Month 1, Day 6 - 36-month forex trading challenge - review the rules, trading error and GBPUSD update.

It's week 2 and day 6 of the 36-month forex trading challenge. The weekend was good and a time to relax with the family, but I'm finding my mind is constantly preoccupied with trading, even when the forex markets are closed.

I guess this is the price you pay for focus. Once committed to a goal (it doesn't get much more committed than sharing my whole journey publicly for all to see) the positive side is that everything you do, and choose to do is in pursuit of the goal. The downside is that focus can border on obsession, and I'll need to keep a watch on this to ensure I actually have not just physical time, but also mental time, away from the markets to rest and recover.

I'm very conscious of the need for sleep, and a good eight hours of it each night. Getting up at 5:45am means I need to be out for the count by 10:15pm, which to be honest hasn't been much of a problem so far. This morning though feels a little hazy. At the weekend I like to have a few drinks, and this morning I'm possibly paying the price for one too many yesterday.

Over the weekend I ran through all of my analysis, which helps to give me an overall picture of the market and specifically each currency pair I have the option to trade. It's quite a big job, which I need to fit around family time and I'm finding that I'm doing it in two parts, on Saturday morning and Sunday evening.

In the past I'd wake up on Monday morning expecting to be in a trade right away, but the market operates on its own time and this was the cause of many a losing trade. Now with the challenge underway this urge to action has disappeared, and I'm finding myself being much more discerning and selective in my trading. Whereas before I would think: How can I get in? Now I'm thinking: Is there a reason I should stay out? 

The emphasis and focus has changed.

It's moved away from capital acquisition – the need to make money right now...to...

...capital preservation – the preoccupation of the professional trader.

I'm focused on the process of trading, not the prize – I trust in my plan to deliver the outcome I want.

All in all, I'm feeling much calmer, much more in control and a lot happier about my whole interaction with the forex market.

The day trader needs to make money 'right now' – they think of trading as a regular job where you get paid for the hours worked, and of course, you expect to be paid for each day worked.

This is not the reality of trading – just because you want (and need) to get paid today it doesn't mean the market will present an optimal opportunity. My approach doesn't seek to force opportunities, as forcing opportunities leads to sub-optimal trading decisions. I'm looking for the best opportunities, and take them only when they show up.

I focus on months, not weeks or days. Second only to capital preservation my focus is a 10% return each month, which will see me double my account at the end of February 2020. This doesn't mean I'll make 2.5% each week or 0.32% each day – it just doesn't work like that.

And on that note, it's back to the market.

My GBPUSD short is still in play. According to the way I see the market, we're in RANGE mode. There was positive news out of the USA last week (according to my relative strength analysis, the USD was the strongest performing currency last week and on Friday), primarily off the back of a surprise number out of non-farm payrolls on Friday.

Fundamentals are not part of my trading approach, but this USD strength showed up in price action. On GBPUSD price tested the bottom of the range and the 1.2500 level to close out the week at 1.2523.

I'm now looking for a close under the base of the range, below 1.2507, which will switch the market mode from RANGE to BEARISH. I will then look to add to my position on the way down. Of course, I might be wrong and my stop loss is ready to take me out with a decent profit if things go the other way.

I should point out that I'm not long from the bottom of this range for two reasons:

1. All of my SMA analysis from the monthly chart right down to the 240 indicates sell. To buy off this bottom at least one SMA signal needs to be bid (see explanation on my CADCHF trade below).
2. My sentiment indicator shows an extreme bias (> 70%) in the retail market to the long side. I take a contrarian approach and, as such, currently can only enter a trade to the short side. 

Having a trading plan is critical to your success as a trader. The reasons above are firmly stipulated in my plan and RANGE strategy. They're designed to keep me out of potentially losing trades and for the most part on the right side of the market. 

A trading plan is not something you write and then file away in a drawer never to be looked at again. It's a living, breathing document that I constantly refer to and read in detail each weekend. On Saturday while reviewing my CADCHF (T3S) trade, I realised I'd made a mistake. 

I'd set a sell limit inside the top of the range, despite all SMA signals (including the daily 10 EMA) from weekly down to 240, being to the buy side. 

My rules clearly state: 

'Do not take if weekly, daily and 240 SMA and EMA signals are all against the direction of my trade. Wait for at least one signal to change before entering.'

Unless I'd reviewed my rules, I wouldn't have picked this error up. The sell limit has now been cancelled and I'm waiting for a better opportunity.

The above is the entry in today's trading journal. Having completed my prior day and overnight market analysis, I've identified the pairs I need to watch today. 

There are a number of opportunities setting up, but as always, patience is a virtue.

Let's see what the week brings.

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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
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[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.]