March 2019 Review
Forex Trading Review – Week 13
The markets can be… humbling.
This week started off with three flying kicks to the face.
I lost three trades in a row, all stopped out at the exact same time on Monday night. Fair enough. I’ve gotten away with a lot of mistakes this year, so it feels like my trading karma has finally caught up with me.
Last week I made a few trading errors and got away barely break-even. This week the market dished out its belated punishment.
Often after a hot streak many strategies will endure a cold streak. Well, after screwing up my hot streak it looks like I’ve moved straight on to the cold streak. I am now in a 6.68% drawdown.
I’ve been here many times and gotten out before. This is about my hundredth drawdown, but now that I have my strategy together and my mind together I know what I need to do.
Bring it on markets! Give me your worst. I’ll handle it, even though I’m not going to like it!
25th March – 29th March
I was actually pretty confident in this trade given the confluence of a major structure level and the 1.13 even handle, but obviously the market disagreed with me.
It teased me a little bit by going into profit but then immediately reversed and ripped towards the 50-EMA. Disappointing, but met my rules so it’s still a good trade.
Only issue I have is that I took it on Monday, and I have long suspected that Mondays are not good for me. After reviewing my EUR/JPY trades a few weeks ago I noticed that it was performing horribly on Mondays.
The other pairs in my portfolio performed slightly worse on Mondays but nowhere near as bad as EUR/JPY. Ironically, this Monday I got a setup on EUR/JPY and it was the only one I didn’t take – and it won.
So I have decided to just cut Mondays out of my trading completely. I feel better letting the market unfold and price-in whatever changes may have occurred over the weekend instead of jumping straight in guns blazing.
I live in Australia, so Monday to me is Sunday night in America (where the most FX liquidity is).
So it is not surprising to me at all that my setups perform badly on Mondays as they require momentum, and during those early week hours there is rarely any momentum and markets tend to meander.
That is the biggest insight I’ve had from this week. But anyway, moving on to the other losing trades…
This was my second Monday trade. Not a terrible setup, but also not ideal.
It’s not terrible because there is a half-decent 15M structure level that price is clearly holding above.
It’s not ideal because this is a day trade, and there’s no momentum. I was hoping that momentum would come in later in the day, but that’s not how I should be operating.
There’s no room for ‘hope’ in trading. If I don’t see it then it’s not there, and no amount of hope in the world is going to manifest it.
Do, or do not. There is no try.Yoda
This loss was probably a bit reckless on my part and could have been avoided.
The setup I was entering on occurred last Friday about two hours before the final close. So on Monday morning I was watching price action and considering entering, but talked myself out of it because of the major support level.
But then after seeing price break and close below that major support level I decided to try and be clever.
I placed a limit order at the entry of the setup and waited to see if price would retrace far enough to pick me up before continuing down to my first target.
Well, price retraced alright – all the way to my stop loss.
I won’t be doing that again. The fact that price retraced half of that large momentum candle within a single 4-hour candle right at a major support level should have been enough to put me off this trade.
But as Jordan Peterson says…
This was another good trade by my rules. Price was showing selling pressure right at the 50-EMA.
Because this setup occurred overnight I didn’t enter until the next day, so I got a better 1:1RR on my first position and I was happy to take this trade.
Of course, the markets slapped me again.
Hallelujah! Praise be to forex Jesus. A winner to break my losing streak, finally.
This was literally the only winning trade I had all week. It’s still playing out and I have trailed my stop-loss to around a 2R on my second position at 63 pips, which means I have only locked in a 1% gain despite losing several percent this week.
So yeah… I’m not exactly jumping for the moon over this trade, but it’s a fantastic setup that took courage to take considering I lost on my previous attempt to go short and I knew this week was going to be rough after the other losses.
But my rules say I can take one more stab at a trend-continuation move if price tests and fails at the 50-EMA. Sure enough, price did that with rather nice-looking bearish price action.
