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How about option 5: Take some profits and let some ride? I suspect that
is what I'd do if I felt the risk of intervention were high. Note though
that if I had a technical target a distance away, I might stick with it,
since it is entirely possible that an intervention would not work. The
BoJ has allgedly been intervening for a while and a first action
typically is taken by the markets as a chance to buy
cheaper...Ultimately, it seems as if the central banks do win, but often
several percent away from where they started intervening.
Gwenn Ael Gautier wrote:
>
> Hi all again!
>
> I was curious to find out about what traders usually do in the following
>
> case. If question1 dealt with loss management, question2 deals with
> profit management:
> Again, I hope as many as possible among you will respond, and I'll post
> the results over the week end:
>
> To respond, please hit "respond to message" and answer "option3" or
> "option4" in the text body. That's all you need to do. Thank you in
> advance for your participation
>
> Question is:
> You regularly trade futures, by entering on breakouts in what you
> define as being the direction of the trend. When trades prove profitable
> you pyramid systematically, effectively doubling initial size.
> You trade 50 times a year on average, and your average trade is about
> $4.200 in profits. You are currently in a
> short trade in yen, sitting on 6 pyramided contracts with over $14.000
> in unrealized profits at yesterday's close. However it appears the BOJ
> and the Fed could lead a joint action to reverse course and this is
> currently the main topic among currency traders. .
> You are facing the following alternative, which one do you chose?
>
> Option3: Take immediate profit of $14.000, and wait for next setup to
> happen.
>
> Option4: Hang on to the position, knowing you have 25% chances the
> intervention does take place and the market shoots up to reduce your
> profits down to $6.000 only. If they don't, you will collect $6.000
> more in profits.
>
> Pick your choice...
>
> Gwenn
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