Forex Trading Review – Week 48

Hey traders! Hope your trading week and month went well.

This month was a nice change of pace. I finished with a +7% gain for the month which has turned my equity curve around and back in a positive direction again.

It appears that I won’t be ending the year with the results I was hoping for, but that’s ok. I learned more this year than all of my previous trading years combined, and that means I’m one step closer to achieving the results I’m after.

I just need to be patient and remain diligent to the process-over-outcome approach and the outcome will manifest itself in due course.

25th November – 29th November

Trade #237

Reflection:

This trade is still ongoing, but I’ve locked in 2.63R on my second position with a trailing stop.

We had a bullish trend materializing on this 1-hour timeframe within the context of a bullish Daily trend (which is technically in consolidation). I felt comfortable taking this 1-hour setup within HTF consolidation because the Daily chart had just reacted off of the 50-EMA, we had room to move up towards previous structure resistance and USD was strong across the board (as well as the S&P500, which is typically bearish for Yen).

I have reason to believe that USD/JPY has potential to move much higher due to both fundamental and technical factors (the Daily chart just took out a key resistance zone), so I’m being conservative with my trailing stop on this trade in the hopes of capturing a larger move.

If price had struggled for longer at that resistance zone around 109.300 then I was prepared to trail my stop loss much tighter on a 15-Minute timeframe or take the position off altogether if we got a strong bearish pattern at that level.

We did get a rather large bearish engulfing candle on the 4HR chart which made me nervous, but I held on to the position because the lower timeframes were not confirming a reversal.

Anyway we’ll see how this trade plays out as we enter December which is typically a bullish month for U.S. stocks, and a bearish month for Yen. If the USD stays strong then this pair could easily rip higher by 100-200 pips.

And if it doesn’t, and price stalls during this breakout and reverses back down into last month’s period of consolidation, then I’ll be stopped out for a decent win on my second position and I’ll be ok with that.

Trading is all about making the best decisions with the best information available, and I feel comfortable that I’ve done that here. Even the worst case scenario is a good situation for me, so I can relax and manage this trade according to my rules without any emotional interference.

Trade #238

Reflection:

This was a cheeky little intraday reversal setup that I hoped would have more momentum behind it.

Unfortunately price did not follow through as quickly as I expected it to, so when I got a lower-low lower-close candle after a 1:1 move I exited my position.

Of course, price then rallied a further 20 pips or so immediately after I exited my position. I followed my rules and I did my best to protect my capital above being greedy, so I’m ok with that. Good Trade.

Trade #239

Reflection:

This was a momentum setup on this timeframe.

Even though we are technically within consolidation, we had a 1-2-3 move here with strong momentum above the 50-EMA and with room to move higher to the first zone of major resistance.

Unfortunately price decided to roll over in the middle of nowhere (as it tends to do in consolidation) and this trade was a dud.

Given the fact that GBP/USD is forming a giant bullish flag pattern on the Daily, I was hoping to capture a better entry from within the flag pattern before the breakout occurs (if it does).

Now that I’ve lost a trade within this consolidation period I am no longer allowed to take another trade until we make a new high or low from this consolidation period.

This was a very similar trade to USD/JPY. Good Trade according to my rules which I’ve found to have an edge.

Weekly Reflection

Last Week’s Goal: Backtest At Least 2 Hours Per Day.

Overall Grade: B

This week was solid. I had 1 losing trade, 1 tiny winner and managed to jump on board 1 decent trend-continuation move.

That’s a good outcome to me. One Good Trade, and then One Good Trade, and then One Good Trade. Keep that up, and the money will come of its own accord.

Monthly Review

Annual Return: +6.45% | Drawdown: -17.22%

I’ve finally broken the curse of consecutive losing months!

The past 4 months have been brutal. I’ve been bleeding money to the markets and given back the majority of my profits for the year. It’s very disheartening and discouraging, but it’s also to be expected and not something I was unprepared to experience.

I’m still a developing trader with a lot left to learn about trading and my own process. I started this blog early this year to document this part of my journey because I knew that this year was going to either be a positive year or a break-even year at worst.

It seems that I’m going to end the year in my “new” worst case scenario – either break-even or slightly above it. It sure beats blowing accounts, but it still sucks.

This is the natural progression of most retail traders. If I worked at a proprietary trading firm with a hands-on mentor and a babysitter watching and reviewing my every move and forcing me to improve then I have no doubt that this year would have been a big winning year for me.

