It’s been a tough month: Perhaps the toughest we’ve faced, and as a result of that the future direction 
will change somewhat. The details of these changes will be revealed in a future post, but for now I’ll focus on your monthly review.
To see further information on any of our current accounts, just click on the name of that account below and read the brief account summaries that follow. As always, please do feel very welcome to follow up with a direct inquiry. We’re always delighted to furnish genuine inquiries with live-account statements, read-only access to live-accounts and, of course, to address any concerns you may have.
Official March Results:
- Managed FX Miner: -53.57%1
- Weblink to detailed account reporting
- Managed FX Hunter: -2.01%1
- Weblink to detailed account reporting
- NEW Managed FX Razor: -0.4%1
- Weblink to detailed LIVE account reporting
The Miner account had a really bad month. The account was rightly long on EUR/CHF and short on AUD/NZD, according to the long-term correlation theory on which it is based. In addition to this, the Razor EA (which runs on the Miner account too) was also short the EUR, and that too was the right thing to do – until this recent rally.
And then, simultaneously, all of those pairs headed in the wrong direction such that within 24 hours account equity went from somewhere near reasonable, to extremes that pushed the smaller and more highly leveraged accounts to a margin call. (A margin call occurs when the sum total of all open trades exceeds the account balance, and the broker closes all positions at a loss to the account holder).
While we already knew that the possibility for EUR/CHF and AUD/NZD to head to these extremes was there, statistically it seemed extremely unlikely – and even more unlikely that they’d both do that simultaneously while the EUR also rallied against the USD… but, fundamental forces resulted in: CHF rather EUR’s (for now obvious reasons); AUD rather than NZD, because Australia is a natural resource power house with virtually no sovereign debt. After a strong EUR sell off, which brought some strong profits for the Razor, it now seems that the market wants EUR for USD’s, while the Razor EA has short positions down low.
Were it not for the EUR/CHF and AUD/NZD positions, or even if the worst affected accounts had received additional capitalization, then they would likely have had enough to room to breathe with their additional EUR/USD trades. All said and done now, it should never have gotten to this point, and the decision to first run the Miner as a stopless system, and later the same for the Razor system has proven fateful for our Miner account clients, the company and myself.
The Hunter account’s relatively consistent run of profitable trading continues with most account about flat for the month, albeit with a game of hedge on the GBP/USD pair for a period. The overall negative results was a results of two saftware malfunction on two accounts causing orders to unintentially close. The open position DD has continued this month, though to a lesser degree than it has otherwise been recently. The month finished off smoothly for the Hunter accounts, despite focus being somewhat diverted to the Miner account issues.
Given the lessons learned from the Miners, and considering the long-term trading of the Hunter accounts, these Hunters are now being traded with some variation to their strategy: That is, from now on I will take more regular smaller losses in order to prevent a large accumulation of any currency pair, and rely more on good entries and exits with shorter term stops. The idea is to remain more consistently flat to market, with no large open positions. The more recently opened Hunter accounts are now in profit and flat over the weekend. And, boy, I can’t tell you how satisfying it is to not have those accounts constantly in the market, exposed to ever changing fundamental market forces.
The Razor accounts performed nicely for the first part of the month, but were unfortunately caught in a series of short EUR trades placed on a Friday. The market then rallied significantly to our upper most risk tolerance, at which point I manually implemented a hedge. This gives a trader time to develop a trading plan to deal with the situation. I waited for that opportunity, which seemed to arrive on Good Friday when the market failed to reach 1.36; I placed a take-profit on the hedge at 1.3585 (with a protective long hedge again at 1.36 in case price rocketed north), and simultaneously added to the short position with stop-loss at 1.36. The market just had to hit that 1.3585 mark again, while not reaching the 1.36, and then drop far enough that I could close out all orders in profit without taking a single loss, and get the accounts back to flat for this plan to work out perfectly.
As I was manually installing orders to execute this plan, on the first account I manually closed the long and went short, before moving on to the next account. By this time the price had moved just below the long hedge, so I installed a take-profit very close, thinking we’d surely have another spike towards 1.36 – if not breaching it, thus reapplying the long hedge (this prevents the situation from otherwise worsening). Well, the price didnt come back and proceeded to tank – just my luck it seems this month. At the end of the day I will again need to await the right opportunity to try the same plan again until it works; the only alternative would be to manually close all orders and take the open position hit of around -30%.
This month, the Self Managed Gold account didn’t close out any trades, which is hardly surprising given the downside seen in gold, care of the recent flight to the USD. Still, it remains very strong in the face of an uncertain and volatile economic environment. This is the suggested account of choice for folks wanting core long exposure to Gold, and who are willing to take the relatively small investment of time to learn how to employ the system, and importantly to understand the associated downside risk. It’s essentially no riskier than the same quantity of physical gold but with any increase in leverage comes an associated increase in risk.
