Daily Archives: August 24, 2010

By now you've figured out that we have some pretty cool interns. They are smart and fun, and truly have made this summer a blast here at Currensee. As the days become a little shorter, the nights a little cooler, and before our interns head back to school I'd like to introduce you to our final 3; say hello to Andrew, Orli, and Lin.

Andrew hails from the University of Denver (obvi he's a skier). He's a Boston local here, living in Cambridge with his family. Currently he's an international studies major but is considering a switch to journalism. Andrew has been working closely with the marketing department. One of his favorite projects this summer has been working on a bit of research for a new initiative Currensee is about to launch. Andrew is an Always Sunny in Philadelphia fan and is currently listening to "Hungry Like the Wolf" on his iPod. He's a catch ladies and we can't wait to see what great things are to come from him.

Next is Orli. Orli comes to us with an undergrad in advertising and international business from Florida International University and she's currently working towards her Masters from Emerson College. When Orli "grows up" she hopes to be a marketer for a financial instituation which is a big departure from her former dream of wanting to be a Disney Imagineer. Her favorite task this summer has been being our pulse on the Forex world (she works with the marketing department). She loves gathering articles and throwing ideas for the blog around. Orli's favorite food is mofongo, which is an ubber crazy dish that goes great with octopus on top! Lucky for us, Orli is hanging around even after the summer months end - she's a good one kids, and she's ours!

Lastly is Lin. Lin also works with the marketing department. Lin has been working closely on some new initiatives which involve translation into Chinese (stay tuned). She has also collected an amazing amount of research for the team which has helped us develop some awesome, new programs. Lin is quite the world traveler and has lived in some amazing places, but her favorite was Moscow. You may not know that Lin is a piano player, but she's bummed that her apartment here in Boston doesn't have a piano. She says she's going to miss our "great marketing team" when she heads back to school - well, we'll miss you too Lin.

That's it for our intern round-up this summer. Like we said before our interns rock and if you are looking for a cool team to hang with come check us out, we're always looking for new blood.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Currensee member Ray Y. initiated a discussion recently in the Currensee platform about diversification. He wants to know:

"Why do I not see more about diversification? Surely we should all be looking for a hedge against our manual trading drawdowns."

Diversification in Forex is a tricky thing. The number of currencies we trade are relatively few. Yes, there are a fair number of different pairs to trade, but there are only maybe eight currencies which are commonly traded (depending on what you include among the majors). That doesn't provide much opportunity for diversification. If you want to avoid any overlap between currencies you can only have 4 positions on at any given time before you start introducing multiple exposures to a single currency. Even there it gets a bit dicey since the EUR and CHF tend to trade so similarly most of the time, and other currencies can also be highly correlated at certain points.

I've seen a number of folks talk about diversifying or hedging by matching up one pair against another, such as EUR/USD and USD/CHF. The thought is that since the euro and Swissy trade so similarly, if you go long EUR/USD and long USD/CHF you've got a hedge. What many fail to realize, though, is that the USD positions in such a set-up will nearly or completely cancel each other out (depending on trade sizes). What is left is a long EUR, short CHF exposure – so short EUR/CHF. Obviously, if you want to be short EUR/CHF, then it's better to just short that cross directly rather than legging into it and having two spreads instead of just one.

Just keep in mind that adding an AUD/JPY to an existing EUR/USD trade may be diversifying, but adding EUR/JPY to EUR/USD is altering your exposure in one fashion or another (either canceling or double the EUR position, depending).

Now, having said that, Ray's question offers up the potential to discuss diversification of our trading methods or systems. The idea there is that one system's good results over some time span may offset poor performance in another. This is certainly something worth exploring. For example, a trend trading system could be paired with one which is more range oriented. In theory at least, these two systems would perform best under different market conditions. So long as the losses in one don't wipe out the gains in the other, it could work out very well.

The issue with running multiple systems, as with any situation where you might be running multiple positions, is one of risk management. Two systems always run the risk of having the same trade on simultaneously. If you don't account for that potential you could end up with a double-sized long in EUR/USD, for example, and find yourself suffering a loss you did not anticipate if something dollar-positive happened.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.