For a technical trader (or a quant trader) events like those that we are watching now happening on the global marketplace are difficult to exploit. If a technical rule allows you to have an edge over the markets, abnormal circumstances will cancel that rule in a way that it will be much easier that you destroy yourself instead of making some money. So when exceptional events unfold better to stop applying the same old rule you are applying all the year long. 10% swings in prices over the markets are something that is unusual and that recollects the story of the normal distribution of prices and returns: if prices are not normally distributed it will happen sooner or later that an abnormal oscillation will kill you. And this is the case.
Moreover for a technical trader another risk is to take, maybe unconsciously, a position from a fundamental point of view that has nothing to do with a technical approach. After 60 years the trend in Europe is that “nobody wants to die for Danzig”. It is a big mistake but fully understandable. What happened in these days means that we will still have the euro in the forthcoming months but nobody knows for how long.
A big mistake was done allowing to enter the European Monetary Union for those countries that do not have a strict fiscal attitude like Greece, Italy, Spain, Portugal. There is a book in Italian that tells the true history of the entrance of Italy into the European Union and the title already explains the full body of the text: “Wiles or virtues ? How it happened that Italy entered the European Monetary Union”, by Luigi Spaventa and Vincenzo Chiorrazzo, Saggine, 2000. Basically the topic is simple: to say that you will enter the Monetary Union is by itself a push for interest rate reduction and this in turn will lower the debt and make the impossible possible. I do not know if it really went that way but what I know is that the big challenge is to create the same economic conditions all around Europe and not only in Germany or in Austria: productivity, labour costs, State spending should sooner or later will the same all around Europe otherwise the European Monetary Union eventually will crash.
This is the real mission impossible of the European integration. But your heart and your political beliefs should not intervene in trading decision: we will all trade Euro as long as it will be liquid and as long as it will exist. There should not be any political involvement in trading. With an important warning: if tomorrow something will go wrong in the European Monetary Union just take only “technical” decision and not “political” decisions, a price series is a price series and nothing more than a prices series. Even if its name is Euro.
Euro is an easy price series where many traders win their bread every day so it would be a pity to lose it. But if it will happen there should be no complain and not regret since, as I told you already many times, euro is a price series and nothing more than a prices series. Think about how many price series disappeared in the last 20 years and nobody today even recollect them.
I have been working for 2 decades on the Eu Barley in UK, a futures contract that was traded at the former London Commodity Exchange. It was a magnificently working futures contract, efficient and liquid. A day of 2001 it was suddenly canceled by the British Authorities and everybody still has to understand why. Maybe in a marketplace that was to go “global” nobody would have been interested in the barley grown in UK by the British farmers. So a piece of financial history of UK disappeared in a few days without any formal declaration.
Euro is not Eu Barley but be ready to think the unthinkable and be also ready to change your price series. Euro should not live in your heart but just in your pocket. We are traders, are we ?