Weekly Review #11
Forex Trading Review – Week 11
This week was pretty average.
There’s not much to be excited about, but not much to be disappointed about either. Weeks like this are not uncommon for systematic traders.
A few small wins, a few small losses. Nothing spectacular, but still a push in the right direction.
My main focus is on limiting drawdown and I ended the week positive, so that’s a win to me.
11th March – 15th March
I viewed this trade as a potential reversal on the lower timeframe. Price had just reacted from a HTF support zone and then broke and closed above the highs of the previous day’s range.
But the markets really disagreed with me here. Price immediately reversed and I had to take a loss. At least it was over quickly.
After taking a loss on the previous trade EUR/JPY decided to cooperate with my analysis and head higher after all.
This is one of the more frustrating elements of trading. It takes courage and maybe even a little bit of insanity to enter a trade based on the same underlying thesis after taking a loss on the first attempt.
But the thesis was in-tact. Price may have stopped me out on the last trade, but it then rocketed higher indicating a clear reversal and was screaming at me to buy.
So I did, knowing that I still had a ~50%+ chance of price heading higher – and this time it worked out (barely). But a win is a win, and I’ll take it!
This trade is a bit of a head-scratcher.
I am not sure what I was thinking here. This trade doesn’t really meet my rules, so I wrote it up as a bad trade. This is what I would refer to as a ‘sub-optimal’ setup at best.
This was a case of trading what I wanted to see instead of trading what the market was giving me. I was seeing a 1-2-3 reversal at the time, but in hindsight all I see is noise.
Price is not just consolidating, but in ugly consolidation. And although the HTF trend is bullish, this was not the time to buy.
If I hadn’t taken this trade then maybe I would have made a gain this week instead of barely breaking even.
Next week’s goal is going to be to stop taking trades like this one.
This is a good trade to reflect on.
If you recall, last week I was short EUR/USD and got stopped out of my trailing position for a reasonable profit around 1.12400 during Non-farm payrolls.
U.S. data missed quite heavily on the job creation numbers, but wages and other indicators were pretty steady. So the initial reaction was bearish for the U.S. dollar but then it seemed like the markets were going to blow off the news.
So I was expecting EUR/USD to head lower this week, and was prepared to enter short if I got another signal. But I didn’t get another short signal. Instead, price broke above the 50-EMA and then began to show signs that it wanted to trend higher.
Rather than stick rigidly to my original thesis that USD was headed higher, I took notice of the new evidence the market was giving me and reversed my bias completely.
When I got this long signal that was approaching a level of resistance, I decided to go for it. U.S. data had missed pretty bad last week, and after thinking about it a little more I decided that perhaps the fall in EUR/USD preceding the data release was a little bit over-done.
And although I am confident EUR/USD is headed lower in the long-term, I must trade the data from the timeframe I am focused on. And on the 1-hour chart, price was telling me to buy. So I did.
This trade is still active, I am still holding my second position and I am sitting on a 3:1RR with it. However, I have not had a chance to trail my S/L. So there is a chance this could end up a 1-target winner.
We’ll have to wait and see what happens next week.
This was a trade I probably could’ve afforded to pass on.
It wasn’t until I’d already entered the trade that I noticed the massive bullish RSI divergence on the recent low.
Normally I don’t consider this kind of variable in my trading as I didn’t include it in my testing, but I like to observe what effect the RSI has on my trades.
I couldn’t exit the position after I’d already taken it based on this information as it isn’t included in my trading plan. But I probably should have used my discretion to not take this trade in the first place.
I trade USD/CAD on both the 15M and the 1-Hour, which is usually not an issue because it’s rare that I get a signal on both timeframes. But this was a situation where it looked like I was going to get a 1-Hour signal, so I should have waited for that.
The bullish momentum leading up to the 50-EMA was a little bit too strong for my liking. But hey, if I’m being coldly objective, this trade met my rules, so a good trade is a good trade even if it lost.
I can’t dwell on hindsight factors too much and if I want to incorporate a rule regarding the RSI then I need to back-test it first. So let’s just move on.
Another strong momentum trade here on EUR/JPY.
The wick on the candle before my entry had me very concerned. The RSI being overbought had me worried too. But the trend is up, the market is strong, and the worst thing I could possibly do is presume that I know what’s going to happen next.
So I fell back on my trading rules, reminded myself that this setup has a 50%+ chance of success on average and that I have nothing to fear from a long-term perspective.
So I pulled the trigger and hit a win. Good trade. Good lesson.
This trade stung a little. This was a re-attempt at the USD/CAD short play. Previously I went short using my 15M day-trading strategy and got stopped out.
Then this setup occurred, which was a textbook 1-Hour pullback. I had to go for it, as it met my rules perfectly. And of course, it also lost.
But I wasn’t too phased about that this time because this was actually a very good setup. I would take this trade 10 times out of 10, because it has a nearly 60% win ratio under these types of conditions.
This time it didn’t pan out, but as you’ll see in the next trade – if at first you don’t succeed, try and try again.
This was my final trade for the week. Yet another stab at USD/CAD short.
It took a considerable amount of conviction in my plan to take this trade after taking two simultaneous losses on this pair over the same setup.
But my trading plan says that if I am stopped out below the 50-EMA, then I am allowed to re-enter on a failed re-test of the 50-EMA.
As you can see here, price indeed failed at the 50-EMA which also happened to be in confluence with a HTF resistance level. If it wasn’t for that fact I must admit I would have found this trade harder to pull the trigger on.
I think I’ve done well this week on implementing my previous goal of having more conviction in my trades and my trading plan.
There were a couple of trades I took that in the past I may have been tempted to sabotage through micromanagement, but this week I had the self-control to let all of my trades play out.
Next week I plan to start focusing on reducing the amount of sub-optimal setups I take. If I had not taken a couple of crappy trades this week then I would have ended the week with a better result.
I need to follow my rules to the letter, have conviction in my plan, and be patient to wait for the best setups. Then I am certain I will start to see better results.
I’m excited to see how the rest of the year turns out.
Next Week’s Goal:
Don’t take obviously sub-optimal setups
Previous Week’s Review
This Week’s Review