My Year In Review

Imagine working your ass off every day for an entire year, and at the end of that year, instead of getting paid a nice big sum of money, it turns out you owe your employer 1% of your savings.

Now imagine that instead of quitting that job, you decide to double-down on your efforts and put even more work in over the next year.

You would have to be crazy to think that’s a good idea.

Well, I guess I’m crazy. Because that’s exactly the situation I find myself in!

I’m Finally Part of the -1%!

In 2019 I placed 249 trades (equating to 488 total opened positions) and ended the year with a -1.14% gain.

I woke up every week day and jumped out of bed to perform my morning analysis without missing a session or taking a single sick day.

On my weekends I dedicated several hours of my free time to backtesting and trade review (and creating content for this website and for YouTube). I invested thousands of dollars in trading equipment, education, software and my website.

I recall more than a few times that I had to pull over my car to manage a trade on my phone or laptop, or had get out of bed at 3am to manage a position, or missed social occasions with friends and family because I had work to do, or sacrificed market holidays that could have been spent down at the beach, sitting in front of my charts backtesting until my brain went numb instead.

And at the end of all that, not only did I not make any money, it actually cost me 1% of my total trading capital that I started the year with.

Obviously I feel pretty rough about that. I even had to cancel my plans of donating 1% of my trading profits to charity this year, because it looks like I might need some charity support myself.

2 Steps Forward, 1 Step Backwards

Fortunately, I’m used to this experience.

It’s not something I’d wish on my worst enemy, but it’s a part of life that I’ve come to accept. Trading, like all challenging things in life, is a 2-steps forward 1-step backwards game – and that’s if you’re good at it.

For those who don’t know my back story, before I began trading for the first time in 2017 I was an aspiring professional musician and audio engineer.

In 2017 I was 27 years old and had spent literally every day over the 10 years since I’d graduated highschool in 2007 obsessed with mastering the art of music and the science of audio production. I invested untold thousands of hours into the craft of music, locking myself away in my bedroom and later my home studio sometimes for days at a time with minimal sleep.

But as I entered my mid-twenties, something happened to my health and I developed severe chronic pain issues in my neck, arms and abdomen (pains which still affect me and defy medical diagnosis to this day).

In the course of about 3 years, I went from a promising and talented guitarist, full-time band member and music producer to practically a cripple and a university dropout with no light at the end of the tunnel.

I had to abandon my dream of being a musician, and in the years that have passed since then I’ve lost almost all of the skill and muscle memory that I developed during that period of my life. Worst of all I slowly lost the magic that made me thrilled to be alive, and have had to find other ways to invoke that feeling of joy and excitement about life.

One of those ways has been losing myself in my work as a trader and content creator with the goal of helping others achieve the same success I strive to achieve in order to make the journey feel even more meaningful.

I tell this story to paint a picture of the kind of mentality I approach trading with. I’ve already been through hell and lost the things that were most valuable and dearest to me. I literally have nothing left to lose in terms of personal sacrifices. Nothing, not even my physical pain or my worst drawdown, can compare to the pain of slowly and agonisingly losing your dreams.

And so I can honestly say that after this year of trading every day and not making any money, it has hardly been the worst thing that has ever happened to me. And even if it was, it’s something I can handle. I’ve adapted to become comfortable being uncomfortable – physically, spiritually and emotionally.

And although I’m extremely discouraged and demoralized by this outcome, it has not swayed my long-term resolve in the slightest. This is just the beginning for me, and to be honest with you, although I prayed for a much better outcome after all the hard work I’ve put in, I still consider 2019 a huge win.

The Road to Success is Never Straight

When I started trading in January of 2017, I blew my account. Twice. In spectacular fashion. It was an absolute disaster. My equity curve was backwards to how it should be – a volatile rollercoaster ride from 0% gain directly down to -100% gain.

If you want proof, here’s my stats:

Look at that curve. It might as well have represented my heart rate at the time, rapidly flat-lining as I realised that I was in way over my head.

