Weekly Review #21
Forex Trading Journal – Week 21
This week was a great leap forward for my equity curve. Four trades, four winners.
I’m happy with my strategy’s performance so far this year and I believe the reason I was off to a slow start is because I was not being selective enough with my trades.
This week’s return demonstrates the importance of consistency.
I haven’t changed anything about my trading (other than refraining from over-trading). If I had changed strategies altogether just because I wasn’t content with my returns then I would’ve missed out on this week’s opportunity to advance my equity.
I am overdue for a drawdown so I’m not getting too excited yet, but so far this is great evidence that my strategy and trading plan really does have an edge over the forex markets and all I need to do is keep executing it with discipline and let the results play out over the long-term.
I’m significantly closer to my goal of having a profitable year which is extremely encouraging, but I need to make sure I remain focused on the process over outcome.
It is precisely during times when I’m doing well that I begin to make mistakes or let my guard down.
A great trade to start off the week.
Strong momentum above the 50-EMA breaking higher highs and making lower lows, plenty of room to Daily resistance, and a textbook pullback entry.
This is an example of my new Pullback strategy for the 15-Minute timeframe. I’ve spent the past few weeks backtesting ways to take targets and I found a more profitable exit reason (over the long-term).
Previously I exited on a fixed 2 ATR target. Now I exit after price has exceeded 2R profit and then prints a single lower-low lower-close candle.
So unfortunately on this trade I got my exit signal below a 2R profit, but I followed my plan to the letter and so this was a Good Trade. Throughout my testing I found that accepting the occasional sub-2R win is worth the potential to make 2R to 6R wins on occasion.
Anyway, luckily for me I was blessed by the slippage Gods this time. I exited my position at the exact same time as some economic data was released which happened to spike USD/CAD up for a split second, making this a 1.5R trade instead of the 0.8R trade it was supposed to be.
Normally I don’t trade around news events, but this particular news event was “supposed” to be insignificant according to the volatility rankings that the economic calendar assigned it. Apparently it meant something to someone out there.
|Date & Time||23/5/19 1:15PM|
I got this valid pullback setup at the exact same time as the USD/CAD setup, and it also happened to be a winner.
Similar to USD/CAD this trade was taken around some economic data releases so it got whipped around a little bit. I also got lucky with slippage on this trade.
By the time I clicked the close-trade button price had already moved a few pips lower, so I got a 1.18R trade out of this instead of the much lower R profit I was expecting.
Price had just reacted from the key Daily level that I was targeting so I was happy to exit this trade with a gain no matter how small it was.
In hindsight, knowing that this pullback strategy is profitable with a 2 ATR fixed target, I should have just left my target at the 2 ATR position it was initially.
Given the fact that I’d gotten a slightly better entry on a pullback and my fixed 2ATR target was a 2.5R distance and resting above a key Daily support level, I should have just left the target there. I would have been happy with that out of this trade.
But this is something I’ll need to address in my trading plan when I get time and develop clear rules for. My trading plan says I can leave a 2R fixed target in if I need to leave my computer for a prolonged period or go to sleep, but not when there is structure nearby.
I believe adding structure to this rule may increase my profitability, but as I’ve mentioned before in previous journal entries, the reason I don’t include structure-based trading decisions in my trading plan yet is because it’s extremely monotonous to backtest and I want to keep things simple for now.
There will be plenty of time to add complexity and extra filters as I get the hang of this strategy, which I believe I am only just starting to.
|Date & Time||23/5/19|
Later in the day after the past two trades I got a second setup on USD/CAD.
This is a great example of patience and discipline. I sat on my hands on both Monday and Tuesday as I had no opportunities to express my edge. It was difficult to do nothing. But then when the opportunity arose I acted on them without hesitation.
In this case I decided to use my regular 2ATR pullback rules because of the heavy resistance at my 2R profit target and because it was getting late at night and I needed to get some sleep. This decision paid off and turned out to be a wise decision.
I decided to do this because price had run up from 1.336 to 1.35 without even the slightest pullback on the higher timeframes. I knew it was unlikely to bust through resistance at 1.35 without consolidating first.
Even though I am ultimately bullish on this pair and expect a potential Daily breakout soon, this is a great example of using discretion wisely to trade the timeframe you’re on.
|Date & Time||24/5/19 9:00 PM|
My final trade for the week.
I was reluctant to take a trade late on Friday night because I wanted to go to bed at a reasonable hour, relax for the weekend and be flat. But after considering this setup for an hour or so I decided it was a valid pullback setup that met my rules.
Plus, the Daily chart had just double-bottomed at a key support level and formed a very nice large-wicked engulfing candle, leading me to believe we could see a further pop out of this pair on the intraday timeframes.
I’d be a fool not to take it. As it happens it turned out to be a winner.
I set an alarm to wake up early before the close of the forex market because I wanted to exit this trade before the weekend. There is a European election this weekend and I didn’t want to expose myself to any potential large gaps against me.
Unfortunately I got the time wrong and missed the close by half an hour which means I am still in this trade. It is in profit which is good, but I am uncomfortable being exposed to political risk over the weekend.
It’s only a 0.5% risk position and my stop is at break-even so price would need to gap significantly against me (100+ pips) to cause any meaningful damage. But technically this trade is going against the Daily trend so I am not too stoked about being stuck in it during such an important event.
We’ll see what happens on Monday. So far price action has given me no cause for concern but as we all know with high-impact weekend events, anything can happen when the market opens.
Monthly Return: +12.03% | Annual Return: +18.68%
Last Week’s Goal: Don’t make any trading errors. Execute my plan flawlessly.
Overall Grade: A
This week was a big confidence boost in regards to both my faith in my ability to stick to the plan and my plan itself.
All I need to do is keep doing what I’m doing: executing with discipline and consistency, and incrementally improving my strategy and trading plan as I develop more experience.
There’s not much else to say about this week except that I am optimistic about the rest of this year and I’m excited to share this journey with you guys.
I should note that I have decided to stop with the trade score system.
After reflecting on my process this week, I decided that I’ve been too subjective with the grading and analysis of my trades this year. There is only one question that really matters, and that is: Did I follow my plan?
So from now on I will be grading trades black and white. Either they are Good Trades that met my trading rules or Bad Trades where I broke my rules.
If there is anything of note worth mentioning about the trade itself I will elaborate in the trade review section, but my journal entries will be more concise from now on.
During my monthly and annual reviews I will address any patterns I notice in my trading that require attention and I’ll mention any changes I make to my strategies. But on a trade-by-trade basis I think it’s best that I keep it simple.
Anyway that’s it for this week’s journal entry, tune in next week to see what happens next. Have a great week, and good luck out there!