Please find attached the net returns for July 2024.
July was the month many news events occurred. Most of these news events would not normally be large. Because of the lack of movement in the markets for the last 3 months it meant build ups have been occurring, so news events were bound to cause larger movements then normal.
Last month we discussed how AUDJPY was hitting all-time highs. It actually reached over 109 levels so setting a new all-time high since the pair first traded. But the news events over the last weeks have resulted in steep falls in the currency pair and at a rapid rate where it is now at 98. Within a short period of time there was a point this pair had lost 15% of its value and this was due to positions being built on Japan raising interest rates and Australia not raising rates or even reducing interest rates. There were also further news events that were more positive towards Japan as opposed to Australia.
Whilst the above was occurring the S&P500 (stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States) had a 10% drop in a couple of days.
The reason for the explaining the above is we had a sizable negative return occur on All Tassie HR due to closure of buy trades on AUDJPY in loss positions.
The strategy for All Tassie SR and All Tassie HR are very similar. But for All Tassie HR we have some extra safety options built in due to it trading at high risk. One of these is an Average True Range (ATR) setting. This looks at the averages of the currency pair over a 14-day period and sudden large movements occur there could possibly be concern of a large draw down in play and it will assess if positions should be closed. With the ATR we have it linked to S&P500 so if these two experience large movements in the same direction, the bots begin to look to close trades in a loss position.
The ATR and S&P500 both have large sudden down movements in a short period of time (which is abnormal) and the bots are programmed to begin exiting positions even if losses will occur. Due to the record highs on AUDYJPY and S&P500, the large pull backs look like the market could enter freefall, so instructions are given to begin exiting positions. Whilst it was not a freefall, the drop in AUDJPY has been sizeable so the bot did everything right. We did not overrule the bot settings as we knew further news events were coming for AUD and JPY so best to let the bots follow through and close in loss otherwise, we could be holding large draw downs.
Whilst we do not like losses it ended up being the right decision to save the capital on the strategy. All Tassie SR is holding these same positions, and the draw down is over 20%. On the HR this would have been closer to 35% if it held the positions and could have gone higher depending on how the news tracks this month. We do not use the ATR and S&P500 on the SR as we have more time to assess the situation and it has a high equity position, so it can hold positions and wait for turnarounds.
As always, we want to be very up front that whilst we do not like losses, it is part of trading. From our side we still increased out equity position for the month due other strategies performing well and absorbed this loss. But for those who only hold this strategy it meant any profits on strategy for this year were taken away. However, whilst a loss was incurred the strategy continues to trade and can recover the losses and profit again.
Our priority this month is to keep monitoring the strategies that are in draw down and keep an eye on news events so see if we need to step in. We also closed off trading on USDJPY during the month as we expected some turbulence but not to the degree that happened on All Tassie.
Reminder we will look to try and exit all trading positions as we get closer to the US elections as this event can lead to extreme movements in the markets.
Any queries, please do not hesitate to come back to me.
