How do you minimize risks when EURUSD moves 100 pips up and back down in 2 hours?

And this happens quite often.

EURUSD, 5 min

There are a few choices to minimize your risks in times like these:

1. Stay on the sideline until the dust settled.
2. Target higher time frames with larger stops and smaller positions.
3. Partner up with someone from another timezone.
4. Set a trailing stop.
5. Set alerts to wake you up on extraordinary events.
6. Use a position management bot.

I opted for #6. What about you?

The picture is worse in equities as you are locked in your positions overnight.

S&P500 ETF

Bearish USDJPY on 19th week of 2011

I am going bearish on USDJPY this week using my QTD system. No position is opened at this point. I am merely entering my sentiment into the system to trade for me. Figure 1 is a daily chart of USDJPY. Notice it’s lack of life despite the USD making headlines last week. Figure 2 shows the move with a US dollar index, USDX, daily chart. Furthermore, according to the order book on USDJPY, there are massive bullish positions in the red (at a loss) which make this pair ripe for some bull squeeze.

I am going short on NZDUSD as a hedge on this move. It is my favourite long USD pair these days.

USDJPY, daily

U.S. dollar index futures, USDX

First QTD trade, 0.19% gain long EURGBP

My semi-automated trading system, Quantised Trading Desk, closed its first trade this week. I was bullish EURGBP and USDJPY, and bearish NZDUSD as per the previous discussions. The QTD system saved me from the premature calls in both USDJPY and NZDUSD by not making any trade this week. That, in and of itself, has made me very happy with QTD’s first week of live trading. Particular in light of how fierce that USDJPY down move has been.

As a bonus, QTD entered a long position in EURGBP for a small 0.19% gain as illustrated below. My parameter were a maximum of 0.25% risk per position. The gain could have been better if it weren’t for that 61% retracement. Not that I’m complaining as I haven’t even looked at the market this past couple of days while the system is trading for me.

USDJPY touched my threshold support price 80.70, my bullish sentiment needs to be reevaluated. NZDUSD just cracked a higher high (marginally though), so I’m easing on the bear button for now. EURGBP is testing some resistance to, so I’m not so eager to dive in again. Overall, I’ve been 2/3 wrong. I’ve told you before that I’m very bad at timing the market. That’s why I developed QTD to trade for me.

Seeing that it’s a long weekend, and I’ll be way from town, I’m just going to shut down my remote trade server in London until next week when I can have some time to re-do my analysis.

EURGBP, hourly

Bullish EURGBP as hedge and Bearish NZDUSD as diversification

I’ve had more time to study the market tonight and is running a second and a third instances of Quantised Trading Desk (QTD) to trade 3 currencies in total simultaneously. For my dollar bull sentiment, I’m dividing between USDJPY long and NZDUSD short. QTD still hasn’t taken a position in USDJPY in the past 24 hours. That’s a good thing as USDJPY is still drifting downward today even as the dollar is gaining some ground. My line in the sand is at 80.70 for USDJPY and above 0.8100 for NZDUSD.

EURGBP long is a hedge against my dollar longs. Again, I’m not making any trade at this point but merely setting up QTD to wait for the right moments to enter. A break below 0.8660 for EURGBP would challenge my bullish bias.

These three currencies should be my complete market bias for a while. I’m just going to let QTD do its thing and trade for me. Hopefully this will be the last you’ll hear from me about my market bias for a while.

NZDUSD, weekly

EURGBP, weekly

Bullish USDJPY on week of April 17, 2011

I have unofficially launched my Quantised Trading Desk (QTD) expert system this weekend as the system is ready for live trading after almost a year in development. You can’t miss the announcement if you visit the new frontpage of this blog. So, I won’t talk about it anymore here. The purpose of this post is to discuss my forex trade. It’s been over 7 months since I’ve traded on the forex market. I have been working on QTD during all these months to improve my overall trading. Anyway, let’s dive right to it for my first trade back into forex.

I am bullish on the U.S. dollar this week. Why?

The Financial Times is letting on rumours that the US Fed is signalling an end to quantitative easing. Coincidentally, the U.S. dollar appears to be testing supports across all major currencies. Secondly the US equities market hasn’t been able to make higher highs even as the dollar is marking new lows. Still, I’m not one to call a bottom, nor am I hunting for one. This is merely a good risk-reward trade to gun for an obvious move.

In particular, USDJPY appears to be the best of the bunch as its been holding well over the past few months while the dollar crumbled. The fact that Europe and US are rumoured to be lighting up on the money printing whereas Japan’s money printing press is on full steam for the quake reconstruction (Yen bearish) is a decent excuse to place some chips on USDJPY.

You might have noticed, I haven’t specified my entry price, amount, or stop loss price as usual. This is because I am relying on the Quantised Trading Desk expert system to trade USDJPY for me. QTD will monitor the market for me and execute trade entries and exits as it sees fit to accumulate a long position in USDJPY. All the risk management and quant analysis are built into the system. So I don’t have a position yet because I’m waiting for QTD to do the grunt work.

USDJPY weekly chart