They say 90% of traders lose 90% of their money in the first 90 days. The only positive thing I can say about that graph is that it actually took me 120 days to lose 90%. Plus I did have one profitable month, I suppose that has to count for something.

But then in 2018, with the guidance of Steven Hart, I managed to turn the ship around. I made it through a year without blowing an account. I didn’t make any money, but I didn’t lose all that much either, ending the year -27% from where I started.

Now, in 2019, I ended the year -1%. Obviously nowhere near ideal, but certainly not the worst performance I’ve ever put up. And I can see a positive trend developing.

2019 was the year of no return, but 2020 will be the year I finally break through. I can feel it. Because I’m willing and ready to put in the work required to get there.

I learned a lot this year – a lot of what works, and even more of what doesn’t work. Every step forward in that sense is a victory, and makes the occasional step backwards less painful. After all, you can’t make money until you stop losing money, and this year was basically a break-even year. That’s actually a great sign for any developing trader, and I would be wise to put things in such perspective.

“I am not discouraged, because every wrong attempt discarded is another step forward.”

Thomas Edison

I also have a lot to be grateful for in the small community of traders I’ve fostered through this website over the past year. I created this blog with no intention of making it into a business or community. I just wanted to share my journey and ideas for others to draw inspiration from and so that I could look back on my own progress in hard times like these to remind myself of how far I’ve come.

But over the course of the past year I’ve seen and seized the opportunity to begin making this into something much, much bigger than I originally intended. Perhaps that is the best thing that came out of my trading this year and I am most excited to see it grow as I grow as a trader.

Know When to Celebrate

One thing I did very right this year was withdraw some trading profits when things were going extremely well and spoiled myself and my friends with it.

Around the first week of June, I withdrew around $1000 of profits to spend on my friends. As it has been a long time since I was in a position to spend money on my friends, I decided to spoil them all at the same time on a special occasion.

To celebrate the success I’d had so far and to remind myself of why I was doing all of this grueling work in the first place, I took my beautiful girlfriend and my closest valuable friends out to dinner for my birthday at a really nice 5-star restaurant. I bought everyone’s dinner and drinks with the market’s money, and it felt fantastic. We all had a great time and there was no stress over the bill.

Then I entered the most prolonged and painful drawdown I’ve experienced since becoming a disciplined and consistent trader who manages risk appropriately. But needless to say, I do not regret taking that money out and having a good time with it. Because if I hadn’t, then any success I had during the year might have been truly for nothing.

As traders it’s important to know when to celebrate. We shouldn’t celebrate any individual win with too much energy because there’s a lot of randomness in that. But we should absolutely celebrate and recognize our progression as traders in regards to our process-driven results.

I knew that the money I’d made up until that point was because of the process I’d employed, and I knew that the process was repeatable. Even though I also knew I was a long way from being able to make this kind of thing a regular occurrence and I didn’t enjoy the feeling of taking capital out of a winning strategy, I did it on purpose to force myself to enjoy myself and give back after so many months of intensely stressful study and hard work.

Obviously that celebration was slightly premature. But as they say, and I’m a firm believer – everything happens for a reason. And I believe that if I hadn’t celebrated that process-driven success by creating a memorable night with my friends on my birthday instead of spending it staring at charts, then I would absolutely feel worse about this year.

That night reminded me why I’m doing this. To become free and financially independent, so that I can spend my time how I please with who I please, where I please, doing whatever we please, for whatever price.

I don’t care about the money any more than I need to in order to respect it and properly look after it so that I can continue re-investing it wisely to make more. The money I make from trading and investing is just a way of keeping score and knowing whether I’m doing well or not.

I also withdrew a little bit of money whenever things were going well to re-invest in my education and my equipment which was the best money I spent all year and will make my work in 2020 a little easier than last year.

But beyond that, always remember that money itself is meaningless. It’s a means to an end, and the end is enjoying life and relationships.

We don’t always need money to do that, but it certainly helps. That’s the healthiest attitude to have towards money – respect it, work hard to earn it, but don’t let it enslave you.

