Help with QE3

Discussion in 'Trading' started by spencer, Nov 30, 2012.

  1. spencer



    Beginning on August 6th (Monday) this year, I experienced a massive two week drawdown with my currency day trading. After the two weeks, everything was back to normal. The pairs involved during the period were any USD, JPY, EUR, GBP and CHF liquid combinations (I won’t bore you and list them).

    I place 1 to 2 trades per day per pair, and usually have 1 to 5 pairs on at one time (usually 1 to 2). I rarely skip a trading day. I occasionally have three losers in a row per pair, and have never had more than five in a row per pair during my career up until this drawdown, where I had over 8 losers in a row (BIG losses, the entire two weeks) per pair, and most pairs had losers - so I effectively had 20+ losses in a row, with only a couple of modestly profitable trades.

    During this time, QE3 was moving and Bernanke spoke about this on the morning of the 6th (Monday). Possibly there was something else involved with the yen, since spot yen pairs are my second-most traded securities. I don’t want to jump to conclusions, but it seems clear the fed was the cause of this. I’m confused why, because trading is trading and not long term investing. I guess everyone changed their daily routines for those two weeks to cope/figure out QE3, and that screwed everything up.

    The trading style that broke down here is very objective with little desecration. It is not fully automated because it involves daily news reading/analysis, which my CS majors obviously can’t program. It is one of only three currency styles I use, the other two being bread and butter interest rate arbitrage and futures calendars. I have legitimately traded my intraday style for years (and further in history on the simulator), and have never experienced anything like this period. I have been making good money since August to this day without any problems.

    Friends of mine did not speak directly on this, but commented on how QE3, while viewed positively, was producing “funny numbers” (direct quote) for everything - possibly they experienced something similar. I am very used to GDP, FOMC minutes, ECB, rates and other critical news releases - I suppose I just was not prepared for QE and did not understand it because it is a very rare event.

    Thanks for any discussion and insight.
  2. 1) "Discretion". :cool:
    2) From time to time, weird "feces" can happen in the markets. If you're overleveraged with correlated positions and/or get stubborn with losses, you can get "hurt" badly. :( :eek: :mad:
    3) It's more important to focus on risk management instead of knowing a "logical" reason to explain price movement, after-the-fact. :)
  3. smaranam


    "Help with QE3"... I agree,it`s hard to spend,but i can help!:D
  4. spencer


    Sorry, I was typing on an iPad, it tries to auto correct spelling.

    I'm not overleveraged, I'm just trying to figure how QE has its effects when it is announced, and how it might affect markets intraday going forward. I pulled out of that drawdown several weeks ago, I was just surprised because it's the worst drawdown I have had in awhile. It was short, but the losses were huge and consecutive. You are right, I shouldn't focus on it too much. Thanks for your post.