But I’m on my own. I’ve got to learn all of this the hard way by fumbling through the dark and burning my hands on the stove, and my own trading mentor can’t really help me with this part of my journey because now it’s all about personalizing what I’ve learned from him and creating a process that feels intuitive to me.

So in light of that fact, and given just how difficult it is to become a consistently profitable trader as a technical retail trader, I’m actually proud of my progress as a trader this year. I’m not happy with my results, but I’m happy with my growth.

Next year will be even better than this year, I have no doubt. And the year after that will be better again, and again, and again. So although I acknowledge there is a lot of work left to do, I have nothing but improvements to look forward to and so I’m maintaining a positive attitude and keeping on keeping on.

I hope you’re doing the same!

Anyway… regarding the actual stats:

• My drawdown is still bad, but I feel more comfortable now that it’s moved away from my max of 25%
• AUD/JPY’s R:R statistics are glitched out. Not sure what happened there
• Trade #228 (day trade on EURJPY) was my second-biggest winning trade for the year
• All of my pairs performed much closer to their expected performance
  • Some were nicely profitable, some were small losers – as expected
  • Yen pairs carried the team this month

Discipline Review

My discipline for this month was pretty solid. I only broke my rules once, and it was by accident which isn’t cause for any red flags just yet so long as I do my best to prevent it from happening again.

Overall I think I did pretty well this month. I’ve been feeling more and more comfortable with my trading process and everything is beginning to feel second-nature. I took the least amount of trades in a single month which I think is a good sign. I’m becoming more selective and better at filtering out poor quality setups as I continue to master my strategies.

I haven’t broken my rules on purpose for a long time which is a huge improvement for me regarding self-sabotage. It’s hard enough to beat the markets without shooting yourself in the foot every week by taking trades that don’t have an edge.

Those days are behind me now and I feel really excited to see what the next few years bring for my trading results as I improve my process and continue to grow as a trader.

I only made 1 serious error this month which occurred on Trade #234:

As you can see, preceding this losing setup was an RSI Swing Signal pattern. The 7-period RSI was oversold below 20 and then we got a fractal-bottom higher-close bullish engulfing candle.

A few weeks ago I added a new rule to my trading plan that says I cannot take these setups anymore, but of course in the heat of the moment I forgot about that rule and failed to notice this negative filter until after the trade had lost – which kinda defeats the purpose of having a negative filter lol.

According to my analysis of my live trading stats for the year, whenever this RSI Swing Signal occurs before a pullback setup it gives me about a 60% chance of losing the trade.

I suspect this is because the conditions that satisfy an “RSI Swing Signal” setup probably also satisfy many mean-reversion strategy setup conditions, which in turn makes trend-continuation pullbacks more likely to be stopped out as all the mean-reversion traders push the market into a deeper retracement than would otherwise happen if this RSI Swing Signal pattern hadn’t occurred beforehand.

In any case, I don’t like taking setups with a negative edge because it makes it much more difficult to maintain consistent profitability with my current risk:reward ratio.

So I have two options: increase my average reward per trade by adjusting the way I take targets, or increase the probabilistic qualities of the setups I’m taking (ie. take less shitty trades with negative edge).

I’ve opted for the latter for now, but I plan on making adjustments to the former too. I’m not convinced that trading 2 positions on the 1 hour chart is as profitable as using 1 position given how often it consolidates and whipsaws around, so I’m backtesting variations of how I take targets with my existing strategy.

I’m also still working on implementing advanced patterns into my trading as well as a 4HR strategy. I’ve finally mastered the Bat Pattern after a few weeks of study, and now I see that thing popping up everywhere. I’m loving it.

Now all that’s left to do is complete backtesting it across my portfolio of pairs and see which timeframes and currency pairs it performs the best on. Then I can move on to the next pattern.

This process is probably going to take me the rest of this year and perhaps well into next year, but I’m hoping that next year when I resume trading after my end-of-year break I can at least add Bat Patterns to my trading plan.

Anyway that’s it for this month’s review. Everything seems to be on track. I’m not stoked about my trading performance this year, my drawdown is nasty and my gain is pitiful.

But I’m pretty excited that I’ve stopped hemorrhaging money to the markets. It’s only a matter of time before I have a big winning year, and if I stay diligent with my development as a trader, hopefully that year will be 2020. We’ll see.

My end of year review will go into much more detail about what I plan to do to achieve my goals and also address all of the things I’ve learned this year and any issues or patterns I’ve noticed with my strategies.

In the meantime – take care, be safe, and trade green!

– Matt.

Next Week’s Goal

Continue Backtesting Bat Pattern and make no mistakes in my trading for the rest of the year.

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

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