Month 2, Day 34 & 35 - 36-month forex trading challenge - trading enlightenment.
Trading when you're ill is no fun, and yesterday I woke up with a headache, sore throat and feeling pretty dreadful.
For the first time since the 36-month forex trading challenge began, I ditched my 6am morning market analysis (day 34), and headed straight back to bed. I caught up before the 10am close, but at this time was still feeling under the weather.
Trading when you feel ill is not really a good idea, but at the middle of month 2 I'm feeling the pressure to hit target, which involves catching up on month 1's missed target too. Feeling ill can mean making mistakes, and yesterday that's exactly what happened.
I entered my second long position of the challenge in USDCAD (T2L) using my FULL HOUSE strategy. To buy this pair using this strategy requires that price is trading above the weekly, daily and 240 200 and 50 SMAs (in addition to the daily 10 EMA). Late with my analysis, and with the 10am close creeping up, I entered this long position in haste, only to realise moments later that on the weekly, chart while price was trading above the 50 SMA with no candle close for this week yet, price had closed last week below this level – technically I was in breach of one of my entry criteria.
240 chart >
Weekly chart >
So, realising my mistake, why did I decide to stay in this trade? Well it's a good question and one where I have to monitor my answer closely to be sure it's not influenced by greed or some other unhelpful motivation.
There are three reasons I decided to stick with this trade:
While I try and remove as much discretion as possible from my trading approach, on this occasion I decided to make a call that could pay off or end up costing me – only time will tell.
As a quick update on other trades – I'm now out of my AUDUSD (T21S) short. I was stopped out on a trailing stop on positive overnight employment news. My first position on this trade was a winner, but my second was a loser. Overall this trade came out in positive territory, primarily because my rules stipulate that I take profit on half of my position when my initial target (T) is hit. I learned some valuable lessons on this trade and fine-tuned one of my rules as a result.
On my USDCHF (T29S) trade, signals showed up to tell me to exit the position in full, which I did for a marginal loss of c.0.18% of capital, instead of 2% if my initial stop loss is hit.
It's a similar story on my NZDCAD (T28S) trade, where I've exited 2/3 of my position. I still have a final 1/3 on that could go my way, but if the 30 EMA crosses and closes past the 50 SMA I'll be out in full.
Yesterday, I entered a short GOLDEN GATE trade in CHFJPY(T31S).
I entered on the close below the 50 SMA and although I don't have 1:1 reward to risk to T, I took this trade anyway, as on the weekly / daily charts we're at a very interesting level (see daily chart below).
The turquoise line represents the weekly trend line, which is pointing down. My signal supports the direction of the longer-term time frame – this always gives me additional comfort. If I'm right this trade could offer an outstanding reward-to-risk ratio and could give me the opportunity to add more on the way down. Once again, only time will tell, and I'm ready to exit if conditions change.
That's been a whistle-stop update, as to the trades I'm in. For a more detailed appraisal and explanation, please be sure to check out my YouTube channel, STG FOREX TV. The trades above will appear in week 7.
So, what's the trading enlightenment that I highlighted in the title of today's blog post?
I believe there are things you know in life, and things you really know – and there's a big difference between the two, which manifests itself in the form of action.
I know that cutting losses is a key component of a winning trading approach. I've read it in books, magazine articles and had this message reinforced via a whole host of other media. It's something I know to be true due to the weight of evidence behind it, not to mention that it makes sense to get out of positions that are going against you with a small loss now, rather than a much bigger loss later on.
Although I've known this for some time, if I'm honest with myself I've not really known it. I've held positions for longer than I should have, and when the market gave me a clear signal that conditions were changing and it was time to exit, in the past I've ignored these clues foolishly thinking I know best.
Yesterday though I feel was a turning point. As I explained above, signals showed up to cut my USDCHF trade completely and lighten up on my NZDCAD short. I've started to really know that cutting losses early makes sense, and I know this because I've started to take action without question, and without thinking I know better. I've started to see small losses for what they really are – not a bad thing, but as a necessary cost of doing business. What's helped me to really get this is my weekly trade management sheet, which I use each week to monitor all of my trades (see below).
Imagine the possible scenario if I'd have let these losses run – it's highly likely I'd be in a losing position for the week, not to mention the untold damage to my confidence.
I make no apology in referencing Paul Tudor Jones again. As one of the greatest traders of all time, he has it right when he says that before you can make money you have to play good defence.
If the currency markets are the ocean and I'm a surfer, I know that I'm not going to catch every wave, and that the ones I do catch will not always deliver me safely to shore. When I catch a wave I can never be certain whether it's a good one or a bad one, but I have to catch it to find out.
