Why more potential opportunity doesn't always lead to bigger trading profits.
I closed out all trades on Friday at 8pm to ensure a clean (and transparent) start to the 36-month forex trading challenge that begins on Monday.
My plan is to write a blog post every day (Monday through Friday) charting my progress and documenting the experiences (good and bad) along the way. I'm also going to record a weekly video where I'll dig deeper into my trading approach and showcase the trades I'm taking.
It's Sunday morning and while a blog post at the weekend won't be happening moving forward, I wanted to get this final post out before the challenge begins.
On Friday we had a family day out and met up with my Mum and Dad. Over coffee my Dad expressed concerns over the fact I don't have a 'regular' job, and off the back of this conversation, yesterday my wife also told me she was worried.
My initial reaction was one of annoyance – why are they doubting me already, can't they just support me? But after a session in the gym I thought differently and realised that their thinking is the same thinking of the majority – the 9-5 is drummed into us from an early age and it's hard to break the mould. They view trading as 'not a proper job' and a risky one at that. There's a big difference however in taking calculated risks in pursuit of reward and just taking risk in general. I asked my Dad what he thought was happening with his pension – isn't this money invested in the financial markets?
The concerned feedback from my nearest and dearest is because they care, and it's also one of the reasons that as a trader, it's difficult to talk about trading with those who have no experience of it. I've perhaps shared too much with my wife in the past and this is an important lesson to take forward.
Anyway, let's take a look at the results for last month (June) and see what I can learn. Over the last couple of months I've been making minor changes behind the scenes to fine-tune my strategies and to put rules in place to avoid mistakes.
Results for the last three months:
April 2019 – 29 trades / 55% win ratio / £11,681 profit.
May 2019 – 43 trades / 26% win ratio / £4,457 loss.
June 2019 – 27 trades / 26% win ratio / £379 profit.
So what went wrong in May and June?
Well in April I traded a maximum of 15 currency pairs and from May onwards increased this by eight to 23 pairs. It appears that more opportunity (in the form of more markets) does not necessarily mean more reward.
The drop in my win ratio is a clear sign of overtrading. I was taking too many lower-probability trades, which cost me.
There's also an interesting observation when comparing May and June. I had exactly the same win ratio of 26%. In May I lost money, but in June I made a marginal gain. The reason for this is that in June, as part of my fine-tuning exercise I began cutting losses earlier.
Don't get me wrong – both May and June were difficult trading months with plenty of whipsaw action and general uncertainty across the markets, but this is no excuse. My trading system is designed to identify market type and to trade accordingly.
The two big takeaways and focus that I've now built into my trading approach are:
I started trading in eToro in May and in the first month generated a 3.26% return. Disappointingly, June's outcome was a loss of 3.81%, resulting in an overall negative position of -0.67%. These results differ to those from my private trading account as not all trades were taken in eToro.
A number of copy traders have now left me, which is not unexpected. I'll do better moving forward.
So, here I sit, in my office on Sunday 30 June 2019 at 10:30am. I was up at 7am, doing my weekly market review and preparing for the week ahead. Trading forex is a grind as I explained in one of my earlier posts.
Tomorrow the 36-month forex trading challenge begins to turn £50K into £1M.
All accounts are funded:
Private broker account (long) – £25K.
Private broker account (short) – £25K.
On each position I will risk 2% of opening capital (£1K) and have a permitted maximum drawdown of 20% (£10K) before I reduce this position size to 1% until the drawdown is recovered.
All trades will also be made in eToro where I'll be trading smaller and with one account. This is now funded with $10K, which means for July a maximum risk on each trade of $200. The beauty of percentages is that whatever the size of the starting account the end result is always the same in percentage terms.
Maybe I'm mad to take on this challenge – there are many that have already told me it can't be done. Well, time will tell and I know I'm going to learn an incredible amount about myself and the markets as things progress.
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
My plan is to write a blog post every day (Monday through Friday) charting my progress and documenting the experiences (good and bad) along the way. I'm also going to record a weekly video where I'll dig deeper into my trading approach and showcase the trades I'm taking.
It's Sunday morning and while a blog post at the weekend won't be happening moving forward, I wanted to get this final post out before the challenge begins.
