I suppose the whole world was looking out for this event today, wondering what Mario Draghi will do. We all know that he will continue to ease but the real question is whether or not the easing will be aggressive or not?
At about 8:33pm, I put in my trade with the following details: –
Spot: 1.0550
Buy EUR, Stop if Bid: 1.0570
Sell EUR, Stop if Offered: 1.0530
SL: 1.0550
At 8:40pm, Financial Times leaked that there was no change in decision, the EUR spiked up, triggering my 1.0570 level, I followed it till 1.0640 and squared the position right after the media confirmed that FT made and error. I locked in a 70bps trading profit.
I decided to put in another trade with the following details: –
Spot: 1.0600
Buy EUR, Stop if Bid: 1.0630
Sell EUR, Stop if Offered: 1.0570
SL: 1.0600
At 8:45pm, it was announced that ECB cut deposit rate to -0.3% (previously, -0.2%), market took it as a ‘whimpy’ move by Draghi and instead of the EUR falling it spiked up again. This time driving higher than the last level a few minutes ago.
It triggered by 1.0630 level and I followed it till it hit 1.0690 and I squared the position for a trading profit of 60bps.
In totality, 130bps trading profit thanks to Draghi.
As I was not really comfortable with the event because I felt that there could be some irrational whipsaw volatility, I decided to cut down my trade size and did only US$1Bn, much lower than our normal size. Then again, risk management is also in managing the size of your trade.
I am not going to wait around for the press conference. Almost had a heart attack earlier.
Guess what? The EURUSD is now 1.0800, 10 minutes into the press conference. Did I want to risk the gains in my earlier trade? No, decisions we have to make each time given the situation at the time. Easy to say in hindsight, but when one is in the hot seat at the time, what will we decide to square the position or keep it open?
The Panthenon Investment Group 