The difference with my surfing now, is that as soon as I recognise a wave is taking me in a different direction to the one I'd anticipated I jump off the board. I don't want to get hurt, I don't want to get dashed against the rocks – I protect myself at all times to ride the next wave, and the next, and the next. I do this because the next one could very well be the big break I've been looking for.
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.]
For the first time since the 36-month forex trading challenge began, I ditched my 6am morning market analysis (day 34), and headed straight back to bed. I caught up before the 10am close, but at this time was still feeling under the weather.
Trading when you feel ill is not really a good idea, but at the middle of month 2 I'm feeling the pressure to hit target, which involves catching up on month 1's missed target too. Feeling ill can mean making mistakes, and yesterday that's exactly what happened.
I entered my second long position of the challenge in USDCAD (T2L) using my FULL HOUSE strategy. To buy this pair using this strategy requires that price is trading above the weekly, daily and 240 200 and 50 SMAs (in addition to the daily 10 EMA). Late with my analysis, and with the 10am close creeping up, I entered this long position in haste, only to realise moments later that on the weekly, chart while price was trading above the 50 SMA with no candle close for this week yet, price had closed last week below this level – technically I was in breach of one of my entry criteria.
240 chart >
There are three reasons I decided to stick with this trade:
- On the daily chart (see below), price had closed above the 200 SMA on a strong bullish candle.
- On the 240 chart (see above) the trade moved immediately in my favour.
- On the weekly chart (see above) we're trading some distance above the 50 SMA, and given it was Thursday, there is a good chance the week will close above this level.
While I try and remove as much discretion as possible from my trading approach, on this occasion I decided to make a call that could pay off or end up costing me – only time will tell.
As a quick update on other trades – I'm now out of my AUDUSD (T21S) short. I was stopped out on a trailing stop on positive overnight employment news. My first position on this trade was a winner, but my second was a loser. Overall this trade came out in positive territory, primarily because my rules stipulate that I take profit on half of my position when my initial target (T) is hit. I learned some valuable lessons on this trade and fine-tuned one of my rules as a result.
On my USDCHF (T29S) trade, signals showed up to tell me to exit the position in full, which I did for a marginal loss of c.0.18% of capital, instead of 2% if my initial stop loss is hit.
It's a similar story on my NZDCAD (T28S) trade, where I've exited 2/3 of my position. I still have a final 1/3 on that could go my way, but if the 30 EMA crosses and closes past the 50 SMA I'll be out in full.
Yesterday, I entered a short GOLDEN GATE trade in CHFJPY(T31S).
That's been a whistle-stop update, as to the trades I'm in. For a more detailed appraisal and explanation, please be sure to check out my YouTube channel, STG FOREX TV. The trades above will appear in week 7.
So, what's the trading enlightenment that I highlighted in the title of today's blog post?
I believe there are things you know in life, and things you really know – and there's a big difference between the two, which manifests itself in the form of action.
I know that cutting losses is a key component of a winning trading approach. I've read it in books, magazine articles and had this message reinforced via a whole host of other media. It's something I know to be true due to the weight of evidence behind it, not to mention that it makes sense to get out of positions that are going against you with a small loss now, rather than a much bigger loss later on.
Although I've known this for some time, if I'm honest with myself I've not really known it. I've held positions for longer than I should have, and when the market gave me a clear signal that conditions were changing and it was time to exit, in the past I've ignored these clues foolishly thinking I know best.
Yesterday though I feel was a turning point. As I explained above, signals showed up to cut my USDCHF trade completely and lighten up on my NZDCAD short. I've started to really know that cutting losses early makes sense, and I know this because I've started to take action without question, and without thinking I know better. I've started to see small losses for what they really are – not a bad thing, but as a necessary cost of doing business. What's helped me to really get this is my weekly trade management sheet, which I use each week to monitor all of my trades (see below).
Smaller losses pale into insignificance compared to bigger wins when as the contrast to cutting losses short, I let my profits run. Despite cutting on USDCHF and NZDCAD (and also AUDUSD) denoted by 'CS', I've put a very small dent in my win on GBPUSD and am presently in profit for the week.
Imagine the possible scenario if I'd have let these losses run – it's highly likely I'd be in a losing position for the week, not to mention the untold damage to my confidence.
I make no apology in referencing Paul Tudor Jones again. As one of the greatest traders of all time, he has it right when he says that before you can make money you have to play good defence.
If the currency markets are the ocean and I'm a surfer, I know that I'm not going to catch every wave, and that the ones I do catch will not always deliver me safely to shore. When I catch a wave I can never be certain whether it's a good one or a bad one, but I have to catch it to find out.
The difference with my surfing now, is that as soon as I recognise a wave is taking me in a different direction to the one I'd anticipated I jump off the board. I don't want to get hurt, I don't want to get dashed against the rocks – I protect myself at all times to ride the next wave, and the next, and the next. I do this because the next one could very well be the big break I've been looking for.
*********
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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