Weekly Review #17
Forex Trading Review – Week 17
This week was a welcome reprieve from having my head beat in for three weeks by the market.
It’s not fun to trade for several weeks without making any money.
But I must admit, the fact that I now refer to a current -4.88% drawdown and +4.35% yearly gain as having ‘my head beat in’ is actually pretty exciting.
When I consider that by this time last year I was down -22.69% on my account and headed for worse I believe I have made some fairly massive improvements in my trading over the past 12 months.
I am proud of my performance this week but it was not perfect. My last two trades were bad trades. I have not taken any other “bad” trades this month (ie. trades that don’t 100% meet my rules), so this was very disappointing.
I’ll break down exactly what happened and what I plan to do about it below.
22nd April – 26th April
This was a trade I took on Friday. Why I took a trade on a world-wide bank holiday is beyond me. I don’t know what I expected to happen, at the time I didn’t really think about it which was stupid of me.
I deserved to lose this trade. As soon as the market opened on Monday, because price had gone nowhere on Friday, the spread spike during the low-liquidity morning hours of New Zealand trade took me out.
I will not be taking trades on international bank holidays anymore.
This was a great momentum reversal trade. Last week there were several setups like this that played out profitably but for whatever reason I couldn’t pull the trigger on them.
My rules say I can take trades within consolidation as long as there is clear momentum and a 1-2-3 reversal move leading up to the setup and the underlying higher-timeframe trend backs the setup.
That’s exactly what we got here. Plus because price had contracted I was able to get a very tight 1-ATR stop-loss and 2-ATR target within the range. This is an A grade version of this setup as far as my rules go.
I am glad I was able to execute on it this week when I couldn’t last week. It seems my weekend meditations on my process and practicing mental visualizations helped with that.
This was a great pullback trade. The big reaction and wick from the Daily support zone at 1.12 had me spooked, and the 4HR timeframe was forming an engulfing candle.
But the 1-Hour chart was telling me it was a sell and the HTF momentum was bearish so I went for this trade despite my reservations and the markets cooperated this time.
Unfortunately price had a second bullish reaction from that support zone and stopped me out for break-even on my second position making this only a 0.5% winner, but every win helps the cause so I’ll take it!
This was a fairly painless trade. Similar to the previous trade I was nervous to pull the trigger due to price appearing over-extended on this timeframe and approaching major Daily resistance.
But something about the overall HTF trend and momentum made me confident that this setup stood a chance, and it technically met my rules 100% so I had no excuse not to take it.
Fortunately I was correct this time and the momentum held up. This actually turned out to be one of the most painless trades I’ve had in a while – which goes to show that you shouldn’t always listen to your fears.
It’s normal to be uncomfortable trading. The market is an untamed beast and anything can happen, so it’s no wonder we feel anxious sometimes even though our rules have been met for a textbook entry.
But let go of your expectations and just follow your plan. Whatever will be will be. Sometimes that ‘anything can happen’ part of trading turns out in your favor even when you least expect it.
All we can do is execute our plan as best we can, learn from our mistakes and keep on grinding towards improvement. The rest is out of our control.
I got lucky with this trade. I was asleep when the setup occurred but in the morning I placed a limit order at the close of the candle that confirmed the setup.
I was filled an hour later and price pretty much rolled over immediately and never gave me another chance to enter had I missed it (nor any reason to worry about being stopped out).
I am still involved in this trade with a trailing stop at 78.834.
Last night price attempted to reverse trend on this timeframe but was shot down in the red zone which marks the area between the most recent swing high and my trailing stop (1 ATR above that recent high).
I am anticipating this trade being stopped out early next week given that price is now holding within a HTF structure zone.
It is Golden Week in Japan which means the Japanese smart money is on holiday and the markets could get a little crazy with the reduced liquidity.
So anything could happen next week in either direction, but I am anticipating JPY weakness which is bullish for AUD/JPY. The U.S. markets appear strong despite testing their ATH which is typically bearish for JPY.
Whatever happens, we’ll have to wait and see. Worst case scenario I should come away with 3R on my second position. Best case scenario I may be able to ride the rest of this fall down to at least the 78 even handle which has acted as major support in the past.
If I get an exit reason down there I will probably take my profits. Until then I’m sitting tight and giving this winner as much room to breathe as I can afford to.
My trailing stop happens to be above Thursday and Friday’s highs so I am content to let the market play out from here.
This trade was a tease.
18:00 is the European Open my time. Often at the open Euro pairs will flail around a bit crazily on intraday timeframes.
Because I have begun trading my new intraday strategy on EUR/JPY which requires 2 higher-high higher-close candles after a 2:1 move is reached, I did not get a chance to take profits on this trade.
