FX Family Valuesthings properly, that you live well, sleep well, knowing that your
strategy is working the way it should.
Lessons from Marcelino Livian
Make Sure You Have Enough Funds to Sustain Your
PositionLivian is the epitome of a long-term trader. With positions open
for as long as a year, he aims for big movements. Although this
style of trading comes in contrast to many of the shorter-term
traders in our book who look to make as little as 10 pips a day or
50 pips a week, Livian’s 80 percent return over the past four years
rivals that of most hedge funds. However, in order to trade the
way Livian does, you need to have deep pockets. The core of his
strategy involves identifying a trading zone and then scaling into a
trade little by little toward the bottom or top of that zone. By doing
this, Livian ends up building a large position that has a low average
entry price. However as you build your large position to the point
where only an incremental movement is needed to bring you into
a profit, any small move against you also becomes more damaging.
So it is extremely important to ensure that you have enough funds
to maintain that position.
This idea is important even if you do not trade the way Li-
vian does. If you hold too large a position and end up not having
enough capital to sustain regular fluctuations, then you can easily
get stopped out by short-term market movements.
Get Paid While You WaitOne of the Livian’s primary trading rules is to always be on the side
of carry, which is another word for positive interest. In currency
trading, you are buying and selling countries. In every currency
transaction, you are long one currency and short another. On cur-
rencies that you are long, you have the potential to earn the inter-
est. On the currency that you are short, you have to pay interest.
The difference in the spread of the interest rates between the two
countries is the net amount that you can earn or pay. Being on the