Even though I can’t get too excited over this trade because I am in drawdown, I’m glad that despite the shit storm of losing trades this week I was able to continue executing properly and catch at least one potential big winner here.
There is a lot of room to the downside on EUR/USD if I don’t get stopped out on a retracement. The next Daily level is about 30 pips away, but it is a weak level in terms of multiple tests, and the next major level is over 200 pips away.
I don’t expect to make that much, especially with my luck lately. More than likely I will be stopped out of this trade early next week, but that’s okay.
There’s a chance I won’t be. So I’ll stick to my rules and let it play out. That’s the only way to claw out of a drawdown.
A breakout trade with half-decent momentum, but the RSI being over-bought and the large red candles relative to the green candles above that minor resistance line were clues that this breakout was going to fail.
But with day trades there’s only so much room you have to
maneuver. My stop loss is pretty tight as it is. Exiting this trade early just because I don’t immediately see what I want to see is not a profitable strategy (according to my back-testing).
I am constantly surprised at how often trades that feel “off” turn out to be winners. And often times it’s the trades you are most confident in that fail.
Good trade, it’s unfortunate that it lost but it was an interesting lesson about market patterns. Not all great-looking breakouts are equal – that’s what I have learned this year.
Soon I will be spending a few days backtesting breakouts and studying them to see if I can develop rules around these scenarios that reduce the probability of losing.
Another hit to the face. The market really didn’t want to cooperate with me this week.
I thought this setup looked reasonable, with an impulsive 1-2-3 move breaking below the 50-EMA and minor support levels, heading towards a major support level.
Combined with the large-wicked rejection engulfing candle that was my entry reason, I thought this trade had a decent chance of hitting my first target.
But price decided to do a little head-and-shoulders dance at the 78 even handle and then took off towards my stop loss.
My rules say that I can take a setup within higher-timeframe consolidation only if I get an impulsive 1-2-3 move and my target falls near a major support/resistance zone that price is likely to be attracted to.
So technically this was a good trade by my rules, but this time the markets didn’t cooperate.
This week was brutal. It was not the best feeling to watch my equity curve fall back down to break-even for the year.
I am still a developing trader, so it is not that surprising that this happened and I was expecting it. But I need to work on my flaws and overcome the mistakes that are holding me back.
I have been treading water for far too long and I need to step up my game.
Right now I believe I am going through a natural drawdown to be expected from my kind of strategy, but I have definitely compounded it by making bad trading decisions at the same time.
A 6% drawdown is nothing to panic over, but I can’t help but feel like it should be half of that. I took too many mediocre trades this week, particularly on Monday, and I got burned for it.
Weeks like these are humbling and always make me hungry to do better. Bad weeks hone my focus to make sure that I do better next week.
So there are a lot of lessons to be learned from this week’s trading and also my past few weeks.
I have a lot of areas to improve, and this weekend I will be spending time reflecting on what I need to do better and how I will implement processes to ensure that I achieve my goals.
End of Month Review
Here is my spreadsheet for March (click to enlarge):
These are my goals and performance stats for March (click for more detail):
This month was rough.
Last week I was sitting on a nice 6% gain for the month. Taking several losing trades in a row this week undid most of that work.
I know I’m not going to make money every month, so I’m not too concerned about my results at the moment. I have seen this strategy endure worse drawdowns both in my live trading and in my backtesting.
That being said, I have definitely made a few mistakes this month which has compounded the problem. My win % should be a lot closer to 50%, and I should have made more than I did on a few trades.
If I can eliminate just a few of those mistakes then I think I will begin to break out of the rut I’ve been in the past few months.
Next month I will be focused on continuing to step up my journaling game and goal tracking. When I get time later this week I will backtest my strategy from January this year up until now and compare the results to see how I am performing relative to how I should be performing (theoretically).
That should give me some valuable insights into what I need to do better, what I need to do more of, and what I need to do less of.
In the meantime… I just have to keep grinding out trades that meet my rules and let the numbers play out.