If I had been trading my old strategy on this pair with a fixed target then this may have been a winner, although I can’t be certain because spreads went a little crazy during this candle.
So that’s frustrating, but bound to be a problem you encounter whenever you adjust your strategies. The adjustments I’ve made are definitely worth missing out on the occasional easy win like this so I’m not too bothered by it really.
I haven’t finished testing my new strategy on USD/CAD yet which is why I still only shoot for 2:1 targets on that pair (in case you’re confused at the inconsistency in my trade management this week).
Anyway, nothing could be done in this case. Good trade, break-even result. If I had won this trade that would have marked 4 winners in a row which is cool.
My strategy is performing well. If I take less “bad” trades then I should start to see my equity curve begin to pick up some steam again.
Another win on EUR/USD. Price finally broke out of consolidation to the downside on the Daily and I got a textbook pullback setup soon after.
Unfortunately price had already moved a fairly decent distance so I got caught in some chop and stopped out for break-even on my second position, making this another small winner.
This was a bad trade.
I traded what I wanted to see here instead of my strict rules. As I mentioned earlier, my rules say I can take pullback setups within consolidation but only if the higher-timeframe trend backs the setup.
In this case the HTF trend was obviously bullish. But I tried to be clever and thought that I could catch more of the retracement down towards HTF structure.
I got what I deserved here and price rallied as the bulls were still in control, stopping me out for my second loss of the week.
I believe I took this trade because I was feeling over-confident as a result of my past winning trades. I felt like I could afford to take the risk on this sub-par setup, and I paid the price for it.
Technically this trade met my rules because of the 1-2-3 move within consolidation with HTF momentum backing the move, so it was not necessarily a terrible setup.
But I still wrote it up as a bad trade because of a lapse in concentration which I’ll explain below, and also because I feel like this was a revenge trade or at least an ‘avenge’ trade.
A revenge trade is one you take out of frustration or anger because you lost money and you want to make it back.
I am calling this an ‘avenge’ trade because although I wasn’t frustrated or angry or focused on the money, I still believe I only took this sub-par trade so readily because I was more focused on trying to make up for the previous mistake than on following my process.
I felt like I’d let myself down by making a trading error and the best way to make up for that was to try to win one last trade before the end of the week.
Of course the markets don’t work like that, and by trying to rectify one mistake by acting out in the markets, I caused another.
Anyway, the entry candle was far too large to enter on as it put my 2:1 target beyond the consolidation range, so I waited for a pullback.
I got a pullback into the 50-EMA and as price began to rally from there I pulled the trigger on this setup and went long.
Unfortunately I totally forgot that at 10:30pm, which was the very next 15-Minute candle, U.S. GDP data was due to be released. So I entered long into the pre-sale before the data released.
Which is why I am writing this up as a bad trade. That was a silly move.
Sure enough the data released and price tanked from there down into the support zone that I was anticipating price heading to earlier in the day.
Ironically the GDP number came out better than expected and USD still sold off, which is a perfect example of what I talk about regarding economic data in the blog post I wrote this week called Ignore The News!
In that post I break down why you should not trust financial journalists and why you shouldn’t trade immediately leading up to an important data release.
However I did not mean that you should ‘Forget That The News Is Happening’, which is what I did here.
It is an unforgivable moment of negligence because I have all the important data events for the week written up on my whiteboard in my office specifically so that I can avoid situations like this.
So that’s an unprofessional move that I paid for, unfortunately ending the week on a sour note despite several good trades earlier.
Monthly Return: +1.04% |Annual Return: +4.35%
Last Week’s Goals: Focus on the process over outcome. One good trade, then one good trade, then one good trade.
All things considered, this was a good week. Any week that I make progress towards improving my discipline and my yearly gain is a good week.
But I must be careful. I have noticed that I have a tendency to spoil winning streaks by becoming over-confident and letting sub-par setups creep back into my trading.
I must work on this as it repeatedly sets me back whenever I encounter a period of success. I need to meditate on what it is that makes me sabotage myself whenever I start winning.
Anyway, it’s a good problem to have for a change. The past few weeks have been unkind to my strategy but thanks to my consistency in execution I managed to claw back a decent chunk of my losses this week.
Trading is more about perseverance and process than immediate results. So although I am not getting the results I would prefer, I am not letting that discourage me or dampen my enthusiasm for my work.
I am using my dissatisfaction as motivation to focus on what’s going wrong and improve it so that next year’s results will be even better than this year’s, rather than as a reason to get frustrated and feel shitty.
I constantly look back at my old records and compare them to my records today for inspiration. When I see how far I’ve come since I began trading three years ago I am extremely excited.
If I stay focused and keep up this trajectory of self-analysis and improvement then I will reach my goals eventually and start generating the returns that I expect to.
It is only a matter of time and effort spent correctly.