Global Macro Trading Journal

[Daal]

Quote from Ghost of Cutten:

So, what's the play here with EURCHF, any thoughts?

I'm long EURCHF from 1.2016 ish. If the pair goes to 1.15 I lose about 1% so its a very small position. I want to get a better avg so I'm waiting. Ideally size I'd lose 4% on 1.15, profit would be a little less than 0.5%(I would take profit when the pair reached some kind of mean reversion indicator)

That said it is very likely I could cut the loss before it reached 1.15. I believe the market is totally overplaying that chance anyway

 

[ralph00]

Quote from Martinghoul:

Long EURCHF, long OTM put spread for protection (if you feel like it). Best expression is still to do it w/ccy other than EUR, IMHO, such as CHFSEK.

Especially today.

 

[Martinghoul]

Quote from ralph00:
Especially today.

Yeah... All hail the Riksbank!

 

[Ghost of Cutten]

Quote from ralph00:

Long to the hilt. Small downside with the chance of waking up one morning to find you've just made 500-1000 pips.

Where would you put your stop, or would you just hang on if it traded at 1.19, 1.18, 1.15 etc? And how big a position is 'to the hilt' in terms of % of trading account.

 

[Butterball]

Quote from Ghost of Cutten:

And how big a position is 'to the hilt' in terms of % of trading account.

Daal has made the point a few times and I agree: % of trading account may be a popular metric to gauge conviction, but % of networth is much better IMO.

What good is knowing I commit 15% of my trading account to a trade when the account value is a mere 5% of my networth (aka 'gambling with pocket money').

Short EURCHF with about 12% of my networth. Stops very close obviously.

 

[Daal]

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/04/Grantham Q2 Letter.pdf

Grantham asserts that stocks are 19 times more volatile than their fair value. I also said that I read in a Shiller book a similar assertion

But looking at the data now, I'm not sure that is correct. In the Grantham data he uses Shiller PE, which is a 10 year average against DAILY changes in stock prices(I think). This smoothes out the volatility in the earnings but not in stocks

I downloaded Shiller earnings database and run some tests. I'm not totally sure my calcs are correct but the results are attached

So, yes, stocks are a bit more volatile than earnings but it seems that its not by THAT much, certainly not by 19x

 

[ralph00]

Quote from Butterball:

Daal has made the point a few times and I agree: % of trading account may be a popular metric to gauge conviction, but % of networth is much better IMO.

What good is knowing I commit 15% of my trading account to a trade when the account value is a mere 5% of my networth (aka 'gambling with pocket money').

Short EURCHF with about 12% of my networth. Stops very close obviously.

Short EURCHF?

 

[ralph00]

Quote from Ghost of Cutten:

Where would you put your stop, or would you just hang on if it traded at 1.19, 1.18, 1.15 etc? And how big a position is 'to the hilt' in terms of % of trading account.

I take all moves under advisement and decide whether to exit or not.

I'm not sure of the value of figuring out the position as a percentage of net worth. Being long EURCHF with 20% of my net worth is a different animal than being long pork bellies with 20% of my net worth, or for that matter being long WMT with 20% of my net worth.

It's a substantial position. One I wouldn't like to see go against me 100 pips (vs. say, my AUD short last year which I was unconcerned with a 100 pip move, which seemed to happen every day on an intraday basis).

 

[ralph00]

Quote from ralph00:

I take all moves under advisement and decide whether to exit or not.

I'm not sure of the value of figuring out the position as a percentage of net worth. Being long EURCHF with 20% of my net worth is a different animal than being long pork bellies with 20% of my net worth, or for that matter being long WMT with 20% of my net worth.

It's a substantial position. One I wouldn't like to see go against me 100 pips (vs. say, my AUD short last year which I was unconcerned with a 100 pip move, which seemed to happen every day on an intraday basis).

I suppose I alluding to something about VAR, but I'm not smart enough to figure that stuff out. Besides, those VAR measures were the gospel at banks up until the moment they all blew up from it.

 

[darkhorse]

Quote from Butterball:

Daal has made the point a few times and I agree: % of trading account may be a popular metric to gauge conviction, but % of networth is much better IMO.

What good is knowing I commit 15% of my trading account to a trade when the account value is a mere 5% of my networth (aka 'gambling with pocket money').

As with so many things, this has to be a personal assessment.

What if the majority of someone's net worth is tied up in illiquid assets, like real estate? Or what if their liquidity comes on a schedule (released through cash payments, dividends etc)?

Alternatively, it may make sense to determine the total trading risk allocation at the beginning of the year.

So if my net worth is X million, but I decide I am going to allocate $500,000 to the trading risk capital pool for 2012, then that becomes the metric to work off of.

Lots of ways to skin a cat... no real "one size fits all" in terms of what makes sense here.