I have a “Quantitative Easing” trade on — long EUR, treasuries, equities and gold, and short USD. I am sitting on an unrealised gain of 8.8 risk units (i.e. I could have 9 losers before I got back to where I started). According to my market age metric, some of these moves are getting old and I may have to try to ride out a short-term reversal.
In trading as in poker, it takes a long time to learn how to play your winners. In both cases, you have far more losers than winners, so you learn to deal with losers much earlier than you learn to maximise the gain from your best hands.
At present, my conclusion is this: QE2 is coming and the market is still reacting; and all the trades are still going my way. So both fundamentals and technicals say that the trend is continuing. In that case, the right thing to do is hold.
I held long AUD/USD through an early decline yesterday. The RBA decided not to raise interest rates on this occasion, but it retained a tightening bias and the USD is still weakening. This decision was vindicated later in the day as AUD/USD rallied, and it is now making new highs along with other risk assets.
The trade I am most concerned about is long GBP/USD. If the BoE announces QE at its next meeting then the GBP could take a tumble, and it has not been rallying very well lately. On the other hand, the consensus seems to be that the BoE will not go for more QE yet; and this trade is one of two, the other being long EUR/GBP — so together they make a long EUR/USD position, but with the added bonus that they will not both be stopped out if there is some kind of European sovereign shock.