Well, i am now sitting on three trades that have gone red on me to the tune of 100 pips with another two in the system that are not looking good. However … i have to say … i was hesitant before in entered into those trades. Thats a piece of knowledge i am taking away from this experience and perhaps also one weak point in this system which, no doubt, ILZ is aware of.
Yesterday we had some unexpectedly good news for the USD which was reflected in all USD pairs with 100+ pip moves. I entered trades, late yesterday, in the direction of the move caused by the news. Big mistake! Today markets bounced the other way … all my losing trades involve USD. My eurjpy and gbpjpy trades made modest profits. I have nobody but myself to blame!
Which brings me to the weakness of the system … not really of the system but the application of it. There’s too much correlation if you trade all the currencies ILZ suggested. That can lead to significant losses if a major currency like the USD (especially the USD) goes against you.
So i think in the future i will not enter trades on the day when unexpectedly good or bad news hits the market. I need to think a bit more about the correlation risk, my instinct is to only have one active dollar trade at a time but there may be better ways to do this.