FX FX MANAGERS
We haven’t had any major changes to the strategy.
FXTM How do you manage risk in the company?
MH We don’t run portfolios as such but rather 1 to 3 FX positions simultaneously. This allows us to keep a very strict risk management profile.
We can allocate up to 1% of AUM per position and our monthly risk limit is 2.5% of AUM, if triggered we return to cash for the rest of the month and cease trading.
In 7 years of trading this strategy the 2.5% monthly drawdown has never happened.
FXTM Could you give us an example of a trade that you might have implemented in the past but that you would not repeat today? What is the most important lesson you learnt from past trading decisions?
MH Some GBP trades we have done in the past have been difficult and we have definitely learnt to concentrate on our core competency which is the AUD, where we feel we have an edge. This accounts for between 50- 75% of our trades.
FXTM Do you use a blend of strategies or one only?
MH Only one, discretionary global macro.
FXTM What are the market conditions that you consider ideal, and which ones are the most challenging, for the performance of your strategy?
MH Over the last 7 years of trading the FX market we have seen a huge range in volatility. Our strategy embraces volatility as we are adept at adjusting our leverage levels accordingly.
For our strategy a slow grinding market such as the one we experienced in the AUD in 2009 is difficult
FXTM Can you give us an example of a memorable winning trading decision?
MH Seeing the fundamentals turns very negative for the AUD in March 2013 and positioning for this. We maintain our sell bias on the AUD and are very confident the currency will move sub 80c vs. USD next year. It is currently at 91c.
FXTM Do you use Emerging Markets currencies? And do you think
54 FX TRADER MAGAZINE October - December 2013
individual traders should use them, considering they don’t have to worry so much about liquidity issues?
MH We only trade G10 and focus on our core competency—the AUD and its cross.
Our philosophy is to specialize and we believe we have an edge trading the AUD. If you are a EM specialist and believe you have an edge in trading those currencies, you should capitalize on it.
FXTM When developing a strategy, do you give
a higher priority to building
entry signals, exit signals or money management rules?
MH We built Excalibur’s strategy with risk management as our No1 priority. When you want
to manage other
people’s money you have to be able to demonstrate you can adhere to your risk profile. We market our strategy as being a superior risk adjusted return and that’s because we have a 7 year track record of 10% compound return with a Sortino ratio of 3.85.
FXTM Do you think that every strategy loses its accuracy sooner or later, or do you believe in long lasting market rules? Have you ever found a strategy that became profitable again aſter a long negative phase?
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