Friday, December 20, 2013

How OmiCronFX handles potential extreme volatility | Yesterday’s account performance

The chart above shows the gyrations in the Aussie against the US dollar when it was announced by the U.S Federal Open Market Committee (FOMC) on Wednesday that bond buying to stimulate the economy, the so-called Quantitative Easing (QE), was to be phased out, or “tapered”. It would seem that, as is normal on occasions such as this, the institutions with the power to move the markets did not quite know how to react. This is despite the fact that tapering has been on the cards for some time now and it was well known that, when it came, it would be a positive for the U.S. dollar.

Whatever the reason for such extreme bi-directional volatility in the markets (the Aussie was by no means the only currency to be effected, not to mention equity indexes), such activity can kill trades and, along with them, account equity. Therefore our policy has been to stay on the sidelines when announcements of this sort are to be made. The good news is that they are normally well advertised in advance. So we were out of the market on Wednesday.

Yesterday, Thursday, was a different matter. When yesterday’s commentary was being written, the OmiCronFX Silver Trigger was standing ready to enter trades in EURUSD (Short), Gold (Short), USDJPY (Long), NZDUSD (Short), AUDUSD (Short), and AUDNZD. The directions had been chosen by reference to our fundamental analysis, assisted by the Mandelbrot routine, which was run to help with the Technical Analysis of each currency pair.

Yesterday’s account performance

During the day the only one not to perform was AUDNZD. It went in the wrong direction. However, this was compensated for by the performance of each of the component currencies (Aussie and Kiwi) against the US dollar. In this way we were able to achieve an element of diversification, which is always good for mitigating risk. When it became clear that the AUDNZD pair was not doing the business, the trades it was involved in were eliminated ruthlessly, despite the fact that this particular pair has been good for us in the past.

All other trades were very successful. We have now taken something off the table in each case, and tight stops are in position as we move into a pre-holiday period in which trading is expected to be light and, therefore, a little bit more unpredictable than usual.

After yesterday’s performance each of our accounts, which can be inspected on (search for “OmiCronFX”), is considerably further enhanced.

1 comment:

  1. This is really great article regarding trading and performance thanks for this really helpful.