FT has been trading full time from home for two years, with nothing but four kids and a beach to distract him .
He fills his spare time with weight training and rugby, though more coaching than playing these days.
FT mostly trades the forex markets and although he plays FTSE on occasions his bread and butter market is £$.
He likes to think that his technique is evolving but still hasn’t the temperament or money to back the big calls. He prefers to trade between 1 and 3 times a day, aiming to take regular small gains, but feels part of the evolution is in not dealing if the conditions don’t feel right.
Volkswagen Driving The Dax Higher
Morning folks,
Blimey, what a crazy twelve hours; equity markets looked to be putting in a half-decent performance, then they toppled over with the Dow losing 300 points in the final throes of trading last night. Blow me, this morning the Nikkei hit a new low then rallied to finish over 600 points higher. Equity, commodity and forex markets all reversed previous trends in early trading and I’d traded in all 3 markets before 8 o’clock.
There’s more than a touch of Halloween to these markets; it may be a few days early but strange things are happening. Last night I returned from playing pool to find the Dow sitting on 8000 (it had been 8300 when I went out). My limit order to buy back a £2 FTSE short bet at 3712 had been triggered and I was debating opening another short ahead of the morning session. Phew! Thankfully I decided against it.
Overnight the Nikkei and the Euro touched new lows, but by 7 o’clock the markets were buzzing. The Nikkei had bounced 600 points, early FTSE indications were just above 3900 and gold had stuck its nose above $750. The Euro was back above $1.25 and Sterling had a $1.56 handle.
I couldn’t find a good explanation for the moves so when the markets looked to be turning in unison I decided to get involved. I sold GBPUSD in a fiver at $1.5580, opened a further £2 short bet in FTSE at 3910 and sold £1 of gold at $749.1.
I’d like to claim that I hit all 3 oranges on the fruit machine, but my fortunes were more mixed than that. The forex trade went to plan. I closed out my bets at $1.5545, $1.5495 and then back at $1.5524 before my final £1 was stopped out back at breakeven. I made a bit over £200 on that trade.
My FTSE short was poorly timed; the index opened way above my trade and I was soon £100 underwater. But it didn’t take long for the trade to go my way, showing me £100 profit. I decided to hold on for more in these volatile markets, but at the time of writing I’m back in the red on that one.
Looking at the chart you might think that I got gold right as well. And in my mind I did, but that’s all. This was a useful lesson; one that cost me £30. I hardly ever make money out of gold. It’s not my market and I’d do well to remember it. If I’d had the conviction to hold my position I’d now be $6 onside. But because I don’t specialise in this market, when the early trade went against me I closed out for a small loss and kicked the cat.
So, after all that excitement I’m about £150 up, with late night gains of just over £200 from short FTSE trades to add in. At the moment I’m running a £6 short on FTSE of which £2 is slightly red.
Hey, have you seen the difference in European market moves? FTSE is up about 30 points from 7 o’clock, the Dax is up 300 points! And this is almost entirely down to one stock, VW. Check out the chart:
This morning Porsche announced plans to raise its stake to 75% in Volkswagen, sending the tightly held shares up by over 90%. Volkswagen is now the world’s largest company by market value and there are several short traders out there now with testicles the size of peanuts. VW had been a popular target of short sellers, but this morning they found that trying to buy back their positions was harder than holding a conversation with Kerry Katona.
Happy Trading
October 28th, 2008 at 11:46 am
Hey FT,
Speaking of currency markets…how do you see the the euro fairing out against the GBpound over the the short-term. I think its on its way back down towards 75pence(maybe lower) to the euro over the next couple of months but would be interested in hearing your opinions on it.
CM
October 28th, 2008 at 12:11 pm
Can the rally be sustained this time? I’m still looking for FTSE to move up to at least the mid 4000s, possibly higher. I like the look of the 3800-ish base and double bottom — and volumes in the latest sell off are normal, way way below those seen during the panic of the first bottom. Stay/go long.
October 28th, 2008 at 1:02 pm
Well, re EUR/GBP, I’m short, and so far that trade is going in the right direction - nearly 100 pips from where I shorted it at 8079. I think 1 EUR ought to equal 0.7GBP, not 0.8. So that’s what I”m gunning for.
In an act of randomness I reinstated my USD/JPY long lateish last night and that’s going in the right direction too. Closed out my Dow long when it got perilously close to where I’d started yesterday evening, but left the FTSE long alone and that’s very happy now - 250pts up. So I’m back long. Just opened a long Dow and long S and P too,
Very nice. Question is, can any of it be sustained? Or are we just going back down the skislope? But I like Ken’s view.
