Here are a couple of interesting excerpts from a session we did with 888, a forex hedge fund head trader.
SNB War Story
FXRenew888: The best place to start re SNB is the introduction of the floor in Sept 2011... we had been running a long EURCHF position trying to catch the falling knife...
From around the 1.08 level....
In the following days it had a v sharp spike down sub 1.01 if I recall correctly... fortunately positioning was relatively small and we managed to hold on to it...for a move up to 1.15.... we then bought the dip in the 1.10-11 window and had a stop entry from more up thru something like 1.1220 - only looking for a move to 1.1350-1.1400
Quentin: Wow. That was a pretty explosive reversal
(Note Quentin is a FX Renew customer who was attending the workshop)
FXRenew888: I was having problems with my news provider that day and was in the process of resetting it when EURCHF took off to the topside.... I think not long after we'd got long on the stop entry - not seeing the news I saw it go from a 1.12 handle to 1.16 instantaneously, where I tried to sell half the position - the move was so quick that by the time I'd entered the order I got a fill 250 point higher than where I'd tried to sell it...
My screens were lighting up with calls, and fortunately saw the 1.2000 headline so held the position...
I'd say that in the following 3 years we would have been long for 95+% of the time that EURCHF was or dipped below 1.21
FXRenew888: On Jan 13-14th we had an investor shift funds which required that we square each position up completely across all investors, and then reallocate back to the existing positions.... I put on all of the trades we'd had previously, but for a reason I can't explain I didn't put the EURCHF back on.... 3 days later the floor was gone
Quentin: wow!!!!
FXRenew888: I'll put it down to good luck rather than good management - but in that case I'll take it.
Trade management
FXRenew888: Short term, I like to trade larger positions with an initial close profit to improve the average, but beyond that it really comes down to information and experience as to how I exit ST trades - there is no one strategy that I follow. For med term and especially long term trades, I will sit down at the start of each day and assess whether the factors that have resulted in the trade are still relevant, and if I was to open the trade at current levels, would I still be comfortable in that view. If I would, then I would continue to hold onto the trade. But if at any stage the key factors for which I have taken the trade change then I would actively look to exit, either via squaring up then and there, or a tight trailing stop. I don't follow any hard and fast rules in terms of exits... maybe something to work on!
Sam Eder: Thank you. Is there anything else you would like to add about how you manage your trades? Also with regards to how you manage your positions around news events? Or anything else around scaling in-out of trades
FXRenew888: Instead of calling it 'scaling in and scaling out' when running longer term positions, I view it more as running a core position, with an additional position to job over a shorter time horizon. I would do this around key shorter term levels, with the aim to improve the average on the core position during the day, and ending the day with the full core + additional position in the same intended direction. As I've mentioned earlier, this may not necessarily be the exact currency pair in which I have the core position.
For example I may have a longer-term short EURUSD position, but identify a key region of support in EURJPY over a shorter time frame. In which case I may buy a smaller sized (than the open EURUSD) EURYEN intraday possie for 100 pip rally, and then sell the USDJPY leg of EURYEN, which effectively gives me a smaller EURUSD long to match against my overall short position. This approach probably isn't best suited for inexperienced traders, as its quite easy for the wrong leg to rally - but when it works it can work v well.
Re news events - LT and medium term trades I don't generally need to manage unless they are close to the exit points. Depending on the perceived impact of the data point I may just square if they are close and look to re-establish. With ST/intraday positions I generally don't like to go into the release with positions unless I have a very high conviction regarding the likely outcome. If there is one thing that is very difficult to control over big news releases, it's the slippage from your stop - and I don't like to trade positions where I don't have absolute control over my exit at or near a particular level.
The above was excerpted from 888's workshop session. The workshop commences next week with an orientation session on the 12th December.
There is a special offer available to forexlive viewers if they want to join the workshop, it is ending tomorrow.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access)
