Historic Movement and the effects on our system

The moves we have seen over the last 4-6 weeks and especially those by the U.S. Dollar and Japanese Yen pairs have been historic. Both the Yen and the U.S. Dollar have made historic gains against their counterpart currencies. Such large, fast, and direct moves do not play well with our system which relies so much on a currency making sufficient retrace movement and eventually returning to a range. For this reason I warned on Monday that we were in for a "roller coaster" ride this week. We would not have traded this week had we been trading live money but I saw this as an opportunity to test the limits of our system against extreme market conditions.

Well, yesterday alone proved to be close to, if not, a worst case scenario for our system as we saw one of the signal largest gbp/jpy and eur/jpy moves in those currencies pairs' history combined with a larger than normal move by the U.S. Dollar. Over the last 6 weeks we have watched the U.S. dollar gain nearly 20% against the Australian Dollar, over 12% against the Euro, and over 13% against the British Pound while the Yen has picked up over 11% against the Euro, nearly 14% against the British Pound, and nearly 19% against the Australian Dollar.

What does this all mean? Well, I am personally esctatic at how well the system has held up considering the circumstances (as of this post our demo account is only down 9% from our original balance). And while we may not have seen the bottom of these moves yet, it is comforting to know that this drawdown will come back and we still have most of our original balance. I think what is important to learn from the past week is that each one of us as investors of the system must come to decide for ourselves what our maximize personal risk really is. Weeks like these reinforce the importance of not trading money we can't afford to lose and understanding the risk involved with Forex.

So, we look forward to getting today's news (the largest of the month) and a potential rocky weekend past us. Monday will soon come and bring with it a new week and an opportunity to put this one behind us.