And just sold gold again at 744. So far so good…
October 28th, 2008 at 1:14 pm
Interesting note here from Morgan Stanley (via FT Alphaville).
I completely agree with it, although my USD/JPY positioning is in the opposite direction at the moment. (EM = ‘emerging markets’). Get out of Brazil, india, russia and china now is the message if you’re not out already…hence the miners taking a caning (although Ive still got my BHP Biliton shares…)
(1) The dollar rallying in a recession has been a long-standing call of ours (since last December), but the extraordinarily powerful rally in the USD since July suggests to us that the underlying forces propelling the dollar higher may be stronger than I had expected.
(2) At this pace, EUR/USD moving toward parity and USD/JPY trading toward 85 can no longer be ruled out. Risks for global growth are still pointed lower, cross-border risk reduction will continue, which will be supportive of the USD and JPY.
These downside risks, in my opinion, may not be priced-in in risk assets, particularly not in EM.
The risk of a first global EM currency ‘moment’ in modern history is very high (90% probability), in my view. This violent sell-off in EM currencies is likely to only be in the ‘third inning’. Real money investors remain trapped in their positions in EM, and by and large have not
reduced their exposure to EM.
. My guess is that opinions will quickly shift from ‘this is unfair as
EM has solid fundamentals’ or ‘EM assets have already fallen too much for investors who haven’t
sold to sell now’, to ‘could the EM story have been exaggerated all along?’ I belong to the latter
camp and believe that the sell-off in EM FX reflects much more than just the cyclical pressures,
and warn investors that the secular story for EM may need to be comprehensively and critically
reviewed.
The EM downturn will be the second epicentre of the global crisis, with feedback effects hitting
October 28th, 2008 at 1:43 pm
Hi CM,
just back from a stroll along the beach.
EUR/GBP?
I’ve not traded it for a while, but here’s some thoughts for what they’re worth:
Fundamentals:
I’m open to persuasion on this. To me, both side are deep in the brown stuff, and both are late in responding to it. There’s scope for large rate cuts from both and even the ECB look willing to act now.
Offsetting factors are the media-driven ‘It’s another Sterling crisis’ against the fact that a lot of countries built up reserves in Euros and some of those countries are needing to sell Euros to prop up their own currencies.
Technicals:
The dark arts stuff like RSI and MACD suggest there’s room for the rate to move higher. Short MAVs (14 and 21 day) also help the move up, though the move hasn’t been established long enough to be conclusive.
On the other hand the past three days have seen lower highs, suggesting little buying interest above 80. And the pair fit a reasonable trading range where the price doesn’t spend a lot of time between 80-81.
So yes, a move down to 77.50 looks a reasonable bet; I reckon it neds to break trading range support there first before visiting 75.
Would I sell now? Not sure, i’d probably wait to see how it closes. I’d like to be more certain that the up move is over and would wait for a close below 79.50. I’d also feel more comfortable if the MAVs were pointing down rather than up, but that’s just me.
Hope that helps a bit.
October 28th, 2008 at 1:55 pm
Yeah Ken,
I’m trying to stay alert to a possible bounce in equities. I’ve trimmed my short position, which hurts as I opted for the -£190 rather than the earlier +£100. This morning’s move looks to have crossed the recent downtrend and we’ve got a few days of interest rate an month-end considerations.
Not convinced yet, but I’ll stay light on my feet.
October 28th, 2008 at 3:07 pm
Thanks for that FT
October 28th, 2008 at 9:24 pm
This is just getting ridiculous. Dow up nearly 11% in a day? Some years it doesn’t even do that much. I’m not complaining though.
The short gold trade didn’t work. I’m just wondering if we will see the beginning of some money going back into commods - a bet on reinflation? But I think we’d need to see a more sustained equity rally first, and so long as the dollar appreciates it’s hard to see why gold would want to go up. Perhaps some hedging happening ahead of a rate decision?
October 28th, 2008 at 9:53 pm
And the yen has collapsed against the euro, and the dollar is up substantially against the yen. My reading of that is that there’s some revival in the carry trade = risk appetite = some weakening in the dollar if there’s a rate cut tomorrow? So my gold shorts not looking so clever. If the dollar goes down, then we are looking at reinflation - time to consider go long on oil, (there’s a huge correlation between EUR/USD and oil chart), gold and some of the other metals? FTSE should be hot tomorrow though. Good for me as I”m long a bunch of index positions plus long USD/JPY.
However I still think EUR has further to drop against USD. There will have to be rapid rate cuts. So I’m not buying gold or oil just yet.
