The carry-trade strategy has worked for the past 20 years, as indicated by the one-way uptrend. Good, old fashioned corrections like the one this summer are just part of the game. It is simply a matter of whether you have enough capital to weather the storm. Hopefully, the sharp moves of the past few months have taught most people the importance of low leverage. When you’re highly leveraged, small moves can lead to big losses and big losses can lead to quick margin calls.
It shows carry-trade draw downs have reached -10 percent over the past seven years. The drawdown in August (-10.6 percent) came within a hair shy of the biggest drawdown (-10.8 percent) since the inception of the euro.
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