderhoffer is much more of a trend-follower and hence is surviving and thriving currently managing north of $1 Billion.
I guess most of the hedge funds have been following the EURUSD uptrend for a while so these 200-300 pip corrections are kind of like minor drawdowns for them.
Didn't V. Neiderhoffer blow up by selling naked index options?
Chinook
I've been quiet for a few days because wanted to try something different. I traded my account like coinzy scale up against trend most of time (Long EUR) parabolically averaging down and have " as he says " never lost a trade" LOL of course this is BS as a permanent trading strategy BUT a scale up MM strategy is very successful in what ? A RANGEBOUND market. And that boys and girls is what we are having. A while back a penned a piece titled " The worst of both worlds" where I basically argued that both EUR and $ suck for different reasons. However the underlying truth of the FX markets is that because of these dynamics, just like death and taxes the only thing that we can be sure of is RANGE.
Since prices can only trend or range, traders who can successfully diagnose the overall price action will make the most profits. In range bound markets scale up MM strategies print money. In trend, stop losses are crucial.
Taking a much larger view (this is difficult - true ) we still trading 1.18-1.25 range, so BUYING EUR here is prob the right trade to make.
I wrote a piece a while back called the Need for Fear
http://www.moneytec.com/forums/_showthread/_s-5e1c80cd7fd48fc2b5951f7f105c983a/_threadid-9464
which seems apropos now.
Anyway long and strong EUR and won't be shaken out until I see US actually manufacture 1 real job.
Since prices can only trend or range, traders who can successfully diagnose the overall price action will make the most profits. In range bound markets scale up MM strategies print money. In trend, stop losses are crucial.
Taking a much larger view (this is difficult - true ) we still trading 1.18-1.25 range, so BUYING EUR here is prob the right trade to make.
I wrote a piece a while back called the Need for Fear
http://www.moneytec.com/forums/_showthread/_s-5e1c80cd7fd48fc2b5951f7f105c983a/_threadid-9464
which seems apropos now.
Anyway long and strong EUR and won't be shaken out until I see US actually manufacture 1 real job.
I use stops to protect against catastrophic moves. Contrary to what one might have inferred from my posts (that i always get right back in), that is not in fact the case. I suppose that it depends upon what you mean by 'get right back in'. If you mean that I am repositioned back long the EUR fully by the end of the day, then yes, that is true, I do get right back in because if I didn't, I would run significant risk of missing the major moves that I am betting on which is toward a strengthening EUR. I generally have stops at laddered levels so as the market moves against me, I am decreasing my positions. However, as the market stabilizes or the day ends, I re-establish that position hopefully, at levels that are better than where I liquidated. Conversely if and when the market moves in my favor (which seems rare recently), I either hold my position or add to it on a short-term basis. Hence, I pyramid into profits. Range bound choppy markets hurt me the most. When the markets have significant daily ranges like we've seen today and yesterday, my methodology works it's best. For example, the EUR has sold off about 235 pips in the last 2 days. Basis my full position, i probably took about a 135 pip hit. The difference being the time when I was able to stand aside and re-establish lower during drawdown periods. When I make moves, they are typically in 20% of so increments of my full core position size. Therefore, in situations where my stops take me out at bad levels (such as today 1.2061), it is only on a portion of my position. I re-established that 20% at the close of the day (around 1.2073).
Quote from trade-ya1:
I just got out of a meeting with a very large hedge fund allocator ($9 Billion) and they say that they have huge exposure to the short side of the dollar through the current positions that their underlying hedge funds are holding. This confirms my original thinking that the real big money accounts are trading the $ from the short side (EUR from the long side), however, it probably contributes greatly to the vicious counter-trend move that we are in the midst of.
Do you know at what timeframe this fund (and other funds) focus regarding the dollar decline? And what targets do they see? Over 1.30?
Could it be -in your opinion- that US funds are to much focussed on the US situation and not on the currency pair?
The investor was not a hedge fund, it was the Blackstone Group. They invest with other hedge funds. I assume that the underlying hedge funds that they invest with have different time frames and horizons. I have no way of knowing what their thought process is for being in the trade. I imagine they all have different reasons with the underlying theme being the overall trend in the $ index. Incidentally, it was not totally apparent if those funds were short the $ vs. the EUR or any other specific currency, rather, it was more of an overall statement about the fund's postioning in the dollar as a whole.