October 29th, 2008 at 11:16 am
Hi all,
Hope everybody well and not getting too stressed out by the mayhem! Does anybody think we’ve reached a bottom yet in the markets? I’ve been bullish since the FTSE hit around 3700, although wondering if these levels will be reststed over the coming weeks. After a really good run, i’ve decided not to trade today after the volatility yesterday. Getting a bit too hot too handle for me
Also, the memory of last months Fed cuts not matching expectations and sending gold and the indicies all over the shop still painfully linger.
As always, been enjoying the articles and informative chat of you all
October 29th, 2008 at 11:57 am
Hey Marcus,
I think we’ve reached a bottom — for now.
I’m targeting 4500 on the FTSE. Milestones that need to be overcome on the way there are around 4280 then 4375. If 4500 is convincingly breached, there could be a clear run all the way up to 5000.
Then get your shorts on.
October 29th, 2008 at 1:33 pm
Wouldn’t be so sure that we’ve reached a bottom. Last 3 weeks have shown consistantly lower highs, i think FTSE will sink to 3600 maybe even 3500 before we’ll see a bottom. Definately wont be going long at current market value.
October 29th, 2008 at 2:02 pm
Hi Guys,
Interesting opinions. I still can’t make up my mind which way to play at the moment, which means i think i’m gonna sit on my hands and resist. I don’t particulary want to play short currently, although on the other hand I can’t find a decent level in which to go long. Umm, perhaps I’ll wait until after the Fed has done its business tonight and see what happens.
October 29th, 2008 at 2:21 pm
Wise decision Marcus,
I was told a long time a go that in trading there is a third option, the ‘don’t trade unless you’re sure’ option. If you’re not sure, the chances are you’ll jump out of the trade the minute it takes a wrong turn.
October 29th, 2008 at 2:29 pm
Hi FT,
I think your dead right, i had a dabble earlier but certainly didn’t have the conviction to stick around. I’m somewhat surprised that 85% of people of PP are still short. I guess a pullback will come eventually, but i’m wondering what signs people are seeing that i’m missing just at the moment.
As a complete beginner, will the new President in the US have a positive affect on the markets? My naive thinking is that it there will be some kind of honeymoon period….like a new football manager having a positive spin on the team (albeit perhaps short lived).
October 29th, 2008 at 3:40 pm
I think there are all sorts of factors coming together to give a bounce in equities, and there could be a “good riddance Bush” effect, whoever gets into the White House, and especially if it’s Obama as it’ll trigger a wave of New Deal-ish (and inflationary?) spending. On the other hand, if the Fed disappoints this evening we could see a nasty sell off. In fact we could see a sell-off either way - there will be some inevitable profit taking after a 10% rally…
So I’ve scaled back my index positions but I’m still running small core longs on FTSE, Dow and S and P. But I may cut them soon if I think things are getting too wobbly.
Big bounce in commodity prices today, so the miners are up a lot. Went long Antofagasta on the news about copper prices jumping. Also went long on Barclays in anticipation of some sort of recovery in the US financials - just a small punt but so far it’s in the black.
EUR/GBP short is doing the business..EUR/USD not so hot. With a rate cut on the cards, the dollar might depreciate somewhat, and if so then that means commodity prices rise - hence some of the strength in the miners and oil stocks? If I had the margin ( and nerves) for it I’d probably have put a long on platinum and palladium by now . Palladium in particular is very cheap compared to its year highs. If there’s any kind of recovery/bottoming out then the precious metals will rise.
Still think USD has further to go upwards though, although we’ll get some messy volatility in the next couple of days. I think the hedgies are trying to get back into the reinflationary bet though. And lots of stuff out there about big funds rebalancing portfolios out of bonds and into equities. Bit of a buying spree.
October 29th, 2008 at 4:39 pm
I took profits on my long S&P when I went £500 ahead net of my seriously losing Oct option. Nice turnaround and I didn’t want to squander it. Still have a very small long S&P but main focus now on FTSE.
Toying now with the first key milestone at 4280 — clearing this will break the lower highs trend that CM mentions above and would be a bullish sign.
October 29th, 2008 at 4:46 pm
Yep, it also breaks the 21-day mav at somewhere around tht level. Did I mention I’ve got rugby coaching at 6.30? perfect!
October 30th, 2008 at 11:01 am
Short USDCAD with oil rising (thank you OPEC) and Dow rising (thank you Ben). Looks like this is a short-term carry trade!!!
October 30th, 2008 at 11:06 am
AUDNZD hourly volatility is the strangest thing I’ve seen.
Was range trading the last week, but now looks like a bullish trend starting.