Month 2, Day 36 & 37 - 36-month forex trading challenge - trading the TREND.
Yesterday (day 36) turned out to be a struggle. After being ill all weekend with a bad head and cough I booked an appointment at the doctors and was told by the nurse who checked me over that I have a chest infection.
Just the viral kind, so no antibiotics, but instead the advice to take it easy and rest. The trouble is that life as a forex trader is not easy and my specific approach requires an early start to catch the 6am close and analyse the 23 pairs I trade. A night of coughing is never conducive to an early start, and today (day 37), despite getting up at the usual time, after a quick check over my positions I headed back to bed.
It's now approaching 8:30am and I've completed the morning market analysis. I'm currently in six trades the majority of which are performing well. The good news is that even for those that are stagnating or turning against the direction of my entry I feel calm and composed. I know I have a robust trading system with a strategy for a staggered exit when things don't go my way. I talked about this in my last blog post, with hindsight somewhat dramatically describing it as trading enlightenment. All I have to do is follow my exit rules, to ensure a soft landing and to avoid the crash and burn, which can be so detrimental to not only my account balance, but also my trading psychology.
In line with my rules, yesterday I lightened up on CHFJPY (T31S) and the process of doing this is no longer painful. Crystallising a small loss is starting to feel just fine, and surprisingly something I enjoy taking, now really knowing that it's actually good for me. Thank you again Paul Tudor Jones – finally I'm playing good defence.
I'm now in a new trade on NZDUSD (T32S). This was entered using my FULL HOUSE strategy and followed a YX signal that showed up at the top of the daily trend line. A retracement on the subsequent candle still gave me a valid entry, and today despite some heat overnight this trade is showing a paper profit.
By adding this new trade to my portfolio, I've had to move stops tighter on some of my existing trades to stay on the right side of my maximum risk exposure rules. These stop losses have been moved behind the 50 SMA, which is my benchmark indicator for being on the right side or wrong side of any given trade. A test of the 50 SMA is fine, but a close beyond (unless reversed on the next candle) puts me on full alert that something might be changing.
I've been doing a lot of thinking about my TREND strategy over the past few days. I've spotted a number of opportunities where a reversal against the daily trend looked to be in play, but due to strict rules that I can never go against IG sentiment, I've been kept out of these trades.
To gauge the positioning of retail traders, so I can take the opposite side, I use IG Client Sentiment, which is usually published on a daily basis. If over 70% of retail traders are positioned long on any given pair, I can only go short. If the 70% benchmark is met I call this 'IG in focus', and for all of my strategies, RANGE, GOLDEN GATE, TREND and FULL HOUSE, until yesterday I could only trade in the direction of the contrarian view.
The problem I've observed however, is that this online publication is often delayed, which could mean I could very well miss a TREND entry signal. Take EURGBP below (a trade I didn't take), as a case in point.
On the daily chart below, price had advanced to test the 5 & 3-year high (black line), with the 10-year high just above. After such an extended move up, I was on alert for a TREND signal to get short. At SIG. LEVEL 1 highs, the question is always, who is left to buy? What's more, those who had bought the lows need to take profit somewhere, and in the face of significant highs, which have been rejected in the past, this would seem as good and safe a place as any to do just that.
On the 240 chart, this signal showed up on a YX candle close, which corresponded to the entry signal of the 10 EMA (orange dashed line) crossing and closing below the 50 SMA (pink solid line).
Other criteria for this entry were also met, including the 50 SMA being flat and a preceding lower high marked clearly by the two Z reversal candles. In addition, this entry would have been above the centre line of the daily trend line giving my trade room to go, and prior to entry this pair had displayed orderly price action respecting the EMAs and SMA. The one thing holding me back from entry was >70% sellers on my contrarian IG indicator, which meant I could only be a buyer.
Looking more closely at my weekly market analysis (WMA) sheet, I noticed that for EURGBP my weekly relative strength, daily relative strength and carry trade indicators were all displaying a sell signal. Potentially this was a trade I should have taken. Retail traders don't always get it wrong and with overwhelming support for a short sell off the highs, I may be missing a trick. On closer inspection I also saw a similar scenario in some of my commodity synthetic pairs and decided to fine-tune my approach to give myself the opportunity to catch more TREND entries.
My TREND strategy is probably the riskiest of my strategies, but has potentially the biggest pay off. The entry is counter to the prevailing trend, but is designed to get me into a potential new trend early. With strict and staggered exit rules in place I'm comfortable with this risk.
Had I taken the trade in EURGBP, I would have already hit my initial target (T) and now be in a risk-free trade with the opportunity to capitalise on further downside potential.
My TREND strategy rules have now been amended, as follows:
On any of my RANGE, GOLDEN GATE and FULL HOUSE strategies I never trade against the direction of IG in focus. The exception is my TREND a strategy, where I can overrule IG in focus if both conditions below are met:
i) Carry, Weekly RS and Daily RS all support the direction of my trade
ii) On the 240 chart, for a long entry, there is a preceding higher high / for a short entry there is a preceding lower low; or price is at a SIG. LEVEL 1.
