Recap for Week Ending 6/22

For the first time in a couple months, I closed in the red this week. I had been in the black (consistently, I might add) up until yesterday's morning. Nevertheless, due to an inflated assessment of my own market mojo, I became overly self-confident, broke all my rules, and entered into positions that are outright against the market.

The position with the largest running loss right now has to be the short CHF/JPY position. My initial sell order was executed @ 99.90, last night during the London session, right after USD/JPY broke its 124.00 resistance. As the up-trend continued to strengthen, I kept selling more, at 100.10, 100.35 and 100.70. My average price now stands at 100.41.

Because averaging up required additional capital, my cash reserve dwindled; now it's standing at a measly 7% of my total portfolio value (as opposed to 51% last weekend). What's worse is, since short CHF/JPY is an interest-negative trade, my cash reserve is being depleted as we speak. My interest-positive positions are simply not large enough to offset that.

I had known about the SNB's imminent rate hikes, but I did not believe the broad CHF rally had such persistent strength. While there were talks of Japanese investment houses buying U.S. and U.K. assets, I totally ignored them. "Market markers were attempting to exacerbate the Yen-bearish sentiment," I thought. It never occurred to me that as the JPY became the dominant funding currency (before yesterday, carry traders had a choice between the CHF and the JPY), market participants would unwind their CHF-funded carry trades and at the same time increase their JPY-funded carry trades.

Now that I'm underwater, I think I'll stay underwater for a while. There's no use turning back now. If CHF/JPY is to be as strong as the other JPY crosses, it would have to retrace some of its upward movements. If there is a retracement, I will get a chance at break-even. If there is no retracement, then the rally will prove to be short-lived and the eventual downward move will be more violent. There'll be a major event that causes everyone to want to run for the exit. The question is when.


I'm not afraid that CHF/JPY will hit 101.00, no. To take me out, the market has to move another 50-75 PIP's against me. In other words, the pair would have to push past 101.00 and test 101.50, in order for me to get a margin call. But I'm ready, financially and emotionally. Bring it on, Mr. Market.