Trade Components

GBP/USD is still performing poorly.  In fact I terminated two accounts during the month (see later section), and continued to reduce my exposure to the pair.   Anyway I’m hopeful that with my current exposure levels I will be able to hang in there for long enough to see it turn around.  We’ll have to see.     

AUD/NZD has been much more difficult to make a profit from this month.   Up until recently the spread (ie. cost of trading) has been around 8pts, or around 9% of the daily volatility.  Although expensive by the standards of other currencies, the profitability was still there.  However this month has seen my market maker increase their spreads to 14 pts, and I suspect that this has virtually killed off my ability to consistently overcome my costs.     My more speculative AUD/NZD accounts however have continued to produce some nice gains, despite this handicap.

GBP/CHF:  Well, following a superb month, the wheels seem to have fallen off!

The least said the better.

USD/CHF: The month didn’t start too well.  After that things just drifted. 

Looked good for a while, but things faded again to close the month flat.

This is another high volatility account.  What I’m trying to do is trade the best Spread pairs  (ie those that seem to trade around a mean), with the best Breakout pairs (those that seem to want to move out of their current range).   Obviously I haven’t got the mix right yet, but it’s early days and it’s a very small account.

GBP/USD: The writing has certainly been on the wall for a while!  I closed the first GBP/USD account after losing 40% overall.   Once an account falls this far it becomes increasingly difficult to get into profit.  In this case; a 40% loss would need a gain of over 66% just to get back to even.  Ah, the joys of asymmetrical returns!  

I closed the second account more because of mounting depression!  There are better things to do with the money.  

I also stopped trading EUR/AUD at the end of last month, so the chart hasn’t changed from last month’s report.

Shown here are a few of the methods I currently have in simulation.

The really interesting thing here is that one can clearly see that Spread trading on Cross currency pairs * is working overall, yet it’s the reverse on USD Pairs.  There Breakout methodologies are working. 

I’ll be incorporating some of this ‘insight’ into the coming months trading.

  * Cross currencies are those that do not include the US Dollar:  ie GBP/CHF, EUR/AUD, AUD/NZD etc

Contrary LITS is a new addition to this report.  LITS stands for ‘Line in the Sand’.  What this method does, is always hold positions in a basket of currencies.  Trades are checked daily.  If any are in profit, the position is closed, and re-established in the opposite direction (hence ‘Contrary’).  The method therefore breaks all the rules of cutting losses short and letting profits run!

It’ll be interesting to see how it goes over the next few months.  The method will be a good barometer as to whether markets are trending or not.