Having shared our trade idea on shorting the EURUSD currency pair last week, we'll continue to work on ideas revolving around shorting the euro as a general theme going forward. The past trading week saw rather unexpected downside in risk markets, as the U.S. dollar chopped around in a nasty range. Volatility was most pronounced in commodities and global equities.
Recapping last week trade idea on the EURUSD, we said to expect a corrective advance into our "key selling zone" before prices get offered lower. That was exactly what happened in the latter part of the week where we saw broad based weakness in the U.S. dollar, pushing EURUSD up into our "key selling zone".
We traded the weakness in the euro by going short EURNZD last week. Subscribers of our Premium Signals Service were notified on our short trade as it happened. We continue to look to sell strength in key euro crosses as the market generally expects the ECB to ease monetary policy in their December meeting.
We have plans to sidestep volatility and uncertainty in the greenback whilst still being exposed to other still developing macro-currency trends. Price action on EURNZD has been in an extended advance within a corrective channel. Shorting at the range highs will provide bears with good risk-to-reward trades.
Less than 2 weeks ago, we closed out our 2 USDNOK short trades for a good profit after being bullish the Norwegian krone against the dollar for an extended period of time. In the following week, we initiated a long position on the same pair, expecting a bounce from our entry price.
On 2 May 2016 (last Monday), we went long USDNOK at a price of 8.0350. Less than 42 hours later, the long trade was closed out for a profit of 1,120 pips, or +1.39%. In this piece, we talk about this trade, why we flipped from being bearish to bullish USDNOK, and how we managed to do it on such short notice.
The most important takeaway for traders and investors is the concept of not falling in love with any position or bias. The markets make it too easy for us to fall into this trap, especially when old trades or positions have been highly profitable and are deep in the money; it's psychologically hard to exit large winners and flip the other way.
This entry is a follow up to our original Short USDNOK Pays Off Well piece published 9 April 2016. Since then, we have closed out all our trades on USDNOK and have booked a total of 5,370 pips of realized profits. This translates into roughly +6.28% of unlevered returns. This piece is therefore to update readers and followers as well as to provide the last concluding bits of our thoughts.
We've been immensely busy for the past few weeks and had no time to post new trading related content on these pages. Safe to say that the markets have been even busier with a bombardment of macro & central bank events jostling prices around. In today's short entry we'll give you a final breakdown and some concluding thoughts on our short USDNOK trade complex.
4,700 pips won on a single trade. Striking when the iron is hot, is what exactly we have been doing. For the last couple of weeks, we've bagged a couple of decent trades; pretty damn good trades actually, if we spared you the modesty. We won some 1,300 pips on USDTRY, are riding on about 3,300 pips on USDNOK, and today booked a huge winner on USDZAR - a currency pair most retail traders probably never even heard of until now.
We don't have much to comment about other than to say that the trade was highly motivated by technical factors, and that our entry was a tad premature (in hindsight), but we knew where our risk-reward profile stood and believe we still had a risk advantage even though our entry point was off.
We were satisfied with the trade management as we were able to (correctly) ride out some drawdown before the trade earnestly went in our favor. Our objective was well placed, and we would call this trade an overall success with certain aspects that can certainly been improved on.
Update: Our base short position has been closed out at 8.1650 via a buy limit take profit order, for a profit of 3,010 pips, or +3.55%.
It's been a rough week for the markets but that doesn't stop us from sitting on more than 3,300 pips of floating profits on our 2 USDNOK short positions. Recall that just last week, we closed out our USDTRY shorts for a handsome profit (fully documented in our trade journal). What we didn't publicly reveal was that we were already short USDNOK well before we published that article.
There's a lot that could be said about our current trading books. There's a lot going on and it reflects the busyness in our heads. No surprise here as we've been getting some crazy moves across the various markets we monitor and trade, especially in currencies. We won't go into the details in this piece but will briefly explain why we took the trades going long the NOK (Norwegian krone) against the USD.
Update: Our short positions on USDTRY have sinced been closed out via their respective take profit buy limit orders, netting us a total of +1,340 pips. Actual trade tickets posted below.
There are many ways to skin a cat that is the global weakness in the U.S. dollar. Like we have previously mentioned on many occasions, we are bearish the dollar on many aspects and have been looking at different ways in which to gain a healthy short exposure on the greenback.
Congruent with our view that emerging market currencies would outperform most in the FX complex, not withstanding heavily shorted currencies such as the Canadian dollar and Aussie dollar, we have chosen to take the path of being short USD against a basket of EMFX.
Two weeks ago, we initiated our first of the 2 shorts on the dollar against the Turkish lira, at what we believe (and has so far been validated by price action itself) was a good price both fundamentally and technically.
We were right on once again. Exactly a week earlier, we made a public call for global stocks to rally. Specifically, we were short term bullish selected equity indices including but not limited to the SPX (S&P 500), the Hang Seng index (Hong Kong), and other emerging market stocks. We couldn't have been more on point.
Because exactly 7 days after making that particular call, the SPX (we specifically traded this) rallied more than 60 points (+3.1%) at its highs on Friday, reaching our preset primary objective of 2000 on the index. Now that this has passed, what next? In this short trading piece, we share some of our thoughts.
We're 70% bullish 30% bearish. That makes us bullish. We're not entirely convicted yet, however. We'll get down to the reasons further down.
Why bullish these few stock indexes? The technicals (price action) look favorable to us. Price action has been formative rather than destructive to a bullish case.
70-80% of all news articles you stumble upon are either outright calling for a "crash", or are betting at things would remain ugly for the foreseeable future. Now those are very strong narratives and it pays to be a little cynical to what you're been fed on a daily basis. When sentiment is this bad, and everyone is kinda biased towards one end, it doesn't take much for the market to move the other way.
We made several trades, which will term 'good't, his past week. One being our short GBPUSD trade(to the pip). Of course we don't publish all our trades; time is better spent managing our books and generating new ideas as the markets move with great velocity. We've had our hands totally full this week but we wanted to give readers a glimpse of how we managed to bag one of our largest winners on the SPX (S&P 500 stock index) despite the highly volatile environment.
All in all, an excellent trade on our part. We're happy with the risk and money management we exercised, and also how we dynamically readjusted trade parameters in light of new circumstances and information.
We ended 2015 well, and we're starting 2016 well too. Putting our massive 1,420 pip winner on USDCAD last December aside, we're now almost close (5 pips away) from having our take profit limit order filled on GBPUSD. If that happens, we'll walk away with some 350 pips in profit. Not a bad start to the year huh? Especially given how treacherous the trading environment has been ever since New Year's Day; markets all around have been crashing and volatility flaring across the board.
Now on to the meaty part that is the huge downside that cable (short for GBPUSD) has seen since topping late last year. The pair has been in an almost continuous linear decline. This signals that the bears are in control of the trend for most of the time and any medium to long term trade should logically be in the direction of this prevailing trend.
It was a pretty epic run. 1,420 pips to be precise. That how much we made on our 3 USDCAD longs over the last 2 weeks. Seems like we're ending 2015 on a high note. Many of our Premium Subscribers were also part of this, so we're equally happy for them.
Our USDCAD trade complex, as we like to call it, was a result of impeccable price and time precision, and sound risk management. The objectives that were initially set forth when we opened our first position early in December have since been met. All trades on USDCAD have been squared and we're flat through the weekends.