Comment on November’s results

November has come to a finish and with it an early Christmas present.

Following our last post, Arion could still advance an extra leg and finish the month with an all time record in PiP (Points in Percentage) terms, yielding a total of a 1661 pips.

Money monthly return was also one of the best ever and this month’s 7.6% enabled the strategy to recover much of the drawdown experimented in the last two months.

Markets are resuming normal parameters and therefore we are also resuming our normal trading exposure.

As we predicted, Trump could realistically be elected the new president of the USA and markets reacted accordingly, discounting what was not being discounted, recovering then drastically to prior or even extended levels when compared to trading environment prior to elections day, configuring whipsaw effects we referred to in our last post.

Over all, this event introduced about 40% less volatility when compared with Brexit. Our running strategy reacted favorably with the reduced exposure we decided to have. This means higher returns could have been made with a full exposure, but our main aim at Odysseia Capital is to protect capital and locked in gains. Therefore, even in hindsight, we stand by our decision to reduce risk/exposure during this period.

We look to the upcoming US presidential election as a binary event in which a Donald Trump victory is not being sufficiently discounted by the market.

A Trump victory can cause increased volatility across the board and whipsaw effects similar to Brexit vote. This could have potential negative effects for the type of trading we follow in our running strategy Arion.

Therefore we will be reducing the exposure of new trades opened during today. We expect to return to normal trading in the course of this week.

September 2016 has seen one of the worst months in Arion’s history.

Actually percentage wise it was the worst month since inception and managed to beat January 2016 on the negative side.  The month had been progressing well towards the end of the month until the BoJ (Japanese central bank) interest rate decision. The strategy didn’t react well to the announcements made by Mr. Kuroda. The losses experienced in Arion as a result of Mr. Kuroda’s comments didn’t come directly from any extreme JPY related currency movements right after BoJ interest rate announcement, but rather as a result of the post-announcement mixed reaction of the markets, that produced whipsaw like price action, trapping the strategy frequently on the wrong side of the JPY related trades. In fact the problem in case is the lack of BoJ credibility as seen by market participants, after the central bank as failed its own inflation targets of 2% after one and half year of the self-imposed deadline (the bank’s standard measure of inflation stood most recently at minus 0.5%) at the same time that Mr. Kuroda said the bank had set a new target for Japan’s consumer prices, disclosing that it expected to “overshoot” it’s existing price target of 2% consumer price rises, year over year. This inconsistency with official messages with what the reality has been showing send mixed signals to the markets who reacted in a close to chaotic fashion.-

The JPY trades (USD,JPY, EURJPY, GBPJPY) were liable for 112% of September’s losses, meaning that excluding JPY related pairs, the strategy was actually profitable in all the other trades performed during the month. We have to bear in mind though that both historically and also our backtests show that JPY pairs have been a real value contributor to the positive performance of the strategy.

At the date of writing of this post, we also already know that last weekend’s announcement by Theresa May (United Kingdom prime minister) about the deadline to invoke the article 50 as a result of the Brexit referendum opened a GBPUSD price gap over the weekend, which caught an ongoing GBPUSD trade off guard, imposing a negative start at the fist October’s trading tick . Normally our trades are closed over the weekend, but we can see some exceptions, which was this unfortunate case, since September had been already such a negative month.

We are revisiting our strategy settings and fine-tuning them, a process that is expected to be finished until the middle of the Month of October. The aim is to further minimize events as the ones experienced last month.

Having said this, we must also be aware that ups and downs are a normal feature of financial markets and that the loss experienced this month is no outlier, it will likely happen in the future and is well inside our model predictions and our long-term performance objectives.

Keep tuned, we are working our best to recover from this decline and we are confident within not so much time we’ll be back where we were last August.

We ended this month of June as being one of the most successful in our track record since inception of our running strategy Arion. Despite the fact that the strategy was out of the market for one week and running at low exposure for another two due to the BREXIT situation, Arion was able to finish the month with a return of 10.4% for that month, elevating to 17.9% the return for the whole year and bringing us on a half-year performance on track with our target for the strategy.

In points/pips captured from the market this month was by far the most profitable month with 1478 pips captured, reinforcing the robust nature of the strategy that makes profits based on true market returns and not risky approaches such as grid or martingale.

This result allowed us to fully recover from the drawdown he had early this year, meaning that in a worse case scenario a customer who had invested at the peak one day before the decline, would have by now completely recovered his invested capital and would be in positive returns for the year already.

We hope to be able to keep on a sustainable path with more of such months until the end of the year with limited risk on the downside.

Well BREXIT vote is decided, and it turned out against market expectations bringing extra volatility to the markets. For the last two days after the vote, markets have seen extreme movements in some of the currencies with potential to be more largely affected by prospects of negative ans political impacts such as the Euro and the British Pound.

As announced and planned, Arion, our only running strategy at the moment has not been trading since last week before the referendum. It’s hard to predict what could have been the behavior of the strategy during this period. We know the strategy responds well to more volatile periods, and it’s very possible that the strategy could have provided us with some additional returns to what already seems to be a very positive month. However, as stated in the strategy description and objectives, the path we follow is not to maximize returns regardless of the risk, but rather the opposite: we aim to maximize returns within a controlled and pre-defined risk framework.

BREXIT was binary event with large potential to introduce a significant risk contribution to our trading, and therefore we are happy with our decision to halt trading for the last days and protect our hardly won returns for this month of June.

As brokers slowly return to normalizing trading conditions so will we also. We plan to slowly and gradually resume trading today or tomorrow, unless some unexpected relevant market event occurs.