On Friday we had a family day out and met up with my Mum and Dad. Over coffee my Dad expressed concerns over the fact I don't have a 'regular' job, and off the back of this conversation, yesterday my wife also told me she was worried.
My initial reaction was one of annoyance – why are they doubting me already, can't they just support me? But after a session in the gym I thought differently and realised that their thinking is the same thinking of the majority – the 9-5 is drummed into us from an early age and it's hard to break the mould. They view trading as 'not a proper job' and a risky one at that. There's a big difference however in taking calculated risks in pursuit of reward and just taking risk in general. I asked my Dad what he thought was happening with his pension – isn't this money invested in the financial markets?
The concerned feedback from my nearest and dearest is because they care, and it's also one of the reasons that as a trader, it's difficult to talk about trading with those who have no experience of it. I've perhaps shared too much with my wife in the past and this is an important lesson to take forward.
Anyway, let's take a look at the results for last month (June) and see what I can learn. Over the last couple of months I've been making minor changes behind the scenes to fine-tune my strategies and to put rules in place to avoid mistakes.
Results for the last three months:
April 2019 – 29 trades / 55% win ratio / £11,681 profit.
May 2019 – 43 trades / 26% win ratio / £4,457 loss.
June 2019 – 27 trades / 26% win ratio / £379 profit.
So what went wrong in May and June?
Well in April I traded a maximum of 15 currency pairs and from May onwards increased this by eight to 23 pairs. It appears that more opportunity (in the form of more markets) does not necessarily mean more reward.
The drop in my win ratio is a clear sign of overtrading. I was taking too many lower-probability trades, which cost me.
There's also an interesting observation when comparing May and June. I had exactly the same win ratio of 26%. In May I lost money, but in June I made a marginal gain. The reason for this is that in June, as part of my fine-tuning exercise I began cutting losses earlier.
Don't get me wrong – both May and June were difficult trading months with plenty of whipsaw action and general uncertainty across the markets, but this is no excuse. My trading system is designed to identify market type and to trade accordingly.
The two big takeaways and focus that I've now built into my trading approach are:
- Don't overtrade – I don't have to take every signal, only the best ones. I've now set a maximum risk exposure on open trades that's permitted in any given week. This is set at 1/3 of my maximum permitted drawdown in any week (20% of opening capital). With a £50K opening balance this means the maximum unprotected trades (those where my stop loss is not at entry or better) is three. I've also fine-tuned my sentiment indicator to only consider extremes. Again this will help me be more selective. Both will make me more selective and hopefully avoid lower-probability trades,
- Continue to cut losses – this advice is in every trading book I've ever read, but in practice can be very difficult to do. It's akin to self-harm, but the difference is pain now ahead of potentially much more further down the track. It also helps to better my reward-to-risk ration of 2:1. If I'm out before I lose '1' then so much the better.
I started trading in eToro in May and in the first month generated a 3.26% return. Disappointingly, June's outcome was a loss of 3.81%, resulting in an overall negative position of -0.67%. These results differ to those from my private trading account as not all trades were taken in eToro.
A number of copy traders have now left me, which is not unexpected. I'll do better moving forward.
So, here I sit, in my office on Sunday 30 June 2019 at 10:30am. I was up at 7am, doing my weekly market review and preparing for the week ahead. Trading forex is a grind as I explained in one of my earlier posts.
Tomorrow the 36-month forex trading challenge begins to turn £50K into £1M.
All accounts are funded:
Private broker account (long) – £25K.
Private broker account (short) – £25K.
On each position I will risk 2% of opening capital (£1K) and have a permitted maximum drawdown of 20% (£10K) before I reduce this position size to 1% until the drawdown is recovered.
All trades will also be made in eToro where I'll be trading smaller and with one account. This is now funded with $10K, which means for July a maximum risk on each trade of $200. The beauty of percentages is that whatever the size of the starting account the end result is always the same in percentage terms.
Maybe I'm mad to take on this challenge – there are many that have already told me it can't be done. Well, time will tell and I know I'm going to learn an incredible amount about myself and the markets as things progress.
*********
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
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