Mostly Waiting

Last week I expressed an interest in getting involved in the massively oversold AUD/NZD pair.  I've kept my initial long position rather small for the time being as the pair is in a fairly distinct downtrend. As opportunities present I will add to the pair on negative news and technical resistance areas.  The ultimate goal is to build up a large position as cheaply as possible and look for a recovery of about 300 pips before taking profit.

That being said the majority of my equity is sitting on the sidelines, its a waiting game.

VIRT IPO

So we've got the VIRT IPO this week... and it makes a very entertaining prospect for my investment portfolio.


VIRT, or Virtu Financial, is "a leading technology-enabled market maker and liquidity provider to the global financial markets." who has had "only 1 unprofitable trading day in the last 6 years".  

Take minute to understand what it means to be a "technology-enabled market maker and liquidity provider".  They use high frequency trading to take small gains in arbitrage over millions of trades a day, a fundamentally neutral market strategy that, logically, allows them to turn very reliable and consistent profits. Where does that money come from? Me, you, and everyone else trading stocks and losing a penny when we hit the "market" trade button instead of "limit".... or when the market breaks during large news releases and liquidity dissapears..... or those times when markets ramp for seemingly no reason at open or close.  Yes, Virtu is a pro in these situations and takes advantage of anyone trading in an illiquid market with lighting speed.  Predatory and unethical? Ya I would say so, but man what a hell of a business.

If we can safely assume that this practice will stay legal for the next few years (not sure how safe this assumption is... if things really go south HFT will be largely under the gun) I think we are looking at a valuable prospect. Yes the risk is there because of the inherent sketchiness of the income source, but this company cannot lose until regulation steps in to stop them. So with that being said I think this is a strong buy for the short to mid term, adding it to my portfolio @ price: $22.29.

Come and Gone

I've won, i've lost.

That would be my sentiment after getting accidentally caught on the wrong side of the EUR/CHF a bit after my last post. I've had a lot of time to reflect on my risk aversion... the move that single handedly wiped out fx brokers also bankrupted my successful trading from 2014.

Regardless, i'm back in the game and always will be.

In identifying similar risks in the market today I think we don't need to look any further than the USD. Current USD sentiment is so incredibly bullish that it is difficult to imagine how it could be derailed. Of course we all know how it can be derailed.... but it will take a major reversal of the fed policy (or someone else to step up with some balls and give the whole austerity thing a try).

Regardless, this seems to be the most immediate black swan in sight. So without further excuses, my trades for the month are going to be:

Long AUD/NZD, technically and fundamentally a good setup, very oversold.

Short USD. Trade on hold until a setup presents itself, but it could be the trade of the year with the way it has positioned itself like a coiled spring.