shallowdeep

March 18 2006

chapter 1

darwin looks at the screen, smiling. after months of up and down action, slowly diminishing his balance, the trade he had been steadily adding positions to started to drop. his positions were short at this point. a short trade is the opposite of a traditional trade where you expect the price to increase. you sell before you buy in the hopes that the price will go down and you can buy at a lower rate.

darwin didn't like stocks. wouldn't touch them. he didn't trust bull markets, shady accounting practices, exaggerated earnings and balance sheets. currency is a different beast. the charts tell everything. everything except what's going to happen tomorrow, or even in the next 5 minutes. there's a saying in the market, show me a chart and i'll tell you the news.

darwin had been going short on the pound against the yen, probably the most volatile pair of the majors. it had dropped nearly 250 pips in the past few hours as the yen rallied, demolishing not just the pound, but everything paired against it. the japanese economy had been quietly picking itself up from a recession, and now had the strongest, most robust economy on the planet. all of this done in typical japanese style. stealth.

in currency trading each pip is 1/100th of a cent, or in this case a yen. this doesn't sound like much, 30 yen are worth about a quarter. buying $10,000 worth of currency, 1 pip equals 1 dollar. buying $100,000 1 pip equals $10. at $1 million, well, you get the idea. this had the potential to be his best trade in months, maybe for the year, maybe ever. but darwin knew better than to start mentally masturbating over profits. he had not picked the top, but near it. darwin only added to positions as they moved against him, never with them. experienced traders know whatever your system is, the only way to survive is sticking to it.

he was up about 4 grand in unrealized profits so far on the pound/yen. good, yes. but darwin had taken some heavy losses on a string of losers earlier in the month. losses are part of the game, too. anyone who tells you otherwise is living in fantasyland. you are going to lose. the only thing you can control is how much. people try to sell systems advertising 85% success in trades. yeah, right. if you hit 55%, you'll make money if your money management is any good. some do it with less, 30-35%. he began to sweat.

"i should close my positions, some of them, anyway. lock in some profit." that's the voice that starts to rumble once you turn that first pip of profit. by 10 or 20 pips, the voice screams. eventually it drowns out everything else, unless you're really fucking good or have simply walked away from the screen. sometimes, it makes sense to close, but this time, today, darwin felt the big correction was at hand. he went to the other room, opened the window, smoked a cigarette. hard, deep burning drags. he came back, the price had rebounded 8 pips. he closed some positions, to be safe. his balance went up $2700. the price dropped 15 more pips in the next 20 minutes.

clammy, sweating, his stomach a sea of knots, his eyes burned in the darkness staring at the monitor. it was going to be a long night, and there was work tomorrow, but tonight the markets come first. everything else would sit on the back burner. he grabbed his coffee and pulled up the charts.

"drop like a stone, you bastard. drop," darwin said out loud. he pulled up the chart for usd/jpy. it was a watermark and would have to pay attention to the dollar, too. the london market opens in less than 3 hours, pre-trading would begin in less than 2. darwin predicted there would not be a rebound this time, but carry traders holding long, interest bearing positions would start to dump them before it became a bloodbath. he smiled. one man's misery is another man's fortune. "for once, i'm not the one bleeding..."

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posted by: shallowdeep at 03/18/06 19:54 | link | comments (2) |

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