The sum total of everything that is on my plate right now has made me realise that I need to become more focused on a fewer trading systems myself, particularly the stopless systems that require 365 days a year attention. And rather, to work more on more stringent risk management, while further diversifying into a quality range of forex accounts and services that do not exclusively rely on my own input. I still feel there’s an immense amount I can offer, but the format of delivery will need to be changed to leverage it more profitably for you. As I stated previously, the details of all this are forthcoming.
If you have any questions please do feel most welcome to contact us, and we’ll endeavour to get back to you by the next business day.
Sincere Regards,
Adam
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Please note that figures above are gross of performance fee where applicable and that due to different account balances and the fact that official results post outs represent an average of all accounts, individual account-to-account performance will vary accordingly. ↩
2 Comments
Hi Adam,
Your services were introduced to me via David MacGregor (Sovereign Life). I was particularly interested in your NMI Chrome FX Managed Accounts. I was about to call David and ask if he had had any feedback from his clients about your service. ( I didn’t though!) Instead, I thought I’d go to your site and do more research. I could not find the Chrome account mentioned. Has it been ‘shelved’?
I am pleased with your honest commentary that gives an insight to your trading ‘habits’.
I am however concerned that you took a 53% haircut on the “FX miner”. It suggests to me that you had no firm trading plan in place – a plan that might have allowed for (say) a maximum loss of 20% in any given month resulting in an exit from all trading positions and a halt on trading following a review & monitoring of the market for (say) the next month before entering the market again.
Your comment……
…….. seems to confirm the lack of trading plan to cover amongst other things, a potential belting in the market.
In current times when the markets are extremely volatile, a trading / money management plan is essential…… as it is at anytime!
I am keen to invest with. Can you give me your thoughts on the next few months as the PIIGS get roasted and banks run out of ‘paper’ (Monopoly) money.
Hope to hear from you soon,
Cheers,
Peter
PS – $1AUD = $1USD surely by end of year when the world is yet again in total financial meltdown. What are your thoughts / plans in that event?
Hi Peter,
Always nice to hear from a fellow Sovereign life member, and by all means post a question at that forum too – some other members may care to post their replies.
Regarding the Chrome account: I’ve been keeping the promotion relatively limited, although I’ve known the traders behind it for some years now, and I’m convinced of their ability and experience. And after as many experiences as I’ve lived through, I’ve become both more cautious and at the same time increasingly definite about what it is that can be considered a good risk. Mostly the traders behind Chrome run scalping accounts with what I believe is an exceptional data feed. But, they are still like all scalping systems with their high probability trades versus large stop-loss orders (and consequently unfavourable risk v reward trade ratios). I’ve seen some great progress, as well as seen occasional fairly significant pullbacks. They trade some fairly advanced concepts in their newer accounts, and I don’t think it’s in dispute that they are aggressively geared. And that’s fine if you understand and accept in advance the pros and cons of such an approach – which could lead into another topic in itself.
Regarding that 53% haircut: it actually represented a total portfolio loss in some cases, that is with those accounts that were over-leveraged and not sufficiently capitalized to absorb a worst case scenario. To a greater degree there was already a plan set out for that in advance, in that we specifically leveraged those lost accounts by twice the amount for the range it was intended to trade, and before doing that discussed with those clients the possibility of having to float those accounts through any period of adversity. However, in the event, the simultaneous combination of AUD v NZD strength, and weakness of EUR vs CHF pushed them further and faster than you might otherwise think is “probable” given the core logic of the system (stopless regression to a long term mean average).
None-the-less, I do confess that I hadn’t give enough forethought to the absolute worst-case scenario at the outset which resulted in those losses, and the need to hedge. It’s been the stimulus for a significant overhaul of our systems, and in the month since I’ve essentially been trading all client accounts back to flat, one trade a time in a manner set out via regular and direct communication with each client. Please check back to the blog later today, as I’ll be making a new post with charts and methods to give even more transparency to what’s being going on behind the scenes recently.
From a business perspective, my main focus is on accumulating an attractive track record based on disciplined, hard-stop entry trades with favourable risk:reward ratios. Fibonacci numbers essentially form the core of this method. To apply myself fully, client aquisition and marketing are taking a bit of back seat for me, although I’ve some help in that department, by Gary (who’s also responsible for the creation of this new site).
My thoughts on the PIIGS: Well, usually what occurs when there’s an issue with a country (or the whole global economy right now) is for the government to rack up some more debt on the nation (on their own citizens, actually) and simultaneously creating a whole load more “paper” currency. Of course, the more of it you print, the more it devalues… and that’s a big part of the reason why countries like Australia (which don’t need to print as much money) have kept stronger currencies relative to the others. Nothing new here… it seems EUR is a good short bet, but if there’s one thing I have learned above all else – it’s to consider the worst case every time you open a trade. No matter how sure it seems, no matter how much the fundamentals support the trade… think about where you will draw the line in the sand to take any loss if it goes against you.
So Pete, probably the best advice I can give you is to keep doing what you’re doing: enquiring about the worst case first and keep an eye on where we go from here. If you’ve got anymore questions, I hope we’ll be able to muster a reply worthy of the time it took for you to make an inquiry with us.
Kind Regards,
Adam