FX

FX MANAGERS

Christopher Brandon
founding partner
Rhicon Currency Management
explains why it is fundamental to focus on the absolute
risk and be aware of the worst case scenario at all times.
Interview by JW Partners for FX Trader Magazine

INTERVIEW

Manager

Christopher Brandon

Strategy

Rhicon Strategic Program

Location

Singapore and London

Assets Under Management

450 mln Usd

Type

Short to Medium Term Discretionary

Style

Technical Analysis

Instruments

Spot FX & options

Currencies

Majors & selective emerging marktes

JW:How long have you been trading

foreign exchange for? Tell us about your
career evolution.
CB:I have been trading foreign
exchange since late 1995 when I first
joined Swiss Bank Corporation in
Geneva, at the time a major player in the
French Franc and Italian Lira markets.
Thereafter I moved to SBC London
and onto UBS Singapore once the two
banks had merged in 1999, market
making, providing technical analysis and
proprietary trading. In 2000 I resigned
to trade on a private basis with my
two business partners, and established
Rhicon Currency Management, taking
on outside investors in late 2001.
JW:What do you particularly like
36 FX TRADER MAGAZINE January - March 2010

about your job?

CB: The markets are continually
evolving and thus one faces a constant
challenge to remain ahead of the curve in
terms of idea generation, interpretation
of trends and other market participants.
One can never get complacent, and the
need to maintain a trading edge is what
makes it so interesting.

market direction, equally comfortable

trading from the short & long sides
unlike in equity markets for example.
JW:When was Rhicon born? What
ideas brought to its creation?
CB: Rhicon was established in 2000
in Singapore, and we launched our first
fund in December 2001. It was a natural
progression from the private trading
that the three partners had been doing,
which taught us the invaluable lessons
of discipline and risk management, the
keys to successful money management.

JW:In which way trading currencies

is different from trading other financial
instruments?
CB: The 24 hour and the truly global
nature of the foreign exchange market
does make it unique, and it means as a
JW:How is today the company
trader you have to maintain your focus structured?
throughout the whole working week.
CB: Rhicon currently has 14
You are required to be agnostic to employees, equally split across our two

FX MANAGERS FX
main offices in London and Singapore
and a partner trading from Geneva.
Due to the nature of the markets we
trade we felt it was important to have
better internal coverage of the markets
on a global basis, both in terms of
monitoring & execution as well as
back office & operations. This shaped
the decision to have offices in Europe
as well as in Singapore.
JW:What are the key positions in
your company?
CB: Beyond the three portfolio
managers, the most important
position is held by our Head of Risk
Management & Compliance who is
based in London, and has been with
the firm for nearly seven years.
JW:Which authority regulates
Rhicon? Do you keep and update
procedure manuals? Do you have a
compliance and risk management
policy? How time consuming and
important is this?
CB: Rhicon is regulated by the FSA
in the United Kingdom, as well as by the
Monetary Authority of Singapore and
the National Futures Association (US)
in Singapore. Rhicon has dedicated
personnel in both locations who
maintain our internal compliance &
risk management policies & procedures.
In addition, we have employed outside
regulatory consultants to keep us
abreast of external developments as
well as provide a health check on our
own procedures. Whilst this may be
time consuming, we feel it is a very
important part of our business, and
we have been keen to devote resources
to ensure that we are fully compliant
at all times. This not only minimizes

the risk of errors but reassures our on the overall portfolio, on the three
investors as well as ourselves.
managers trading books, and on each
and every underlying position. As
JW:As currency program manager, such we have a maximum monthly
how would you describe your loss on the strategy of 4%, split across
investment strategy?
the three books (1% for the intra-day
CB: Our investment strategy is best book, 1.5% for the other two), and
defined as being short to medium also a maximum amount of risk that
term discretionary trading, with a can be deployed on any single trade
strong emphasis on technical analysis. within each book. This emphasis on
We have been quite fortunate that the absolute risk means that we are
the three portfolio managers have aware of what our worst case scenario
naturally evolved into three different might be at all times.
time frames with complementary
styles. These include intra-day trading
JW:Whats the most important
with a more contrarian bias, short lesson youve learned from trading?
term trading with a bias towards
CB: The old adage of plan your
breakout/momentum, and a more trade and trade your plan is one that
medium term perspective which we have learned from experience
comprises both technical analysis and many years ago. Without a strict
thematic studies. This should enable plan, comprising of entry points, stop
us to generate profits in a broad range loss levels and targets, a trade should
of market environments.
not be implemented. This holds true
regardless of investment style or time
JW:How and when did you frame and one which we all adhere to.
develop your current FX management
strategy?
JW:Do you use a blend of strategy
CB: The partners at Rhicon have types for diversification or one and
been trading their own capital for over only?
10 years, and we continue to be heavily
CB: Whilst we all rely on technical
invested in the strategy. This has analysis as the basis for our trading, we
shaped our approach to trading and benefit from a natural diversification
most importantly to risk management across time frames and trading styles.
which is the cornerstone of our Within a robust risk management
strategy.
framework this means that we should
be able to take advantage of a wide
JW:Risk, an exciting yet dangerous set of market opportunities and
word. How do you manage it?
environments.
CB: Anyone who thinks risk is an
exciting word should not be trading
JW:How do you think has your
foreign exchange. In our view, the performance been over time? What
key to successful trading relies on market conditions are expected to have
faultless discipline and focus on the a positive and negative impact on it?
absolute risk deployed at all times
CB: We are constantly striving
FX TRADER MAGAZINE January - March 2010 37

