Forex Trading Journal – Week 19

This week was a solid trading week.

I only took 4 trades but one of them was a large win that brought my equity curve to new highs for the year. This goes to show the power of consistency.

I haven’t changed anything about my approach (other than improving my self-discipline and ability to stick to my plan), and yet the losing streak has finally been broken.

It’s far too soon to celebrate yet; I still have 7 months of trading left to go and plenty can go wrong between now and then. But so far I’m on track for a profitable year and that’s the main goal.

In the meantime all that’s left to do is keep on improving and working hard at stepping up my game. I am very excited with how things have been progressing.

There’s nowhere to go from here but up!

Trade #78

Trade #78Before

Trade #78After

Before:

Even though this trade was hovering around a key Daily support level, the Daily trend was actually bearish.

And because price had made a lower high before coming down to re-test the lows (and barely managed to break them), I decided this setup was worth a shot.

I believed that the higher timeframe momentum had the power to push this through to the lows at 123.4.

After:

It didn’t take long for price to hit my 1:1 break-even target. But by then it was after 11PM and I was tired. So I rolled my stop to break-even and went to bed.

I woke up at 4:00AM the next morning and I decided to get up and check on the trade. To my surprise price had continued lower all night throughout the U.S. session.

Sensing a pullback coming, I decided to roll my stop loss very tight above structure on the 1-Minute timeframe to lock in the unexpected extra profits.

I am happy with this decision. Although I did not wait for my official rules-based exit reason, I really wanted to go back to bed, we were approaching the close of the U.S. session and I’d already gotten more out of this trade than I’d expected to.

I was more than happy with a 5R winner, so I don’t regret bending my rules in this situation. If I had left my stop at break-even and went back to bed I would have had to suffer through a pullback back to the 50-EMA.

Verdict:

Great Trade.

This trade exemplifies exactly what I’m trying to achieve with my new exit rules for this 15M strategy (ie. catching intraday swings).

Trade #79

Trade #79Before

Trade #79After

Before:

The Daily timeframe for this pair was heavily bearish, so I was happy to take this short setup even though we were technically in consolidation.

The level that we had broken and held below was significant enough on this timeframe to give me the confidence to pull the trigger. Plus my target was before 77.000 which had a high probability to be tested given price action at the time.

After:

The NZD interest rate decision caused some wild volatility on the lower timeframes across the whole market for an hour or so.

I was stopped out for break-even on my second position soon after hitting my first target, but that’s ok. Given we were in consolidation I was happy to take what I could get and get out unscathed.

Verdict:

Good Trade.

This is a somewhat riskier setup than I typically like to take given the fact that we were in consolidation.

But the rejection from the Daily resistance zone at 78 followed by a break and close below previous support on this timeframe was enough to justify taking the risk.

Trade #80

Trade #80Before

Trade #80After

Before:

After already milking the majority of this move to the downside on Euro Yen I was skeptical that I could get any more out of this pair this week.

But this setup was technically a textbook pullback setup according to my rules, and with the added confluence of testing previous support-in-trend on this timeframe, I decided to go short.

After:

Price meandered lower all day but never really regained any momentum to the downside. Price began to consolidate for a day or two after this, stopping me out for break-even.

That’s why I have my break-even rule at a 1:1 ATR move – to protect me from getting caught in a sideways market. My strategy is designed to capture momentum, and if the momentum dies, I want to be out.

Verdict:

Good Trade.

Trade #81

Trade #81Before

Trade #81After

Before:

I was reluctant to take this trade because of that major push up from the Daily support zone near 122.6.

But because my rules don’t account for higher timeframe structure (as I didn’t include it in my backtesting) it is still a valid trade.

So that made it difficult for me to pull the trigger on this trade but I did it anyway because I figure my rules should overrule my emotions.

Plus price had just put in a double-top at previous structure and after testing the EMA, which made me a little over-eager to jump on this short in spite of the bullish momentum.

After:

Sure enough price immediately stopped me out.

Verdict:

Good Trade.

After this trade, I went back and analyzed my trading data for situations like this in the past.

It turns out, unsurprisingly, that these setups have a high failure rate. So I will no longer be taking them.

As I hadn’t implemented this rule before taking this trade I still marked this up as a Good Trade. In the future this type of setup will be marked as a Bad Trade if I ever take one again.

Weekly Reflection

Monthly Return: +5.15% | Annual Return: +11.39%

Last Week’s Goal: Step up detail of journal and trade review. Grade each trade objectively on a set of process-focused metrics. Read more of The Playbook.

Grade: A

This week was another great step in the right direction.

I am happy with my progress, and although I am aware I have a lifetime of hard work to go, I feel like I am on the right path and I am becoming more confident in my decision-making abilities as a trader.

My emotions are unbelievably calm compared to where I was two years ago or even one year ago, so that is exciting to notice. I feel like I am in the zone right now, completely focused on reading markets as objectively as possible and sticking to the process.

I feel proud about how far I have come, but humble in the face of how far I have left to go. The rest of this year will be extremely productive for my trading, I have no doubt about that.

I just need to keep my head down and keep on improving my system and my habits and I have no doubt I will eventually achieve the results I am seeking.

Strategy Amendment

I have spent some time studying my trading records for the year and discovered that I could drastically improve my results if I stop taking setups immediately after a rejection from higher timeframe structure.

I have long suspected this, but found it difficult to backtest. By analyzing my live trading records I have been able to confirm that taking setups immediately following a rejection from HTF structure has a 72% chance of losing.

This is obviously very valuable information to have. I have amended my strategy rules to include a new rule: I can take any valid setups before a test of HTF structure, but not after it has been tested.

Once structure has been tested and rejected from then any pullback setups I get are to be considered invalid. I must wait for price to either break and close through that zone convincingly or reverse trend before I can consider taking any setups.

Here is the evidence I collected before making this decision:

• 11 Trades taken after a rejection from HTF structure.
• 3 Wins.
• 8 Losses.
• 72.72% chance of losing.
• The 3 winners did not make up for the 8 losses.

Myfxbook Drawdown Glitch

I also wanted to point out that it seems like my Myfxbook drawdown chart is glitched (or at least I really hope it is).

According to my stats, on April 29th (which is a Monday, when I don’t trade) my open equity hit a sudden drawdown of 12.7%. Because I did not have any trades open at the time it is obviously some sort of glitch with my trade data.

My account is fine and I didn’t lose any money, so it’s no big deal. I just thought I should mention it for anyone following this journal who might be alarmed that I haven’t mentioned that giant spike in my equity drawdown.

Unfortunately this means my overall drawdown stats are going to be a little out of whack for the rest of the year on this account.

Trade Score

Another thing I should mention is the new trade scoring system and information table I’ve added to this journal. You can click on the * symbol next to the Score label to see how I calculate each trade score.

The trade score is a number I assign objectively to the quality of the setup. It is just a new statistic I want to track which does not directly affect my actual trading decisions.

At present it doesn’t reflect my profit-taking and trade management performance. I will probably develop a separate system for that when I get time.

This is all in an effort to increase my accountability and the clarity of my journal entries to make my progress easier to track.

If you have any ideas or suggestions on how I could improve my journal further please let me know by leaving a comment below!

Next Week’s Goal

Don’t get cocky and give back too much profit on sub-par trades.

Previous Week’s Review
This Week’s Review
Myfxbook Stats

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