That's it for today. I've just checked the 10am close and all is progressing well. There's only eight trading days of this month left, so the pressure is on. I have a clear target, robust rules and my job as always is to execute my strategies with unwavering discipline.
By the way, before I close out today. Week 7 is now available to view on the STG FOREX TV YouTube channel.
These weekly videos provide a fly-on-the-wall account of all of my trades, and what I'm thinking and doing. Please consider subscribing, liking and sharing.
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.]
Just the viral kind, so no antibiotics, but instead the advice to take it easy and rest. The trouble is that life as a forex trader is not easy and my specific approach requires an early start to catch the 6am close and analyse the 23 pairs I trade. A night of coughing is never conducive to an early start, and today (day 37), despite getting up at the usual time, after a quick check over my positions I headed back to bed.
It's now approaching 8:30am and I've completed the morning market analysis. I'm currently in six trades the majority of which are performing well. The good news is that even for those that are stagnating or turning against the direction of my entry I feel calm and composed. I know I have a robust trading system with a strategy for a staggered exit when things don't go my way. I talked about this in my last blog post, with hindsight somewhat dramatically describing it as trading enlightenment. All I have to do is follow my exit rules, to ensure a soft landing and to avoid the crash and burn, which can be so detrimental to not only my account balance, but also my trading psychology.
In line with my rules, yesterday I lightened up on CHFJPY (T31S) and the process of doing this is no longer painful. Crystallising a small loss is starting to feel just fine, and surprisingly something I enjoy taking, now really knowing that it's actually good for me. Thank you again Paul Tudor Jones – finally I'm playing good defence.
I'm now in a new trade on NZDUSD (T32S). This was entered using my FULL HOUSE strategy and followed a YX signal that showed up at the top of the daily trend line. A retracement on the subsequent candle still gave me a valid entry, and today despite some heat overnight this trade is showing a paper profit.
I've been doing a lot of thinking about my TREND strategy over the past few days. I've spotted a number of opportunities where a reversal against the daily trend looked to be in play, but due to strict rules that I can never go against IG sentiment, I've been kept out of these trades.
To gauge the positioning of retail traders, so I can take the opposite side, I use IG Client Sentiment, which is usually published on a daily basis. If over 70% of retail traders are positioned long on any given pair, I can only go short. If the 70% benchmark is met I call this 'IG in focus', and for all of my strategies, RANGE, GOLDEN GATE, TREND and FULL HOUSE, until yesterday I could only trade in the direction of the contrarian view.
The problem I've observed however, is that this online publication is often delayed, which could mean I could very well miss a TREND entry signal. Take EURGBP below (a trade I didn't take), as a case in point.
On the daily chart below, price had advanced to test the 5 & 3-year high (black line), with the 10-year high just above. After such an extended move up, I was on alert for a TREND signal to get short. At SIG. LEVEL 1 highs, the question is always, who is left to buy? What's more, those who had bought the lows need to take profit somewhere, and in the face of significant highs, which have been rejected in the past, this would seem as good and safe a place as any to do just that.
On the 240 chart, this signal showed up on a YX candle close, which corresponded to the entry signal of the 10 EMA (orange dashed line) crossing and closing below the 50 SMA (pink solid line).
Looking more closely at my weekly market analysis (WMA) sheet, I noticed that for EURGBP my weekly relative strength, daily relative strength and carry trade indicators were all displaying a sell signal. Potentially this was a trade I should have taken. Retail traders don't always get it wrong and with overwhelming support for a short sell off the highs, I may be missing a trick. On closer inspection I also saw a similar scenario in some of my commodity synthetic pairs and decided to fine-tune my approach to give myself the opportunity to catch more TREND entries.
My TREND strategy is probably the riskiest of my strategies, but has potentially the biggest pay off. The entry is counter to the prevailing trend, but is designed to get me into a potential new trend early. With strict and staggered exit rules in place I'm comfortable with this risk.
Had I taken the trade in EURGBP, I would have already hit my initial target (T) and now be in a risk-free trade with the opportunity to capitalise on further downside potential.
On any of my RANGE, GOLDEN GATE and FULL HOUSE strategies I never trade against the direction of IG in focus. The exception is my TREND a strategy, where I can overrule IG in focus if both conditions below are met:
i) Carry, Weekly RS and Daily RS all support the direction of my trade
ii) On the 240 chart, for a long entry, there is a preceding higher high / for a short entry there is a preceding lower low; or price is at a SIG. LEVEL 1.
That's it for today. I've just checked the 10am close and all is progressing well. There's only eight trading days of this month left, so the pressure is on. I have a clear target, robust rules and my job as always is to execute my strategies with unwavering discipline.
By the way, before I close out today. Week 7 is now available to view on the STG FOREX TV YouTube channel.
These weekly videos provide a fly-on-the-wall account of all of my trades, and what I'm thinking and doing. Please consider subscribing, liking and sharing.
*********
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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