April 2019 Review
Forex Trading Review – Week 18
This month was another small but positive step in the right direction for my forex trading journey.
I managed to claw back some of my drawdown from last month, ending the month with a +2.58% gain and a +6.53% annual gain, which still leaves me in a -2.89% drawdown from my equity high for the year.
Not too bad, but certainly not too exciting. I have a lot of work to do on optimizing my strategies and profit-taking but that will come in time. I am taking a Kaizen approach – small incremental improvements.
I am fanatical about measuring my stats so I like to give any changes I make to my system time to reflect their influence on my trading before I make even more changes.
So all that is left to do is keep on trading, keep on executing consistently and keep on grinding towards a profitable year.
29th April – 3rd May
This was a trade from last week. A two-target winner on AUD/JPY.
A fantastic pullback setup that I managed to get involved with right before the market tanked.
Unfortunately on Monday price retraced a little deeper to test 79 and tagged my trailing stop, making this a 3R winner on my second target (or a +1.5% gain).
I am not happy about giving back 80 pips of open profit on this trade, but I haven’t found an exit rule for this strategy that I like yet. I am testing various ways to take profit, but for now I am using a simple structure-based trailing stop.
And according to my current trading plan’s rules, this trade was managed properly, and so it counts as another good trade. That’s all I care about!
Great bearish consolidation flag pattern forming here on the 15M after a pretty impulsive drop during the U.S. session (overnight for me here in Australia).
I went short on the swing-high engulfing candle at 1.34, getting a slightly better entry price on a pullback.
I was skeptical that price could reach my 2.5 ATR take-profit and was considering moving it back to a regular 2 ATR distance (from my entry). It was pretty clear that the momentum was dying.
But even if I had moved my take-profit closer, which I decided against, it still wouldn’t have been hit on this trade. The momentum just wasn’t there anymore.
The market was slow as a turtle all day throughout the Asia session, then had a reversal on the European open which stopped me out for break-even.
But that’s ok – price is now at 1.34500 after the FOMC data last night so I’m happy to be out unscathed!
This was a hard trade to take, but the momentum was in my favor on this timeframe so I went for it.
The Daily chart is in a down-trend on this pair, but in my experience and backtesting, when price begins trending on a lower timeframe then there is typically still a good chance to catch some decent moves if the pair has room to move to resistance.
This pair had temporarily reversed trend from bearish to bullish on this timeframe from 1.11200, and we had re-taken a Daily support zone at 1.11900, signalling that price may be able to push a little higher towards the Daily 50-EMA.
Sure enough, after the FOMC data came out last night price tagged the Daily 50-EMA and then reversed as a giant wick. So this was only a 1-target winner, 0.5% on one position, break-even on the other.
No harm done. I wasn’t expecting much out of this trade but I am glad to have been able to pull the trigger on this setup despite the conflicting information from multiple timeframes.
I prefer to trade only using 2 timeframes to avoid analysis paralysis, and in this case the 1-Hour and 4-Hour were telling me there was still room to go higher and so that makes this a good trade.
Following the FOMC decision on Wednesday (4AM Thursday my time) EUR/USD had a huge sell-off after tagging the 50-Day EMA.
This bearish move that broke multiple minor support levels on this timeframe and shot down below the 50-Hour EMA was enough to convince me to go short when I got a valid setup.
Soon after entering this trade the market pushed up, getting within 0.3 pips of my stop loss, but remarkably it wasn’t triggered.
So this ended up being a winning trade believe it or not.
That is one major reason why I added EUR/USD to my portfolio even though it wasn’t necessarily the top performing pair for this particular strategy – the 0.1 – 0.3 spreads are extremely advantageous.
This is also a fantastic example of why I prefer to stick to a rules-based approach to trading.
In my early days when I first began forex trading a trade like this would have driven me mad! I probably would have exited for a loss before it even touched my stop loss.
And then I would have been furious as it rolled over to hit my profit target.
But because I have a plan and I have tested that plan and have confidence in it, that allowed me to resist sabotaging this trade.
