House hunting

31 January, 2008 (14:25) | Journal | By: Colin McGinley

The past two weeks have certainly been packed to the rafters with economic and trading related news: continued equity market weakness around the globe, an emergency rate cut by the Fed followed by even more at their regularly scheduled meeting, a rogue trader, bond insurers on the ropes. It’s certainly made for a very interesting start to the year.

I’m sure I would have been able to make a comment or post on a number of these issues if my free time wasn’t currently take up so much by house hunting. My wife and I realize that where we currently live just isn’t going to cut it in terms of available space, especially if we decide to have another baby in the next few years. To that end, we’ve been spending our weekends visiting areas and touring model homes (since we’re thinking of going the new home route).

After reading so much about the current housing slowdown it is quite an experience to actually go out and see its effects. Builders are offering some very attractive incentives at the moment. This is great on the buying side of the equation. The only problem is then trying to sell our current property. We bought it almost three years ago and I think we would be very lucky to get what we initially paid for it. Most likely we’ll have to take a small loss, before even taking into account realtor fees. The balancing act then becomes trying to make sure that the incentives offered by the builders more than outweigh any losses we’ll suffer selling our current residence.

Even with all this house hunting going on I’ve still been able to keep up with my trading.

My usage of having a 100 pip stop loss has been working out pretty well. I was spared from receiving the full battering taken on January 16th by the EUR-USD when the ECB’s Merch was decidedly dovish in an interview. I have been using the Anti-Hedge re-entry tactic to jump back into those closed out trades to good effect. I still think there is plenty of fine tuning to be done on my usage of this rule, but it has certainly benefited me mentally this month after what happened in December if nothing else.

The markets were noticeably jittery and unpredictable over the past two weeks, so I’m glad to be ending the month in positive territory once again. I only have one trade currently open, a short on USD-JPY, which I doubt will be closed out by the end of today.

Since my next post will most likely be a review of my trades during January I’ll save all the juicy details until then.

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Comments

Comment from amranafy2005
Time 1 February, 2008 at 7:49 am

Hello Colin
It’s my first post but I have been following you for nearly 2 or 3 months and read your posts much earlier. I want to share my little trial (not really an experience) with the SL combined with median grid trading. I use a hard stop of 200 pipis with EUR/USD. my true (mental stop) is usually much less. When the price CLOSES below one of R/S which is more than 100 pips I close the trade. Sometimes the hard SL was hit with significant loss but usually the price doesnt CLOSSE beyond the line. By the way I use 4 hour charts not ! hour. Another thing as an observation. Any pair with CHF is a better choice for me especially USD/CHF. Simply speaking, while trading EUR/USD both EUR and USD can be heading the same direction or the opposite direction while the pair (combining EUR and USD) may be difficult to anticipate. CHF seams much stable to me so I mainly concentrate on US economics and can aticipate the direction (USD/CHF) much more precise than EUR/USD. Just a thought and need your comment

Comment from Colin McGinley
Time 2 February, 2008 at 1:00 pm

I think that having a hard stop of 200 pips but a mental stop in the 100-200 pip range is certainly something that might be a good compromise for me. If you read my January 2008 Review post you’ll note how I lament the fact that placing a hard stop just 100 pips away from my entry seems to have me mentally always looking for at least a 100 pip profit target for that trade.
I’m missing out on the bread and butter trades that I used to frequently extract from the market.
In the past I would have my mental stop be around the 200 pip mark but this obviously didn’t work out so well, so I think having a middle ground where I put a fixed stop at the 200 pip mark but look to close out trades much earlier if I see weakness in the market could work out much better. I’ll be able to more easily look to put on both bread and butter trades as well as more long term ones (or at least ones with 100+ pip profit targets).
I have not actively traded CHF at all, so I can’t really comment with any expertise on the advantages of trading it versus the euro. I think the slow continued unwinding of the carry trade certainly plays well to trading the Swiss Franc. Every time that there is risk aversion in the market, the euro generally gets hit as dollars get bought up. I’ll have to take a look at my charts, but I would imagine that CHF does not exhibit the same scenario, as the Swiss franc would generally gain on any risk aversion, as it was one of the prime carry trade currencies.

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