Discretion triumphed this week. Cable Glider was idle until Wednesday night. As soon as the market opened on Wednesday night, we went short. That short was ridden down until the open in London on Friday morning. This was a decent pip move (70+), but the percentage gain was below average. Why? The position size was much smaller than usual due to the increased volatility in the market. Now, as soon as that short was closed out, the Cable Glider re-opened a short immediately. I didn’t like that decision, and I was ready to book my gain for the week and go home, because the market has been altogether crazy this week. I cut the second short off for a small loss at 6 AM EDT…by the way, what a day to wake up early!
Around 8AM EDT, the Fed announced a 50 basis point cut in the discount rate…not the Federal Funds rate…the discount rate…and the Cable (and stock futures) rallied hard. Since it’s a Friday, and there are lots of SCHEDULED economic events that I don’t trade because of the volatility they cause, it made sense to stay on the sideline when the Fed made an UNEXPECTED move. I didn’t take a long signal that was generated at 8:30 AM EDT at 1.9882…I felt that the odds of a headfake and reversal were high once the market got past the euphoria that the Fed did SOMETHING and realized that it wasn’t all that much!
All told, I saved myself about 25 pips of loss on the first losing trade, and completely dodged what would have been an 75 pip loss on the long side Friday morning. I find myself in the unprecedented position of six weeks in a row of positive returns. Had I followed the system’s signals mechanically this week, that weekly win streak would have been broken. As volatility is continuing to rise, I’m taking down my risk level a bit by transferring two months expenses out of my trading account…when in doubt, reduce your risk and extend your timeframe.