Know When To Take A Break

Now would be a good time to apologise for my absence over the past few weeks.

I haven’t created any content or videos for over a month, and that’s simply because I don’t want to burn myself out.

I love trading and I love what I do. But I think we can all agree that no matter how much you love trading, it can still be exhausting and emotionally challenging – and that’s when things are going well.

When things are going poorly, it can be excruciating. And so to combat apathy and pessimism about my results, I decided to take a few weeks off where I didn’t look at a chart or touch my website or even think about trading at all. Instead, I spent a lot of time with my family and took some time to be alone and reflect on how I want 2020 to look.

To be honest, it was quite uncomfortable to take such a long break as it threw me off my regular routine of spending every spare minute working on trading or my website. For the first few weeks I didn’t really know what to do with myself and I was concerned about missing out on last-minute opportunities that could perhaps make up some of my drawdown. But now that I’ve taken a few weeks off, I feel genuinely refreshed, reset and ready to roll with a blank slate mentality.

It was a necessary precaution, and it will be the difference between me approaching 2020 jaded and discouraged versus fresh and excited.

It’s ok to take a break from trading. In fact, I recommend it. Not too frequently or too long obviously as that will disrupt your routine and flow, but if you do not take a break (like I didn’t last year) then you will begin to feel the burnout.

Take care of yourself, and take some time to step back and reflect on your trading whenever the markets slow down such as during the Christmas break – it will make you a better trader.

This video on the subject by Nicholas from the Duomo Initiative really made me feel a lot better about taking some time off:

What Did I Learn?

Up until now I’ve put a positive spin on this experience, but honestly, it has been a major blow to my self-confidence and I’ve had to take a breather in order to decide on how best to proceed.

I’ve decided, after post-analysis of my year and my trades, that I perhaps took things a little bit too quickly this year in regards to my trading plan. The year started out great because I had a simple plan.

Then around June, soon after my birthday celebration, I began adding complex changes to my strategy and added a handful of new pairs to my portfolio. I tested all of these changes extensively over hundreds if not thousands of trades, and they seemed to enhance my edge.

But somehow, in practice, the changes had an opposite effect. This was partly due to a lack of discipline, because I broke my rules and/or made mistakes a total of 12 times over the last year, and lost a few % in doing so.

But I believe inconsistency and a lack of conviction in my strategy was the real issue. As I implemented changes into my trading plan, I became inconsistent in how I was reading and acting on the charts, and as I became inconsistent and my results began to suffer, I started to doubt myself and my strategy.

This led to a self-sabotaging cycle of second-guessing trading decisions to the point that I missed a number of great valid trading opportunities and then over-traded low-quality setups in an attempt to make up for that.

You see, at the beginning of the year I was trading an extremely simple strategy with fixed targets. I was entering based on simple pullback signals and exiting at a 2x ATR move into profit.

The strategy had a decent win rate and so it was actually quite profitable to begin with. But as time went on and I began to see that exiting trades based on an arbitrary profit target based on the ATR was causing me to miss the biggest moves in the market.

I hated the feeling of exiting a trade for a 2R profit only to see the market continue to rocket into what would’ve been 4, 5 and sometimes 6R profit.

In an attempt to try to capture more of these larger moves, I adapted my strategy’s exit reasons so that I could stay in trades for longer and wait for a reason to exit.

It sounds good in theory, and I backtested these changes thoroughly and thought I was confident in my new adjustments to my trading plan, but as time went on my results actually began to suffer.

I believe this was partly due to market conditions changing and becoming a little more prone to consolidation, as well as introducing too many new currency pairs into my trading plan too quickly which spread my attention and focus too thin. I started to become inconsistent in my ability to get into the “flow” of these markets.

I began trading the hourly chart with a 2-target system across six pairs. I exited my first position at 1:1R, which essentially means I made 0.5% on my single-target winners and lost -1% on my losers. This means that I heavily depended on my second targets to compensate for any losing streaks.

