We have a disciplined investment philosophy that has been consistently carried for over ten years.
The keywords for our philosophy are:
1: Value (cheap currency vs expansive currency)
2: Momentum (strong currency vs weak currency)
3: Rigorous risk control
Getting the exchange rate right on a reasonably consistent basis is notoriously difficult, and currency forecasts can go awry all the time, even, in some case we can see that the aberration in currency rates movement defies explanation. That is why we believe that markets are not efficient perfectly.
We are increasingly cognizant that currency is invariably mispriced relative to its fair values in the short term, yet they do long-term. Many cases have proved that the short-term price fluctuation is anything but relevant to its fundamental for a couple of reasons, including but not limited to market sentiment, speculative positioning, and risk events. We believe that a long-term trade idea is likely to be in embryo when the exchange rate moves outside the equilibrium range. As a result, we use a top-down approach analysis of the global economy via some core indicators to make a big call.
The bandwagon effect is always the main culprit of causing currency rates seesawing significantly for short-term horizons. In order to select which currency may well outperform among G10/EM, we are glued to global markets until something really stands out. Exchange rates might tend to overshoot on both directions in the short run, which makes us believe that gains still can be hefty during this period as long as we have a good entry.
When Technical analysis has been discredited because of its low barrier, we tap into it greatly and consider it as an integral part of our Edge, for example a decent stop-loss level can rescue a trade from potential losses while a great entry can maximize your profits.
If we could say anything to make a terrible trade less horrible, we would say it is a limited loss. We swear by rigorous risk management which is a pillar of our philosophy because a strategy with high conviction still could endure losses. We will not pull the trigger until a trade idea with attractive risk/reward emerges.