Posted by: Bevan | March 2, 2012

February 2012 Trading Commentary

The drought for trendfollowers (well me specifically) continued in February.  It was a fairly quiet month, with three trades closed and two new positions opened.  All three closed trades were losers, comprising -0.8, -0.72 and -0.94 R losses.  This measure is a gauge of the size of a loss in terms of the initial risk taken.  Unfortunately in this case we did not have the opportunity to reduce risk much as the trades did not move significantly in our favour before reversing.

The lack of persistent trends is frustrating but a reflection of a zero interest rate environment with mediocre growth and economies on the cusp of inflation/deflation.  The move up in oil during the month was interesting although it seems a bit overdone against the fundamentals.  The signs of ‘green shoots’ in the US are pretty positive but Europe is still a disaster and its hard to make a good demand story.  On the supply side the Iranian situation seems full of bluster but without much real supply impact at the moment.  I don’t have a lot of faith in the continuation of the trend to 2008 levels.

The Yen has been an interesting trade this month.  I commented on the Japanese macro situation back in January, and the blogosphere has seen increasing commentary on how the ‘widowmaker’ short Yen trade looks more and more viable. The macroeconomic situation there in terms of demography and government debt looks challenging, but you’ve always got to bear in mind that people have been calling for a Yen decline/collapse for a long time without fulfillment.  I’m sure the Japanese Central Bank has been contributing to the Yen decline and all too happy with commentators helping out.  I am short the Yen (due to the compression last year it didn’t take much for my trades to change direction) and would love to see it roll on but any new risk (aside from a Japanese debt crisis) will surely see the currency trading back to the 2011 highs.


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