FX

FX MANAGERS

to perform better, limit our drawdowns and take advantage of fresh

opportunities; hence the benefit of
20-20 hindsight is not particularly
useful in assessing prior performance.
We typically tend to benefit from a
change of volatility, often when this
marks a market correction or reversal.
Low volatility environments such as
witnessed in 2006 or choppy intraday markets such as the ones we have
been experiencing this year can prove
challenging to us.
JW:Can you give some recent
examples of where you have made a
unique winning decision?
CB: A recent winning trade took
advantage of the short term correction
higher in the USD against the CAD
in late October. We had been aware
of the market building long CAD
positions as we broke through the
September lows of 1.0590, and with
commodities surging to new highs. As
equities and risk assets paused in mid
October, the market made a perfect retest of this breakdown level, forming a
pivot point. This is a point of inflection
where the market swings from bullish/
bearish. This provided us with an
entry point (ie. Long USDCAD) to
take advantage of the correction in risk
assets, as USDCAD traded through
that level and on towards the 1.0870
region. We reached our take profit
target within a week, before the move
eventually petered out.

HUF, CZK and to a lesser extent the

ZAR, MXN and SGD. The higher
volatility in these markets generally
compensates for the lower liquidity,
however this is not always the case
and careful monitoring is required to
ensure the risk reward is present before
implementing a trade.
JW:Would you recommend private
traders to trade some of the less mature
currency pairs?
CB: The same issues of ensuring
that your risk reward is skewed in
your favour as well as knowing where
your stop loss is are just as relevant for
individual traders as hedge funds.

JW: How much time do you allocate

to further research and development
of existing or new trading strategies?
CB: We are constantly reviewing our
own discretionary trading (on a weekly
basis) to ensure we are adapting to the
current market environment whilst at
the same time respecting our own style
and guidelines.

JW: Do you believe in ever-valid

rules? Have you ever found strategies
that come back into phase after a long
time in negative?
CB: Money management rules are
ever-valid. Strategies may however
need to be tweaked according to
market environments to adjust to new
participants, interest rate backdrops
JW:When developing strategies how etc. Indeed some strategies such as
much time do you spend on building carry based ones tend to be cyclical.
entry and exit signals, and creating
JW:Do you use less mature
money management rules?
JW:Do you agree that one way to
currencies? Or do you consider the
CB: One can spend a lot of time react to the ever-changing market is
relative lack of liquidity and wider
developing money management rules, to adjust parameters? Do you already
spreads to be an obstacle to efficiency?
but the real key is to follow them at all use changing parameters based on
CB: We trade some liquid spot
times, and never deviate from them.
volatility measures or filters?
emerging markets such as PLN,
38 FX TRADER MAGAZINE January - March 2010

FX MANAGERS FX
CB: A successful trading strategy
should naturally adjust to volatility,
and in this respect our use of technical
analysis allows us to do this seamlessly,
as higher volatility is captured in
larger hourly and daily ranges. Whilst
your trading parameters thus adjust
to these, your risk reward should
however remain constant to ensure
consistency in risk taking.
JW:What should an inexperienced
trader watch when choosing the time
frame to trade on?
CB: He or she should focus on the
time frame they feel most comfortable
in. This should be a reflection of their
personality, so for example a trader
who struggles to sleep with positions
overnight should probably focus their
efforts on intra-day trading.
JW:What are your average and
maximum leverage used?
CB: Our average leverage used
is about 0.5 times AUM, with the
maximum having been 3 times.

JW:How many execution brokers

do you use? How do you split
execution between electronic and
dear old voice?
CB: We use over a dozen execution
brokers which includes all the major
banks, and split our execution
between electronic platforms and
market orders approximately 1/3
versus 2/3 respectively.

have not been relevant to date, however

we would look to soft close the strategy
as we approached 800mio USD to
ensure that our performance was not
being affected by asset growth.

JW:What is the single biggest

strength of your team?
CB: Rhicons greatest strength lies
in the fact that we are a team, and have
been trading together for some 10
JW:What historical data do you use years. This means that we understand
in developing your strategies? How each others strengths and potential
important that is?
weaknesses and have been able to
CB: As we rely on technical analysis help each other to develop as better
the accuracy of data is very important traders.
and thus we have invested in one of
the premier charting packages for this
JW:Can you give us your feeling
reason.
about the most popular, EurUsd, over
the next 6/12 months.
JW:How does liquidity impact the
CB: It appears at the time of
efficiency of your strategies? Have writing that whilst Asian central bank
you already explored to what AUM diversification persists, the EURUSD
limit the strategies would allow you should continue in its uptrend. This
to grow to?
may lead to further jaw-boning by
CB: As our overall leverage is low, European officials however, and could
the effects of liquidity on our strategy even potentially lead to intervention
if the pace of the appreciation
accelerated.
JW:Whats the best advise to give
to an individual trader and to a semi
professional trader who wants to enter
the FX fund management industry?
CB: The all consuming nature of
this business and discipline required
are two of the reasons many traders
fail to succeed. I dont personally
believe trading is something that can
be undertaken on a part-time basis
and as such a total commitment
needs to be made in terms of time and
resources.

FX TRADER MAGAZINE January - March 2010 39