But no matter how hard I tried to capture bigger swings in the market, I just couldn’t seem to manage it. Every time I had a streak of winners the profit was soon given back by a short streak of losses, and because my second targets were not big enough to make up the difference, I couldn’t seem to break the cycle and slowly bled my account back to 0% gain over the ensuing months.

Even though I recognized this as a problem two or three months ago, it was far too soon to know whether or not my strategy was failing or the market conditions were just being temporarily uncooperative, as I hadn’t quite hit my max drawdown according to my backtesting. And so I decided to continue trading my trading plan as it was written with the hopes that things would turn around.

Instead, I eventually did hit my max drawdown limit of -25%. Thankfully, this time it was open profit that I lost instead of my initial trading capital. But to be honest, that doesn’t make me feel much better.

After corresponding with my trading mentor about my struggles, he suggested that I go back and analyze all of my trades to find out whether or not my drawdown was caused or exacerbated by mistakes or bad trading decisions before I react too radically to the problem.

I went through this process over the past few weeks and found that I’d followed my rules on 95% of my trades. So the problem is not necessarily that I was breaking my rules or making bad trading decisions (even though that was a contributing factor), but simply that my trading plan was not performing nearly as well as I wanted it to.

There’s a very good chance that if I were to continue trading my 2019 trading plan as it is written, I will eventually recover all of my drawdown and go on to new equity highs. The problem is that this drawdown of 6+ months does not suit my personality type. Even if my drawdown were only -5% instead of -27%, I would not feel comfortable continuing to trading this way if it means enduring 6 month periods of not making any money.

Of course this is going to happen to even the best strategies sometimes, but I know myself and the basic foundations of trading well enough to know that I can’t continue trading my trading plan exactly as it is written. It needs improving.

At this point I don’t really care if I recover my drawdown using my current strategy – because I’m not happy with the strategy itself. It loses far too many trades and encounters far too many losing streaks far too frequently.

Part of this is because I’ve been trading the 15M and 1HR charts and simply getting a lot of trading opportunities – which was an intentional design so that I could get plenty of “reps” in the market to build a routine and practice consistency. But part of it is because my current strategy is perhaps too basic for these timeframes.

I’ve tried really hard to come up with negative filters to eliminate the majority of losing trades from my intraday system and tested many variations of solid ideas that I’ve had and seen some promising results with a few of them, but to be honest, I feel that maybe I’m jumping the gun a bit here.

The only negative filters that seem to work depend on higher timeframe analysis, and I still haven’t mastered consistency with combining timeframes throughout backtesting and live trading.

So this year I’ve decided to strip everything right back and focus on the basics again.

What Next?

It seems my biggest problem right now is over-trading poor quality setups and not capturing enough profit to make up for my losing streaks – and my solution is simple.

This year I plan to go back to the basics. I’m moving back to the timeframe that started it all for me, the timeframe and strategy I first became profitable on – pullbacks on the 4HR chart.

I will not actively trade the 15M chart this year, at least not until I have a better strategy in place. And I will not be trading the 1-hour chart the way I did last year.

I’ve completed backtesting for the Bat Pattern on the GBP/CHF 1HR chart with great results and I’m in the process of testing other pairs with this pattern. Going forward, any 1-hour trading I do will be using this strategy for the time being until I can optimize my old strategy to better suit my personality (ie. stop losing so often).

I feel really good about this decision. As much as I love the idea of having lots of trading opportunities on the 15M and 1HR charts, I seem to be much better at judging the direction of the higher timeframes (4HR and Daily) than the lower timeframes at this early stage in my trading career.

And considering the fact that my biggest weakness in 2019 has been long periods of consolidation, I look forward to mastering advanced patterns which are specifically designed for trading consolidation.

Plus by moving up to the 4HR chart, that gives me a lot more downtime to focus on creating content for other traders who are struggling through the same problems as me, as well as more time to focus on backtesting and truly perfecting my intraday strategies without the time-sensitive pressure that comes with the fact that I’m still actively trading the strategy while trying to improve it.

