Expert: Mihai Nichisoiu, Private currency speculator at Mihai Nichisoiu
Topics to be covered during the session:
- Risk versus leverage
- Personal attempts to accommodate a tight
- Deconstructing past currency speculations
Summary:
- Risk versus leverage in margin-traded currency markets
- Personal attempts to accommodate a tight and rigid risk approach in
higher-stake currency speculations
- Deconstructing past currency speculations
Who is Mihai Nichisoiu?
Mihai Nichisoiu started to trade currencies first in the local futures market, then in early 2002 moved to dealing in the wide foreign exchange. Since the beginning of 2004, Mr. Nichisoiu has become mainly engaged in building a personal long-term track record in the sense of posting high rates of return only if at the expense of tight and rigid approaches of risk. Mr. Nichisoiu won the August 2005 edition of a popular global demo trading contest, after constantly achieving top rankings during an 11-month long participation.
As a currency speculator, Mr. Nichisoiu is also actively involved in managing and consulting a small number of long-term private connections.
FXstreet.com has been hosting a short, frequently updated market report signed by Mihai Nichisoiu eversince January 2004. Mr. Nichisoiu can be contacted via his recently established, personal website MihaiNichisoiu.com.
Sessioin Material:
Situation #1:
During early May 2006 I did have some observing interest (although not nearly one blowing out of proportions) for the down movement that was slowly taking place in the EUR/GBP.
Then, on May 17th the Euro fell terribly versus both the British Pound and the Swiss Franc. I checked some of the financial media, and it looked like the French Finance Minister had just talked down what particularly during those weeks was considered an un-wanted strengthening of the Euro currency. On that day, I was ending my daily letter to some private connections writing that although my generic interest for that period was to position myself in one of the main USD markets, actually the very next trading opportunity could surprisingly occur either in the EUR/GBP or a Japanese Yen cross pair.
In the light of that freefall the EUR/GBP saw on May 17th, alongside that French official's statement - well, the 'harami' chart pattern that would shape the ensuing 24 hours appeared to me as an intriguing anomaly. It was not only the 'harami' gradually becoming apparent in the EUR/GBP (daily chart wise) that was seriously catching my attention - but another one of the Euro's crosses, the EUR/CHF, stamped its daily chart on that same day of May 18th with a '2B bottom' sort of reversal.
Instantly I knew it was time to buy, and buy aggressively.
The result of my long EUR/GBP position taken on May 18th, although not quite spectacular in its raw measure of pips, did provide my accounts with an welcome and reasonable capital gain (following daily chart of the EUR/GBP and the EUR/CHF copyright NetDania.com, data feed: FXCM).
CHART: file attached 'eurgbpchf'
Situation #2:
May 2006. The main European currencies had already surged across the board, gaining hundreds of pips versus the weakening US Dollar within a fairly short period of time.
The Canadian Dollar made no exception, as the currency was overextending to new historical highs against the US Dollar. The frenzy of CAD buying was already feeding on itself at a time the standard question I kept on receiving was when precisely would I begin buying myself.
I, however, had a different view, and in late May I was already prepared to take the opposite position.
While watching charts of highly liquid markets, developments that are most supposed to raise my attention should consist of three main phases chronologically ordered as follows: 1) a steady trend, 2) the trend getting 'out of hand' i.e. price action becoming overstretched, sometimes parabolic, 3) the occurence of an 'anomaly' with potential to damage, sometimes even reverse the trend, offering me as well proper terms of a counter-trend positioning engagement.
Watching the performance of the USD/CAD market over the second half part of May, on terms of my own perception I had already been able to recognize the phases 1) and 2), and there I thought I was ready to encounter the climax of the whole sequence i.e. the 'anomaly' of phase 3).
That 'anomaly' eventually became apparent on May 31st, technically translated into a '2B bottom' appearance on the currency pair's daily chart (following chart of the USD/CAD copyright NetDania.com, data feed: FXCM).
CHART: file attached 'usdcad'
In my eventually reinforced view, that day of May 31st could have been truly special, announcing the possibility of a notable point of price inflection to be printed, one perhaps of a multi-decade historical importance.
I went long the USD/CAD in the late US hours of that same day; nonetheless, my prompt eagerness to add a second position only several days after the original entry and then consolidate an interim, trailed stop-loss order happened to be a tad more sophisticated way to play the whole bullish stance.
Far from me thinking that sophistication is in itself a bad idea; after all, I collected good profits from short-term trading the US Dollar quite more sophisticated than usual in mid December 2005 as well as last year in mid March.
My early June 2006 complicated dealing in the USD/CAD, though, definitely was not inspired, and perhaps it stood out as my biggest trading mistake of last year.
Then, the late June - early July bullish reversal of the NZD/CAD cross pair would have been even more challenging as an opportunity, since the event had as technical precursors the late May '2B bottom' of the USD/CAD, and the late June '2B bottom' of the NZD/USD - therefore, one of my most favourite chart patterns and trading setups occuring in two different USD-based markets at approximately the same time of the year, technically hinting at the possibility of a significant appreciation of the New Zealand Dollar against the Canadian Dollar.
Since early July 2006, the NZD/CAD cross pair has up to very recently surged for more than 1,200 pips (following charts of the NZD/USD and the NZD/CAD copyright FutureSource.com).
CHART: file attached 'nzdusdcad'
Situation #3:
I had stayed bullish on the main European currencies against the Japanese Yen over the last months of 2006 - although, as already admitted on ocassion, for several reasons I would have found particularly difficult to accommodate that stance via an effective trading participation.
