Tuesday, August 15, 2017

Is the US dollar’s decline since January 2017 a ‘Black Swan’ event?

The OmicronFX algorithmic Forex trading system is proving its reliability by being consistently profitable throughout 2017. It was able to ride out a long-term extreme global economic event, and still show profits.

The US dollar decline as an extreme economic event

The US dollar has been in a prolonged fall since the start of the year. On July 23rd last, Morgan Stanley said that “Our MS positioning indicator shows the most extreme USD bearishness since its inception in 2009”. According to The Wall Street Journal on Aug 7th, the US dollar has been “… suffering through one of its worst stretches in years”. The reasons for this fall have to do with political events in Washington as much as with economic announcements from the Federal Reserve - specifically, the belief by the markets that Donald Trump will not now be able to carry out his tax reforms because of the difficulties he is having with the US Congress, and even the Republican Party, for which is supposed to hold the presidency. It is now also understood that the Trump administration has come around to the belief that a weak dollar is good for the US. However, there are real signs now that the Greenback has reached a significant low, and is starting to rise again. Fundamentals, including payrolls, retail sales and even GDP in the US are showing increasingly valid signs of what could be termed robust good health.

The factors for success

The success of the OmicrFX system in coming through this event was a combination of (1) the capital retention policies we have always used, (2) the price action experience gained over the long development period of the software, (3) as much diversification as was possible (bearing in mind that ALL currencies ultimately respond to what is happening with the US dollar), (4) the fundamental principle that the system incorporates of always playing both sides of a move, so that there will be hedges in place for much of the time, and (5) last, but not least, patience and perseverance during drawdowns. This last was made possible by careful monitoring of the key indicators of leverage used and drawdown size, to ensure that positions were never in danger from elevated gearing.

The system is now well developed

It is important to state that this is not a solicitation for investment. We cannot do that until such time as we are regulated. However, through our professional advisors, we have engaged with the Central Bank of Ireland with a view to becoming regulated under MiFID, the Markets in Financial Instruments Directive of the European Union, to allow for trading on behalf of clients throughout the countries of the European Economic Area (EEA). This process is both expensive and time-consuming.

If you would like to receive regular updates on the performance of the various Forex trading accounts that we operate, as well as our progress towards regulation, please send an email to the following address: seamus.mckenna@omicronforex.com, or sign up to receive occasional emails by clicking here: http://ethicalhft.com/Managed.html

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