And finally, one way that I’ve found peace with this situation is the fact that this is really a good thing for my readers and followers, because I have more experience with struggling as a trader. I’m a firm believer that in a performance discipline such as trading, you cannot learn from someone who has not endured the difficulties themselves.

If I’m going to talk the talk then I have to walk the walk, and that’s what this is all about.

My Goals & Targets For 2020

I picked a bad time to quit cigarettes.

As a test of discipline (and in order to improve my overall health) I decided to quit smoking cigarettes in 2020 after smoking for almost 10 years. I went cold-turkey a week or two before New Years Eve and I haven’t had a single one since.

I don’t even think about it anymore. The reason is because I made a deliberate decision. It’s not really a goal. It’s something I decided must happen, and when I know something must happen, I get it done at any cost of discomfort.

That is the attitude I’m approaching my trading with also. Although I must admit, after the year I had, I really, really feel like a cigarette.

But in any case, my trading goals for 2020 are process-oriented and not results oriented.

I want to master combining timeframes, and I believe the best way to do that is to back up to trading the 4HR chart using Daily analysis. This is something I feel much more confident about compared to using the Daily chart analysis to trade the 15M or 1HR charts (for the moment at least).

According to my backtesting results so far, this appears to be a wise move.

And once I master identifying major Daily support & resistance levels consistently (something I’m very close to achieving but need more practice with) and the Daily trend (something I’m now very good at), I believe it will dramatically improve my intraday trading results – not to mention make it possible for me to begin structure-trading.

But for Q1 of 2020 I simply want to develop a profitable trading plan with minimal drawdown depth and duration (ideally less than -25% and shorter than 6 months) that covers 3 pairs on the 4HR chart for the pullback strategy, and 3 pairs on the 1HR chart for the Bat Pattern specifically for trading periods of consolidation.

Once I’ve achieved that and I’m content with my results for a few months, then I will go back to addressing my 1HR and 15M strategies to see if I can improve them by combining Daily analysis for negative filters to eliminate as many low-probability setups as possible.

My trading strategy rules for the 4HR chart are extremely similar to the 1HR strategy I was trading, so technically speaking, this does not feel to me like strategy hopping. It’s really just timeframe hopping, but I feel confident doing this because the 4HR chart was the first timeframe I got this strategy to work on so I know for a fact that it’s effective on that timeframe.

Apart from that, I don’t really have any other immediate trading goals. Obviously I really would love to have a profitable year this year, but that’s out of my hands.

The only thing that is in my control is my process, and now that I’ve been humbled by a yet another losing year (no matter how small), I’m determined to improve my process and master the foundations of trading and multiple timeframe analysis.

One last thing I should mention is that for 2020 I decided to convert my trading account into U.S. Dollars instead of Australian dollars. If I’d simply done that at the start of 2019, then I actually would have ended the year up technically speaking in terms of AUD value, because the AUD has dropped a few cents against the USD. That’s just some food for thought for other Aussie or international traders. It will be interesting to see if this affects the spread on any of the pairs I trade.

Anyway… this reflection is getting quite long now, and I have a lot of work to do and backtesting to complete. It’s Saturday morning here in Australia and I’m about to begin a weekend of testing. But I will continue my trading journal this year on my website, so I will go into much more detail about what I’m doing in there going forward.

I’m also determined to more actively create content for this website and start actively uploading videos to YouTube regularly, so you can find me on there if you have any questions or if you’re curious about what I’m getting up to.

I can’t reveal every little detail about what I’m doing because most of what I’ll be doing this year is copying my mentor Steven Hart‘s trading strategies, and I don’t think he’d appreciate me giving away his strategy secrets for free when he has an entire paid course and mentorship program designed to teach you this stuff.

But I’ll share what I can and be as transparent as possible, so if you’re struggling with your trading and you need motivation or inspiration for ideas on how to improve, then I encourage you to follow along with my journey and maybe together we can take another step forward in our trading this year.

Best of luck in 2020, I hope you have a better year than I did last year!

Speak soon.

Kind regards,
Matt.

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