Month 1, Day 2 - 36-month forex trading challenge - risk and update on AUDUSD & GBPUSD trades.
Well I survived the first day of the challenge. I was always nervous about day 1, as with any new challenge you want to get off to a good start.
Fear of failure is something that stops people taking the action they probably should take. For me, fear is a clue to exactly what I should be doing!
Fear is what we feel on the periphery of our comfort zones, which I define as the people we know, the places we go and the things we're used to doing. Think of the last time you felt nervous about a situation – were you with new people, in an unfamiliar place, or doing something you've never done before? Chances are it was one, two or all of the above.
Fortune favours the brave and that's exactly what this challenge is all about.
Another early start this morning. I now no longer need my alarm (much to my wife's relief). I wake up automatically just after 5:30am. 10 minutes to come round and then I'm out of bed and into my office. A quick scan of overnight news and then downstairs to make a coffee. It's then to the morning routine of analysing yesterday's relative strength, overnight strength and each currency pair's relationship to the SMAs (Simple Moving Averages) and EMAs (Exponential Moving Averages) I watch.
Analysis done – I then look more closely at each pair and ask myself two questions:
For me – risk management is restricting my exposure to any one currency, and money management is how much of my capital to allocate to any one position. As I highlight above, these are firmly stated in my trading plan.
Drawdown (the reduction in capital after a series of losing trades) is something every trader experiences, no matter how good they are. It's an inevitable part of the game. I know it's coming, so I've chosen to be prepared.
I don't have a rule that stops me trading for the rest of the week / month if a certain number of losing trades occur in a row. A losing trade is not a problem providing I've followed my rules to the letter, and after a string of losing trades the probability of a winning trade coming along, exponentially increases.
Most lunchtimes I train in Brazilian JiuJitsu (BJJ). I've been practicing martial arts since I was 19, including Muay Thai, Aikido, Krav Maga and now, BJJ. I'm convinced that the discipline I've gained from martial arts is incredibly helpful in my trading. BJJ in particular is a game of strategy and patience.
As Carlson Gracie Sr. said: 'There is no losing in JiuJitsu. You either win or you learn.'
It's exactly the same in trading.
Going to JiuJitsu class is an important part of my trading psychology. It takes me out of the market when I might be tempted to do something I don't need to do. As part of my mental well-being it connects me with other people (working from home can be a lonely pursuit) and allows me to forget about the forex market, at least for a period of time.
Yesterday on the close of the 10am candle I took a short position on GBPUSD using my GOLDEN GATE strategy. Having identified the market mode as being in a range, a close below the SMAs gave me my entry signal.
You'll see in the above that the entry signal occurred on high volume (long body, which closed near its low) – a good clue as to the market's future intention.
After a period of sideways action yesterday (common after a big move), this morning we are back on the offer side, with this pair in profit and moving lower.
There was news last night in AUDUSD. I don't trade the news, but I do protect myself ahead of it. I rolled my stop to just inside my entry (this also evened out what had become an inverse risk-to-reward relationship, which I'll explain in more detail in this week's YouTube video published next week (be sure to 'Subscribe' now to be alerted). The market reacted with bids and stopped 10 points inside my entry. Whatever happens now this trade cannot lose and if I'm stopped out I'll walk away with a small profit. With my stop at entry or better I'm now also free to take an additional USD trade if a signal shows up.
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.]
Fear of failure is something that stops people taking the action they probably should take. For me, fear is a clue to exactly what I should be doing!
Fear is what we feel on the periphery of our comfort zones, which I define as the people we know, the places we go and the things we're used to doing. Think of the last time you felt nervous about a situation – were you with new people, in an unfamiliar place, or doing something you've never done before? Chances are it was one, two or all of the above.
Fortune favours the brave and that's exactly what this challenge is all about.
Another early start this morning. I now no longer need my alarm (much to my wife's relief). I wake up automatically just after 5:30am. 10 minutes to come round and then I'm out of bed and into my office. A quick scan of overnight news and then downstairs to make a coffee. It's then to the morning routine of analysing yesterday's relative strength, overnight strength and each currency pair's relationship to the SMAs (Simple Moving Averages) and EMAs (Exponential Moving Averages) I watch.
Analysis done – I then look more closely at each pair and ask myself two questions:
- Do my open trades still make sense?
- What opportunities could present themselves today?
- Am I overly exposed to any one currency? [This means more than two positions (4% of capital) backing any one currency.]
- Am I within my maximum weekly risk exposure? [This is set at 1/3 of my maximum monthly drawdown (20% of opening capital).]
For me – risk management is restricting my exposure to any one currency, and money management is how much of my capital to allocate to any one position. As I highlight above, these are firmly stated in my trading plan.
Drawdown (the reduction in capital after a series of losing trades) is something every trader experiences, no matter how good they are. It's an inevitable part of the game. I know it's coming, so I've chosen to be prepared.
- Lose 5% of your trading capital and you'll need a return of 5.2% to recover.
- Lose 20% of your trading capital and you'll need a return of 25% to recover.
- Lose 50% of your trading capital and you'll need a return of 100% to recover.
- Lose 100% of your trading capital and you're finished!
I don't have a rule that stops me trading for the rest of the week / month if a certain number of losing trades occur in a row. A losing trade is not a problem providing I've followed my rules to the letter, and after a string of losing trades the probability of a winning trade coming along, exponentially increases.
Most lunchtimes I train in Brazilian JiuJitsu (BJJ). I've been practicing martial arts since I was 19, including Muay Thai, Aikido, Krav Maga and now, BJJ. I'm convinced that the discipline I've gained from martial arts is incredibly helpful in my trading. BJJ in particular is a game of strategy and patience.
As Carlson Gracie Sr. said: 'There is no losing in JiuJitsu. You either win or you learn.'
It's exactly the same in trading.
Going to JiuJitsu class is an important part of my trading psychology. It takes me out of the market when I might be tempted to do something I don't need to do. As part of my mental well-being it connects me with other people (working from home can be a lonely pursuit) and allows me to forget about the forex market, at least for a period of time.
Yesterday on the close of the 10am candle I took a short position on GBPUSD using my GOLDEN GATE strategy. Having identified the market mode as being in a range, a close below the SMAs gave me my entry signal.
After a period of sideways action yesterday (common after a big move), this morning we are back on the offer side, with this pair in profit and moving lower.
There was news last night in AUDUSD. I don't trade the news, but I do protect myself ahead of it. I rolled my stop to just inside my entry (this also evened out what had become an inverse risk-to-reward relationship, which I'll explain in more detail in this week's YouTube video published next week (be sure to 'Subscribe' now to be alerted). The market reacted with bids and stopped 10 points inside my entry. Whatever happens now this trade cannot lose and if I'm stopped out I'll walk away with a small profit. With my stop at entry or better I'm now also free to take an additional USD trade if a signal shows up.
*********
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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