North Korea - Risk Off trade over weekend
Tomorrow is North Korea national day and whether or not they will launch another missile is unknown (and if they do Trump will do something just about as stupid). I'm betting there will be some retreat to Risk off asset such as the JPY.
The tricky thing is which pair to pick. I've already had exposure to NZD short and CAD long. My rationale is if there is something wrong with the world, real asset or safe haven asset appreciate, this applies to NZD, AUD, CAD and JPY, not so much for the fiat currencies of EUR or USD. The ECB and Fed are quite Dovish in my opinion, I really can't figure out who's more determined than whom yet though.
My plan is to split the bet into Short EURJPY and USDJPY at the same time. EUR has no major news next week why USD has CPI on Wednesday so I may not be able to hold that part as far. On the retail sentiment, JPY is being sold and I can't be more happy to go Long.
The tricky thing is which pair to pick. I've already had exposure to NZD short and CAD long. My rationale is if there is something wrong with the world, real asset or safe haven asset appreciate, this applies to NZD, AUD, CAD and JPY, not so much for the fiat currencies of EUR or USD. The ECB and Fed are quite Dovish in my opinion, I really can't figure out who's more determined than whom yet though.
My plan is to split the bet into Short EURJPY and USDJPY at the same time. EUR has no major news next week why USD has CPI on Wednesday so I may not be able to hold that part as far. On the retail sentiment, JPY is being sold and I can't be more happy to go Long.
Comment:
Afterthought: Since we had such a nice weekend, maybe equity will also have a jump today during UK and US session, trade Long on indices may be a good bet if the gap is not too extreme.
Trade review:
1) Despite the trade being a loss I did not feel surprised. Actually this kind of insurance trade are supposed to be loss-making over a long period untils it works magnificiently in a market crash.
2) What got me surprised however is the gap up, I intended for this to not hit my SL and maybe I can just close it at the open, scratching a small loss. What I was wrong on is the market actually has anticipated some action from North Korea given their missile test last week. The National Day is a yearly event thus how could anyone be "surprised" by it even if they did test something. I was just herding right into this trade without being more aware of the bigger sentiment picture.
I still intend to make this kind of trade weekly (not all week) but learning my lesson, I'd be more contrarian and put this trade on only after we had a quite week, with complacent equity rise. I may also reduce the betting size, this must be done in conjunction with my key trades of the week (if I have those on) as the goal is to have very strong staying power and catch that market crash without hurting too much performance.