I am not short because I love being a contrarian, I am short because the pair has been acting weak as of late. That's all.
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Global Macro Trading Journal
- Thread starter Daal
- Start date
Quote from Butterball:
You ignore negative vs. positive expectancy.
No, what I meant is that this excitement of people usually drive prices to a point where there is negative expectancy by following them
Its well documented that the worse horses to bet are the ones with the 'best odds'(long shots)
Quote from Daal:
No, what I meant is that this excitement of people usually drive prices to a point where there is negative expectancy by following them
Its well documented that the worse horses to bet are the ones with the 'best odds'(long shots)
I say this even though I'm long the HKD. But I believe there are key differences, I just don't see credible arguments for depegging right now of the CHF. People talk about billions in 'costs' but there are no 'costs' if the FX rate is fixed, when you let it go there is(Assuming CHF goes up and EUR reserves lose value as a result), so if the SNB is trying to avoid looking like a fool they won't let the peg go. Its kinda like a bank who can choose when to writedown its CDOs, there is an incentive to delay
Furthermore from the perspective of how CBs think, they also know that doing QE in gov bonds involve costs too(inflation rises and you lose money in the bonds you bought). Inflation and core inflation is negative, they WANT to print some money
In the case of HKD I believe the case is more credible given that they want to decrease inflation there, as China slows and HK slows I get closer and closer to dropping my bet but I'm still on it
I don't doubt that but there's nothing exciting about entering a trade with a positive expectancy. It doesn't guarantee you're right. I don't see the analogy to horse races, sports betting or lottery at all.Quote from Daal:
No, what I meant is that this excitement of people usually drive prices to a point where there is negative expectancy by following them
Its well documented that the worse horses to bet are the ones with the 'best odds'(long shots)
See it's just a difference in personal approach. I don't mind entering trades even if there's few fundamental arguments for them... there may even be dozens of headlines in random research that speak in favor of entering the opposing position.Quote from Daal:
I just don't see credible arguments
Considering your conviction, how much of your net worth are you betting long EURCHF?
Quote from Butterball:
See it's just a difference in personal approach. I don't mind entering trades even if there's few fundamental arguments for them... there may even be dozens of headlines in random research that speak in favor of entering the opposing position.
Considering your conviction, how much of your net worth are you betting long EURCHF?
Currently 1%(If the pair goes to 1.15). But I plan to increase to 3-4% if the 1.2000 level gets tested
Quote from Butterball:
See it's just a difference in personal approach. I don't mind entering trades even if there's few fundamental arguments for them...
well that certainly is a difference between us. if i have a bias i never trade against it - at worst i am flat. it is very difficult to stay with the trade which is against your convictions to start with when the going gets tougher...
Quote from Butterball:
I don't doubt that but there's nothing exciting about entering a trade with a positive expectancy. It doesn't guarantee you're right. I don't see the analogy to horse races, sports betting or lottery at all.
The analogy is this. A horse that might be 70-1 to win the race, gets priced by the public at 50-1 because people get excited at a large payoff with a low risk. Similarly in trading you might have a trade with a large pay off and small risk but it doesn't guarantee it is positive expectancy at all, specially when the trade is popular AND the thesis has flaws in it
The thesis could be correct in a point or 2(People might know about some political pressures that I don't because I don't read their newspapers) but it doesn't change the fact that other elements(costs, CB misunderstanding) are incorrect, thus the pair is mispriced due those factors. On avg I should profit from that