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What was the Fed thinking?

So many of you have seen that we wrnt from an Epic week to a disasterous one in the blink of an eye. From a 50% gain to 60% drawdown in one night. You are probably wondering how that happened?
Well the short story is the FED contradicted itself and ignored the criteria it had been setting for the lat few years of full employment and inflation being the key things it would watch. Andthis shocked the market and caused a considerable dollar dump. 
I do not understand why the Fed did what it did. They have just lost all credibility in my eyes by ignoring their own advice. The fact is unemployment has been low for a while and significantly more jobs than the 100,000 Janet Yellen has called for have been added each month. NFP has been considerably over 200k for quite a few months now. Also core inflation now stands at 2.3% above he Feds target of 2% and PCE is currently 1.7%, well above the FED’s end of year target of 1.4% in 2016. Add to this Yellen opening with the phrase “our views on the economy remain the same as December” yet they cut their mediam forecasts from 4 hikes to 2 makes no sense! Naturally the market kept selling dollars. I should have guessed something was wrong when someone started dumping billions of dollars in the 40 mins before the Fed, but I assumed it was just people profit taking or positioning. Maybe someone knew something we all didn’t.
Anyway our intention was to make a killing. We thought that the FED would be hawkish as the “data they were dependant on” was muh firmer than they forecast and we did not expect them to cut their forecasts. We were selling cable hoping it would go back to sub 1.40. But of course the BOE could bot let the fed have all the spot light and Carney (who thinks hes George Clooney) who had annouced days earlier that the BOE had room to ease, starting singing a hawkish song. Naturally we got totally nailed.
Anyway balance has been increased but real money (equity) crashed. Hedges are in place that should control drawdown and we are still net sellers of the pound. I feel Brexit fiasco can cause more pain and that continuin strong us data will help push the dollar up even if the fed is trying not to.
To be continued tomorrow, out of time now.

14 Comments

  1. I know very little about trading and the fact that I am, somehow, understanding what you’re saying here, only means one thing, you’re doing a great job, Mohammed! I have always enjoyed reading your posts and I always will. Thank you for that, bro! and now, let me tell you one more thing, being in such situation, I know that this market is relatively dangerous and no such things as guarantees, do exist in such conditions. but I am sure of two things, that we already got all the damage that we could possibly get, the worst has passed, and whatever happens now, You Can Control it, Bro! so Let’s make some, Mo! =)

    1. The sheer size of the drop. A major pair like isdjpy or eurusd with such high trade volumes will not move that much unless the Volume is in the billions.

  2. No country has better economic data than US. I believe you made a good decision Mo. Don’t worry about that the dollar will raise sooner or later.

  3. First i lost around 1000dollars with this luluinvest on etoro, then i lost almost the same with you, i startet account with you.. Becaouse I trust .. Can you call me ??
    …. Thank you

  4. Hello Mo,

    first I hope you are doing well and thank you for all your work so far – also concerning our et***-experience. Nevertheless I am confused about our HF account developmt. Perhaps I misunderstood your trading strategy for HF but I was expecting much lower volatility – a slow but steady developmt. However, the reality is that in the last weeks there were 50% gains and 60% drawdowns. In my opinion this is far too much when it comes to a long-term nest egg fund. What about our goal of achieving ~1% each day for the next 2 years. Perhaps you find the time in the next weeks to explain again the money management and trading strategy for HF.

    Thank you and have good week! Kind regards

    1. The aim is 20% a month for the next 2 years. The massive gains and drawdowns were not planned. They happened since the Fed shocked the market. A theme I wrote about in great detail. Only money management did save us in this case as in the other cases. Many got wiped out multiple times these months after central banks contradcicted themsevles. We have gone through multiple periods of big drawdowns in this time but each time we survived and then went back to profit. We cant make 20% gains without sizeable investments and when central banks shock, and pairs move 300 places drawdown will happen. We are trading very agressively because thats our goal.

        1. Personally I think there is never a bad time, as today shows (we recovered all drawdown without capitalising on the brussels tragedy) but i will let the others answer you. They will be more fair. I may be biased 🙂

          1. Thanks Mohamed… The truth is i have already invested in your PAMM before even sending my previous question 🙂 & waiting for HF to allocate the fund to your account.

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