I was able to sit on my hands and do nothing.
Even though I was absolutely certain this was going to lose (and I even recorded it in my journal preemptively as a loss), my plan says that until that stop gets hit I still have a 45-50% chance of making money.
Lo and behold, to my own surprise, I not only avoided a loss by a hair but ended up winning the trade.
When price made a new lower-low I trailed my stop loss on my second position to a 1:1R, so in the end this trade was a +1% winner.
Unfortunately I ended the week on a loss.
This was a valid trade by my rules as we still had room to move lower but it didn’t pan out this time.
Traders tend to get a bit shy about committing to a directional bias in the lead-up to major economic data releases, so it is not unusual for markets to go quiet on weeks like this.
Sometimes that quiet period is followed by dramatic moves, so I feel it’s always worthwhile to get positioned a few days or hours ahead of data whenever a valid opportunity presents itself.
I was hoping for more of a follow-through on my EUR/USD short (and this short obviously) but U.S. employment data spooked the USD bulls and now it looks like we’re just going to chop around a little bit until the markets decide the USD’s fate next week.
Monthly Return: +2.58% | Annual Return: +6.53%
This week’s performance was acceptable.
I didn’t make any mistakes, but I didn’t get many trading opportunities either so that means there weren’t many occasions in which I could make a mistake.
I need to stay focused on being consistent and improving my edge and keep up the daily grind.
There are lessons to be learned from every trading week, and this week’s highlight lesson was the short on EUR/USD. Price could not have gotten any closer to stopping me out, and yet the trade turned out a winner.
That is why I use 1 ATR stops, that is why I never move those stops, and that is why I do my best to stick to and trust my trading plan.
I could have never anticipated this happening to this trade, but because I had conviction in my plan and the discipline not to micromanage the trade, it worked out better than I could have expected.
Experiences like these help to build even more confidence in my plan and my ability to be able to stick to it. Obviously I am not going to become the next Paul Tudor Jones any time soon, but I am extremely happy with my progress so far at least in terms of consistency and discipline.
I’m enjoying this evolution and journey and it’s exciting to see results slowly forming. I’m glad I started this journal when I did and it’s going to be fun to share this experience with you.
There’s a mountain of work left to go. This will be a never-ending process. But I’m excited to see where it takes me.
Trading is the best job in the world.
End of Month Review
In my previous monthly reviews I posted screenshots of my spreadsheet that contained my trade records.
I’m going to stop doing that now simply because I have taken so many trades that my spreadsheet is getting out of sync with my actual account balance, since it does not include commissions and slippage.
When I reach 100 trades I will probably reset the spreadsheet, but we’ll see. I am trying to think of ways to make it more consistent with my actual results.
In the meantime I will continue to use screenshots of my Myfxbook records which, although not 100% accurate either, is as close as I seem to be able to get as it’s connected directly to my broker.
Here is my equity curve and stats for the month of April (excluding this week’s trades):
And here are my monthly stats for April:
As you can see, Euro pairs have been a little unkind to me this month, but AUD/JPY and USD/CAD are carrying the team. This is why I like to have a small but uncorrelated portfolio of pairs to trade.
This is perfectly normal, and probably soon I will begin winning trades on Euro pairs and losing on the others. But as long as my net outcome is positive I am happy.
I’m not thrilled about my return this far into the year, but there are still seven months to go, and a lot can happen in seven months so I’m not too discouraged by that. Plus I’ve had 3 profitable months in a row which is a very good sign.
The past few weeks I’ve been very busy with things like working on the back-end of this website and dealing with my cats having seizures, so I haven’t been able to spend as much time reflecting on my trading as I would like to.
I am working on a journal template to greatly increase the detail of these trade reviews so you can expect much greater detail in the future regarding my process and metrics.
For now… I need to focus on other things, so I am cutting this journal entry short. I have a feeling that next month’s review will be a lot more interesting.
Happy trading, and good luck with your own trading journey!
Next Week’s Goals
Step up detail of journal and trade review. Grade each trade objectively on a set of process-focused metrics. Read more of The Playbook.
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