Back in the black! The return for the month was 1.03%. It’s not a huge gain, I concede, but a win is a win.
The lifetime equity for QB Pro
Performance didn’t really go anywhere this month. We floated 2% above and 2% below zero most of the time.
The QB Pro performance for September 2015 only
QB Yen came in again at a minor loss -0.61%.
The performance for QB Yen only, Sept. 2015
I’m a bit disappointed with the QB Yen performance so far. Nothing seems wrong other than bad timing turning it on on my part. It’s still hard to take it on the chin for 5 months running, though.
The hedge
I manually hedged the portfolio earlier this month by buying USDCNH in a pullback from of all the chaos. The portfolio took it hard when the yuan was loosened up. I figured that any further volatility would likely stem from USDCNH weakness.
The Chinese are actively intervening in their currency. As we all know from the GBP in the 1990s and the CHF this year, interventions work until they don’t. The main point of concern for me is the rollover cost. It is quite expensive to maintain the position.
The thing that makes me comfortable with that trade is that there is no chance of China miraculously healing. It’s in debt up to its eyeballs – everything from corporates all the way up to regional governments. And while China doesn’t want the yuan to devalue too quickly, the absolute last thing it would want is for the yuan to rise in value.
I cannot conceive of any plausible scenario where China manages to return to the 7-10% annual GDP growth that it experienced for 30 years. Too hot, too fast. If you have a plausible scenario in mind, then write your ideas in the comments section.
Updates to the strategy
I’ve promised many updates to the strategy over the past 6 months. Jingwei and I have evaluated them all. All of the proposed changes came up far short of my expectations and were thus not implemented in the live account.
I’m working with Jingwei, our actuary, to develop new trading systems. You’re going to learn the newest indicator in a few months.
Posted by OneStepRemoved.com on Thursday, September 17, 2015
The changes alluded to in the post are all different from QB Pro. I’ve flogged that strategy about as much as I can.
I feel good about QB Pro long term. Before anything potentially good happens in the account, however, I really need the Fed to get off the bench. Raising rates would be good for us because it should kick off a long term USD trend. Another round of QE would be the best thing for the strategy. I personally despise QE and think it’s a bad idea, but it would ignite a massive USD selloff. That’s the kind of market where QB Pro has done extraordinarily well in the past.
Here’s the US dollar index for the past year:
The US dollar index for the past year.
And for easy comparison, here’s the same QB Pro lifetime equity chart. Notice that performance peaked around mid-March and has been flat ever since.
The lifetime equity for QB Pro
Things should pick back up whenever the dollar picks a direction. I expect that to happen by year’s end. Nobody will believe the Fed if they punt one more time on a rate increase in December.
In the meantime, all of this research has given me the great epiphany that the strategy works best where pairs are trending. The portfolio is being rebalanced this month accordingly.
I appreciate your input on trading forex especially scslping.Thank You
You’re welcome, Ernest. I’m happy to be helpful.
Shaun, you have to read my posting on facebook. Umm, you are not gonna believe it but I am testing the newest strategies that based on community outline on fxbook. yesterday, I made 80% on winning trades based on your tactical strategies. Today, its 57%. Still I made monies. You see, I left these trades open during the nite. European pairs and jpy, aud and nzd. there were no USD pairs were traded last nite. And now I am testing USD/MXN since MXN is 77% long and I am betting short against long position today.
I am working on a relatively new tactical move that based on COT report that usually comes out on Fridays. So I certainly will fire an email to you when it comes to combination of fxbook outlook community and COT report. possibly USD dollar index strategies.
Hey Paul, that’s excellent to hear. You’ll need a lot more data, but that is obviously an encouraging start.
Thank you for sharing your experience. Needless to say, I get a lot of encouragement when I hear about my traders winning!
Your performance remains a winner since it manage to keep its head above the water. The disappointing part is that any CFA can obtain this performance, and God knows they are the worst traders in the world (because they only rely on fundamental analysis). It is the same when one only rely on indicators; indicators are bad, period. No one has ever proven making money out of indicators only, all successful traders I know use their instinct, an instinct that only many years of experience and compiled datas and screenshots and manual analysis can achieve. Just as beginners, indicators to often fall in the myriad of traps they are on the graphics. The holy grail is in the eye of the trader, not on the cup. I hope my comments help you however. Good luck my friend.
Hi guerg,
I appreciate the intention behind the comment. Needless to say, I disagree. I assume the performance comment was about the month? While I do agree that anyone can achieve 1% in a month due to luck, I sincerely doubt that my overall equity curve is just lucky.
I’ll be hosting a webinar next month to discuss the strategy. While the execution is 100% algorithmic, the portfolio selection is not. I’m still a trader. The key difference is that I don’t have to babysit positions.