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| Welcome back.
We hope everybody had an eventful and pleasant New Year's eve. Certainly 2008 is off to a fast start, markets have seen large moves in over last few days. We'll comment more on that in our next update. We decided to devoted this issue to last year, go over our performance and sum it up.
All three of our services have had a good year. "Daily Euro", our longest running service had the best year since we started it 4 years ago. With over 2200 pips in profit system has certainly done better than the year before. As you know, this service covers only EUR-USD. This cross, despite reaching all time new high, hasn't been extremely volatile. Volatility being measured as an average daily move in % of price. There had been periods of greater price movements in the past. We believe 2008 will see increased price fluctuation in EUR-USD, so system should also see another decent year.
"Daily Pound" is another one of our mechanical systems that we offer to the public. This one has also had a good year. Service made just under 3000 pips in 2007. We were very pleased with the outcome, especially since this service experienced only one significant draw down on any significance. We will continue to offer this service in the same format. It has been profitable for a few years, so we stay with it.
Last, but not least , is our "Rainbow" system. This has been only a second year of public trading for this service, and a first full one, there fore it's difficult to view the performance in a historical context. Nonetheless, we believe that it's been a great year with over 15000 pips in closed trades. It bears repeating, however, trades in this service are entered with no leverage, at 1 to 1 ratio.
We will be instituting some changes to the to the system over next year. Nothing drastic, but small improvements. We will provide details over next few weeks.
So, that was 2007 for Spectrum Forex LLC. We want to take this opportunity to thank all our subscribers and supporter for making this a very good year.
Please scroll down the page for a look at some trades from 2007 as well as few predictions for 2008.
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Here are the results we achieved in 2007:
- Rainbow made 15110 pips in closed trades;
- Daily Pound made 2948 pips;
- Daily Euro gained 2211 pips;
Follow the link on the right to view details.
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Last week's results.
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Here are some of the most memorable trades we took in 2007. In July we were on the correct side of massive JPY rally, an event that earned a name in financial press of "unwinding of the carry trade". The name had to do with large interest rate differantial between JPY and other currencies.
In late July we took a few trades in AUD-JPY to the downside, one of them resulted in 401 pips gain in a very short time span. At the time we expected to hold it for 2-3 weeks, but the fast outcome was certainly welcome.
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Another trade taken during the same time was CAD-JPY to the downside. This one also produced huge gains in one day, 268 pips to be exact.
Because of the huge moves at the time, July was the best month we ever had. We cleared over 3000 pips then. An unprecedented event for us. We certainly hope to have more periods like that, but, in reality, that is a tall order.
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In a spirit of full disclosure, here is the worst trade we took in 2007. In August we went long USD-CAD. Market promptly turn against us. We expected the parity line to hold and when it didn't, all time low of about 0.9550 was our line of defense. That broke too. Finally, in early November we saw an exhaustion move and entered additional position. About a week later, we closed both trades at 0.9825 for break even of both positions. We were a little lucky in catching the bottom, the timing part of it, but the analysis was correct.
At the worst time this position was down about about 1400 pips. That's a lot. That translated to about 12-13% equity drawdown.Remember, every position in this service is at 1:1 margin. However, we made over 1200 pips of profit in other trades during that time, so the actual maximum drawdown never exceeded 5-7%.
For 2008 we are taking some steps to prevent these kind of trades, but there is always a possibility of losses. At any rate, we managed to get out of this mess. All is well that ends well.
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Trade of the week.
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What to expect in 2008?
For this update we are going to take a longer term view and share some thoughts about what we expect in 2008. We have seen USD sink to a new low against just about every major currency. In our opinion, this is going to change. Dollar should see sizable gains this year, followed by another sharp sell off into new historical levels. That's, however, farther down the line.
We are going to take a closer look at GBP-USD. Below you can see a weekly chart going back 2 years. After reaching a few decades high of over 2.1100, this pair started to retrace. If the price moves below 1.9600, which we think it will, farther sharp sell off should follow. On this chart we used very simple analysis of just using Fibonacci levels.
First, major price swing from 1.7000 to 2.1000. When we apply a retracement of 61.8%, a very common occurrence, that indicates a price move to about 1.8500. Then we used a projection on a price swing from 1.9600 to 2.1100. Here also 61.8% level was used. This gives us a price target of about 1.8600. Strong confluence of both retracement and projection of these two price swings, makes the target of 1.8500-1.8600 very likely this year. As a matter of clarification, we think we will see one more strong UP move in GBP-USD, before this target is reached.
Other USD crosses should behave in similar fashion, with possible exeption of USD-JPY.
Once again we wish everybody Happy and prosperous 2008!
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Once again we must stress that the trades highlighted here are only a small sample of our trades. If you have any comments or would like to obtain more information please contact us at info@spectrumforex.com .
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Risk disclaimer:
Substantial risk is involved. Forex trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of futures results. Trading involves high risks and you can lose a lot of money.
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