As those of you who have been following and copying for the last few months will know, my current strategy or “game plan” if you want to call it that revolved around my expectations that the FED would begin to normalize rates later this year. Compared to many others who said it was an impossibility and that it could not happen and bet against the USD, we took advantage to gain from USD strength and managed to outperform the general market during the last few months.
Entering December, I expected this to continue, but many things happened that we did not expect that hurt our trades:
1.) Risk aversion happened due to issues between Turkey and Russia.
2.) Commodities unexpectedly fell (we knew they would decline, but did not expect a crash!).
3.) Draghi and the ECB failed to live up to the hype they created and delivered less than the market expected.
4.) OPEC, despite signalling an intention to co-operate with the rest of the world, left quotas unchanged and even boosted production.
All of this has resulted in this month being a terrible one for us. However it changes my fundamental perception as follows:
I now believe that while the FED will raise rates, in line with market expectations, their conference afterwards will state one of more of the following:
A.) They see an overpowered dollar a problem.
B.) They see future increases as being slower than initially expected.
C.) They are concerned over hydrocarbon prices.
I feel that all of this will actually serve to initially weaken the dollar post FOMC decision time and while it will recover towards the end of the year, presently, Wednesday will probably not be the best time to find yourself overly long on the dollar.
Part of successful trading is knowing when you have to let go, even if it means taking a loss, so this week we will try to close our current positions ahead of the FOMC meeting in as beneficial a position as possible and minimize our current losses for this month so that we are in a stronger position to trade when we have a clearer picture. At present, I do not believe that anything can be gained from stubbornly refusing to admit when the fundamental situation has changed. Therefore, if we must close at a loss, then so be it. It is better than effectively gambling with uncertainty and while we have the spare capital to extend SL’s massively, I do not wish to lock people into trades, nor do I wish to tie up capital that can be used for trading and earning.
Some months we win, some months we lose and from the looks of it, thus far this month we are losing. The only thing left to do, is to minimize those losses and make sure that the account does not get damaged beyond a position where it no longer can be used for profit. Sorry that I can not give you better news, but unfortunately everything has just gone wrong for us this month despite our best efforts. I am not going to make excuses or blame other people because it was my decisions and miscalculations that causes us these losses this month. However it is not the end of the world. We lost more than this in July and were able to bounce back strong and recover, also the month is not over yet, so let us try to make the most out of this situation. Please know that every step I take will be in the interest of the community, as always.
Thanks for understanding,