Learning About Intervention

O

oldtime

I haven't been trading forex that long, but last night was the first time I saw someting move 4% in less than an hour. Fortunately I was short, but it could have gone the other way.

I took a majority of my profits. And then sure as shit it pulled back. So I guess if it moves against you during an intervention, the best idea is not to panic, because like I said it pulls back.
 
for the first time you saw something happen one time and for sure you figured out the best way to trade during all future interventions
 
otherwise, I'm not currently using stops, but when I first started trading forex I did, and they saved my ass when SNB intervened at 4am EST (I think that was Sep 4 the first trading day after Labor Day), but the slippage was pretty bad. I hate to think what the slippage must have been like last night if you were long JPY on a Sunday night on the night both Euorpe and London were setting their clocks back.
By the time you got stopped out things were just starting to come to a halt.

So, I'm not sure how to deal with an intervention other than to just curse it and pick up the pieces, but from a novices point of view it would seem panic closing is probably a bad idea if you are like me trading small enough not to need stops.
 
Quote from oldtime:

otherwise, I'm not currently using stops, but when I first started trading forex I did, and they saved my ass when SNB intervened at 4am EST (I think that was Sep 4 the first trading day after Labor Day), but the slippage was pretty bad. I hate to think what the slippage must have been like last night if you were long JPY on a Sunday night on the night both Euorpe and London were setting their clocks back.
By the time you got stopped out things were just starting to come to a halt.

So, I'm not sure how to deal with an intervention other than to just curse it and pick up the pieces, but from a novices point of view it would seem panic closing is probably a bad idea if you are like me trading small enough not to need stops.
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Two ways:
1. either know from experience when a CB is most likely to act and in what direction
2. trade very less size
 
so this is twice I have been on the right side of an intervention and both times I just took my quick profits and that turned out to be a good idea, so it would seem, conversely, if you're on the wrong side, taking your big losses would be a bad idea.

The first time I was about 50% long and 50% short. To give you an example, my stops had a mkt value of about $800 and when I got filled the loss was about $1200 (on each position.) But the profits on the shorts were in excess of $2400, and then by the end of the day everything was more or less normal just at a much lower level.

So to reiterate, in an intervention, take the quick profit but don't panic if it's a loss.

Right?
 
Quote from oldtime:

so this is twice I have been on the right side of an intervention and both times I just took my quick profits and that turned out to be a good idea, so it would seem, conversely, if you're on the wrong side, taking your big losses would be a bad idea.

The first time I was about 50% long and 50% short. To give you an example, my stops had a mkt value of about $800 and when I got filled the loss was about $1200 (on each position.) But the profits on the shorts were in excess of $2400, and then by the end of the day everything was more or less normal just at a much lower level.

So to reiterate, in an intervention, take the quick profit but don't panic if it's a loss.

Right?
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Yes, thats more or less what I would do. Just as a caveat - you must consider the possibility of continued intervention or much drastic measures by CB that keep moving the ccy against you. However, in most interventions, your generalization should hold.
 
and another thing, theres no such thing as "inside information" from the SEC's point of view in forex, so knowing ahead of time when it's going happen must be incredibly valuable information.
 
Quote from antaram:

for the first time you saw something happen one time and for sure you figured out the best way to trade during all future interventions
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how many times should I see something happen before I start trying to figure it out?
 
Quote from gmst:

Two ways:
1. either know from experience when a CB is most likely to act and in what direction
2. trade very less size
More...
number 2. Trade less size, it didn't take me long to figure that out.

1. how do you know from experience when a CB is most like to act? I know in general Japan needs to export at some time so there is pressure on the Yen, and it was good I was short, but it would have been a hell of a shock if I was long, so I wasn't celebrating much, but rather figuring out what to do if on the wrong side.

What signs should I be looking for to know when intervention becomes more likely?
 
Quote from oldtime:

number 2. Trade less size, it didn't take me long to figure that out.

1. how do you know from experience when a CB is most like to act? I know in general Japan needs to export at some time so there is pressure on the Yen, and it was good I was short, but it would have been a hell of a shock if I was long, so I wasn't celebrating much, but rather figuring out what to do if on the wrong side.

What signs should I be looking for to know when intervention becomes more likely?
More...

To be honest, this is a bit tricky. General guidelines I can give is - read news, look for cues from the chattery that comes from finance ministry/CBank officials. They initially try to do verbal intervention and when it fails, they resort to real intervention. These are all the cues I look for.
 
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