Part of the rationale for my already multi-month bullish view I had had of the JPY cross pairs was purely intuitive - though, intuitive in a contrarian sense. The more 'obvious' the Japanese fundamentals became in the public perception and the louder the demand for a 'logical' causative relationship to be reinstated in the JPY markets - the higher the JPY cross pairs, I thought, could extend further.
In the daily chart timeframe, last year during September - October price behaviour of the Swiss Franc and the Euro against the Japanese Yen took a 'triangular' shape - therefore suggesting a continuation of the Japanese Yen downtrend via its cross pairs could have likely been underway. The GBP/JPY did not stamp its own daily chart with a 'triangle' - although in a November 14th note to clients I came to write: 'I wonder whether the depreciation that we have seen today in the GBP/JPY could actually trigger the terminal leg of an A-B-C type of correction that might have started on September 1st.' (following charts of the EUR/JPY and the CHF/JPY copyright FutureSource.com; chart of the GBP/JPY copyright NetDania.com, data feed: FXCM).
CHART: file attached 'eurchfgbpjpy'
Moreover, I suspect - again, intuitively - that the market appeared to be hugely short USD/JPY at the level of the currency pair's October highs, an assessment apparently confirmed by series of sentiment / positioning indicators and surveys of various retail FX brokerage houses. That explains from a certain, contrarian angle why the US Dollar did not lately register the same dramatic down movement versus the Japanese Yen as it did relative to other major currencies, as well as the price constriction and then the surge of the main European currencies against the JPY.
A much earlier in the year, Japanese Yen bearish call however I had made regarding the NZD/JPY cross pair via my letters to clients (as well as in my yet infrequent notes published on FXstreet.com) - as I thought an 'important bottom' could have been established in the 70 - 69 area, followed then by a 'sizable recovery'.
Such a scenario of price direction and momentum eventually proved right, but it was not for the first time that I came to perceive a very specific configuration of technical conditions that would lead later on to a notable market outcome.
Approximately 3 years ago - in early November 2003 - I had the perception, based on a comparable price configuration, that a multi-month selling frenzy was just about to exhaust itself in the EUR/JPY market. I decided then to place an order to buy the EUR/JPY on limit at 125.00 - and the market executed that order putting me in a long position on November 10th. I also had a firm profit target, set beforehand at 133.00 - that eventually locked in a profit of 800 pips straight on December 16th.
The EUR/JPY would, however, steadily climb up further for another almost 500 pips up until it found an interim top in early January 2004 (following chart of the NZD/JPY copyright NetDania.com; chart of the EUR/JPY copyright NetDania.com, data feed: FXCM).
CHART: file attached 'nzdeurjpy'
Situation #4:
The single most reasonable explanation part of the financial media came out with following last week's Japanese Yen movement was money fleeing back to Japan in search for imminently higher interest rates.
I know markets (let alone the financial journalism) can be inconsistent, but that inconsistent to the point of shifting from a frenzy of selling to a frenzy of buying in a matter of days if not hours, stirring around a 'fundamental' premise that has virtually remained un-altered - well, that I must say is leaving me in a bit of wonder.
My own take on the latest days is there may be no reasonable 'fundamental' explanation capable of deconstructing the Japanese Yen upwards movement, or at least the very start of it (although taking this statement as a generalized denial of fundamental analysis would be hazardous).
I believe now what I suspected several weeks, even months ago it could happen, I believe the Japanese Yen might have already acquired a certain 'critical mass', a state of severe disequilibrium sufficient in itself for a serious rearrangement of market forces to happen, one that would not any longer need 'fundamental' triggers or catalysts.
For Reuters nowadays, it is no longer just the Japanese Yen - it is the 'low-yielding' Japanese Yen.
Such attributes the financial media uses during certain stages of reinforced trends have a long, established history of backfiring when the markets least expect it.
I am not an astute forecaster or even commentator of fundamental events and developments - as I also like to think the next major move in the JPY cross pairs will prominently be a technical one i.e. a sudden rearrangement of supply and demand would be triggered mainly as a result of overstretched conditions that have grown embedded in the price itself.
If I early last month were to think of 'fundamental' surprises possibly underway, though, I could primarily think of two: Japan hiking interest rates during December, and / or China revaluing the Yuan ahead of the pre-scheduled, December 14th - 15th visit of U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke in Beijing.
Latest weeks, however, have come to reinforce that the ways in which I observe and stand prepared to deal in the highly liquid currency markets remain mainly technical. None of my recent 'fundamental' hunches proved right - as China did not revalue the Yuan, and the Bank of Japan eventually decided to leave interest rates unchanged despite some intriguing chattering several central bank officials had promoted beforehand; still, each and every time I as of late advised myself against placing an early bet on the Japanese Yen, my reasons were all of a technical nature.
Ultimately, my decision to sell short a Japanese Yen cross pair will still be mainly a technical one. There should be no 'fundamentals' decisively triggering a positioning engagement unless a certain price configuration and proper terms of risk present themselves. But that basic positioning premise certainly does not stop me from spotting anomalies and virtual elements of surprise within the 'fundamental' background as well - on terms of my own perception, of course.
Reuters utilizing these days the attribute 'low-yielding' with regard to the Japanese Yen - a 'fundamental' stigma more often than not associated with maturing trends and an overextending market environment - is the financial media's ultimate acknowledgment of the 'obvious'.
But according to another, far wiser and more successful Eastern-European, money in the markets is made by discounting the obvious and betting on the unexpected.
Recent Comments