Month 1, Day 17 - 36-month forex trading challenge - mistakes and a reminder to stick to the rules.
Well I'm a bit late getting to today's blog post. This morning I had to go to my eldest's school to sort out an issue and I'm only just catching up.
It's now 4:20pm and lots has happened already today. For one, the UK has a new Prime Minister. I had half expected Jeremy Hunt to make a final sprint to the finish line, but no, Boris is the man in charge, and while he obtains a new pad in central London bearing the number '10', he also inherits an ongoing issue with the EU and a mandate to deliver Brexit.
Sterling has hardly reacted. An initial surge in GBPUSD was capped and for the the moment at least, the downtrend I'm riding looks to be intact. Yet another reason I don't trade the news. The markets are unpredictable at the best of times, but adding a sprinkling of political turmoil and they become even more difficult. My rules are clear – I don't trade the news, but protect myself in advance of its release.
The quest to hit my 10% target return on opening capital in month 1 continues to be frustrating.
Yesterday I was stopped out of my USDCAD (T9S) short.
The big mistake I made was not getting out of this trade earlier. With the 10 EMA (Exponential Moving Average) and 30 EMA crossing above the 50 SMA (Simple Moving Average) on yesterday's 10am close, my rules once again were clear – I just, for some reason chose to ignore them.
This meant exiting the final 2/3 of this trade with a much large loss than necessary. Exiting at 10am in line with my rules would actually have seen me walk away with a small gain to offset the loss on the initial 1/3. This trade cost me 1.8% of my precious capital – it was an expensive mistake and one I mustn't ever make again.
Rules are not there to be broken – they are there to protect me from myself in times of high emotion. Times when I want to give the market a little more time to prove me right and times when my ego just gets in the way. It's a stark reminder that the success of my 36-month forex trading challenge has very little to do with the market, but has everything to do with my trading psychology.
Hindsight is a wonderful thing, but reveals the other mistake I made with this trade. I was playing a TREND strategy in a range market. The clue was price not respecting the 50 SMA on the 240 chart, which is characteristic behaviour of an indecisive market, bound between an area of support and resistance.
I've now highlighted this range on the daily chart in yellow. It meets my RANGE criteria, with two touches either side of this yellow box being rejected, and the Bollinger bands narrowing and flattening at the top and bottom of the high and low.
Now in line with my RANGE strategy, I've sold the top and placed my stop loss just beyond the 200 SMA, which is sloping downwards.
After some initial heat, price is starting to turn in the direction of my trade, and with T placed just above the 50 SMA this gives a reward-to-risk ratio in excess of 1:1. At T I'll take off 1/2 of my position and leave the rest to work. I'll then be looking for a close on the daily chart below the bottom of the range, to signal a move back to trend mode.
The rationale for a short position on the monthly and weekly chart on USDCAD still hold true and my RANGE sell is in line with the overall direction I'm predicting for this pair.
Lessons from my USDCAD trade have reinforced the importance of following my rules just in time for USDJPY (T14S). Despite a positive start following my entry yesterday, the market pushed to close above the 200 SMA, and I've now exited 2/3 of my position. If the 30 EMA crosses above the 50 SMA I will manually exit the final 1/3 and take a small loss on my overall trade. This loss is a cost of doing business and my exit rules are designed to keep any loss well below my 2% initial stop placement.
When I'm wrong I of course must pay the price, but want to pay the market as little as possible. When I'm right I want to leverage the opportunity I've been given to capture as much of the move as possible. This is cutting losses short and letting winners run, which is a necessary practice to become a consistently profitable trader, and one who is determined to turn £50K into £1M in 36 months!
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.]
It's now 4:20pm and lots has happened already today. For one, the UK has a new Prime Minister. I had half expected Jeremy Hunt to make a final sprint to the finish line, but no, Boris is the man in charge, and while he obtains a new pad in central London bearing the number '10', he also inherits an ongoing issue with the EU and a mandate to deliver Brexit.
Sterling has hardly reacted. An initial surge in GBPUSD was capped and for the the moment at least, the downtrend I'm riding looks to be intact. Yet another reason I don't trade the news. The markets are unpredictable at the best of times, but adding a sprinkling of political turmoil and they become even more difficult. My rules are clear – I don't trade the news, but protect myself in advance of its release.
The quest to hit my 10% target return on opening capital in month 1 continues to be frustrating.
Yesterday I was stopped out of my USDCAD (T9S) short.
The big mistake I made was not getting out of this trade earlier. With the 10 EMA (Exponential Moving Average) and 30 EMA crossing above the 50 SMA (Simple Moving Average) on yesterday's 10am close, my rules once again were clear – I just, for some reason chose to ignore them.
This meant exiting the final 2/3 of this trade with a much large loss than necessary. Exiting at 10am in line with my rules would actually have seen me walk away with a small gain to offset the loss on the initial 1/3. This trade cost me 1.8% of my precious capital – it was an expensive mistake and one I mustn't ever make again.
Rules are not there to be broken – they are there to protect me from myself in times of high emotion. Times when I want to give the market a little more time to prove me right and times when my ego just gets in the way. It's a stark reminder that the success of my 36-month forex trading challenge has very little to do with the market, but has everything to do with my trading psychology.
Hindsight is a wonderful thing, but reveals the other mistake I made with this trade. I was playing a TREND strategy in a range market. The clue was price not respecting the 50 SMA on the 240 chart, which is characteristic behaviour of an indecisive market, bound between an area of support and resistance.
I've now highlighted this range on the daily chart in yellow. It meets my RANGE criteria, with two touches either side of this yellow box being rejected, and the Bollinger bands narrowing and flattening at the top and bottom of the high and low.
Now in line with my RANGE strategy, I've sold the top and placed my stop loss just beyond the 200 SMA, which is sloping downwards.
The rationale for a short position on the monthly and weekly chart on USDCAD still hold true and my RANGE sell is in line with the overall direction I'm predicting for this pair.
Lessons from my USDCAD trade have reinforced the importance of following my rules just in time for USDJPY (T14S). Despite a positive start following my entry yesterday, the market pushed to close above the 200 SMA, and I've now exited 2/3 of my position. If the 30 EMA crosses above the 50 SMA I will manually exit the final 1/3 and take a small loss on my overall trade. This loss is a cost of doing business and my exit rules are designed to keep any loss well below my 2% initial stop placement.
When I'm wrong I of course must pay the price, but want to pay the market as little as possible. When I'm right I want to leverage the opportunity I've been given to capture as much of the move as possible. This is cutting losses short and letting winners run, which is a necessary practice to become a consistently profitable trader, and one who is determined to turn £50K into £1M in 36 months!
*********
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.]
Comments
Post a Comment