BLACK SWAN CAPITAL BELIEFS & METHODOLOGY

Core Market Beliefs and Methodology

Two primary core beliefs about the currency market:

·      Know your risk: There will always be unforeseen events lingering in the market place beyond the scope of induction. 

·      Ground your approach in human nature: Price movement in currency markets is sentiment-driven by emotional (fearful and greedy) participants who sometimes approach rationality, but never quite get there.   

Guiding beliefs:

· There is no such thing as market equilibrium

· Prices move in self-reinforcing trends within various time frames

· The greater the confusion, the more price-led players become

· Fundamentals influence prices and prices influence fundamentals

· Focus on risk first, return second, and pre-define risk before taking a position.

· Currency analysis is analogous to being a judge at an ugly contest—the least ugly wins

· Trading is a probability bet and winning over time comes from applying your edge consistently (Mark Douglas)

· Every moment in the market is unique (Mark Douglas)

Methodology

Black Swan’s analysis is designed to exploit price trends in short-term, intermediate-term, and long-term time periods.  The firm’s trading ideas are generated on the major dollar currency pairs, and key cross rates.  

Global macro-economic analysis and Elliott Wave analysis are the primary decision tools Black Swan’s utilizes to develop trading ideas.  

Black Swan’s Analytical Trading Framework is a fully integrated three-legged stool used to formulate trading recommendations; it includes:

·      Primary: Elliott Wave and Pattern analysis

·      Secondary: Macro fundamental analysis

·      Supporting: Sentiment analysis 

The objective of this analytical framework is to help identify higher probability trade setups.  Elliott Wave analysis is the primary decision tool, especially when considering shorter term trading opportunities, i.e. those with an expected holding period ranging from three-five days.  But as the expected time frame for holding a trade increases, so does the level of global macro fundamental and sentiment analysis which is integrated into the trading idea.