Skip to content
GetProfitable
Search
Dictionary

Managed float

A regime where the exchange rate is broadly set by the market but the authorities intervene when they dislike the pace or level, without publishing a target.

Most large economies outside the pure floaters sit here. The rate moves day to day, but the central bank keeps reserves ready and steps in against moves it regards as excessive, using the tools in central-bank-intervention and often preceded by verbal-intervention.

China's arrangement is the most visible version: a daily reference rate is published and the onshore rate is allowed to move within a band around it, with a separate offshore market trading more freely. The gap between the two is itself watched as a signal of pressure.

For a trader the practical effect is asymmetric risk. Trends persist until they attract official attention, then reverse violently, so position sizing has to assume the reversal can be larger than the daily range suggests.

Example: a pair trending 0.3% a day for three weeks moves 1.5% against the trend in twenty minutes on an intervention headline. Five days of gains disappear in one candle.

Related: free-float, central-bank-intervention, currency-peg, verbal-intervention

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

How a position size is worked outAccount size, risk per trade and stop distance feed into one box giving the number of shares.ACCOUNT SIZE$25,000your capitalRISK PER TRADE1%of the accountSTOP DISTANCE$0.50entry to stopPOSITION SIZE500 sharesrisk budget: $25,000 × 1% = $250position size: $250 ÷ $0.50 = 500 shares
Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.

Educational only, not advice. Spotted an error? Post in Site Feedback.