Month 3, Day 58, 59 & 60 - 36-month forex trading challenge - AUDUSD and fine-tuning rules.
It's Friday (again) and the end of another week. With one week left to go in September, the pressure is on.
This is self-imposed pressure in line with the challenge, but the difficulty is that the forex market is not an ATM / cash machine. You can't just turn up to make a withdrawal anytime you like. The market pays you when it's ready, and on many occasions surprises by swallowing your card!
This morning I'm thinking back to 2008 when I started my own recruitment company. Along with my two fellow founding directors, we'd all left secure jobs just before the financial crisis hit in September. We'd resigned at the top of the market, and to use a trading analogy, were the late buyers in a market about to turn.
It was a scary time, and for a while we didn't think we'd make it. After a few months of making no money I remember my colleague Danielle saying she was off to get a part-time job. I reminded her of the focus needed in any new pursuit and that diluting this focus so early on would only serve to diminish our chances of success.
Having a 'Plan B' is not always a good idea. Yes, you could argue that if things go wrong you have a pre-planned safety net, but the problem with having a secondary plan is that it takes your eye off 'Plan A'.
The Vikings were fearsome warriors and the history books tell us that arriving on new shores with a mission to conquer, they would burn their boats. This resolved their commitment to the challenge – with no way home it literally was, do or die. The burning boats also sent a powerful psychological message to their enemies – how terrifying to face a foe so committed.
Danielle was a Viking and didn't take a part-time job, and it took us roughly six months to make our first recruitment fee. The investment in focus, time and energy was worth it – the business is still going strong today and when I left in 2013 had a turnover of £1.5M+.
Almost three months into the 36-month forex trading challenge, having not hit target in months 1 and 2, I'm feeling a little like Danielle did back in 2008. I'm on my own and there's no one to have a word in my ear. Life teaches us lessons for a reason and it's up to me to remind myself of the important of focus.
As far as I'm concerned, the greatest Englishman who ever lived was Admiral Horatio Lord Nelson (I've mentioned him a number of times in previous blog posts).
He said: 'That perseverance in any profession will most probably meet its reward.'
In my book, perseverance means no Plan B, and today the challenge continues. There can be no wavering, no uncertainty and certainly no giving up – only perseverance and the pursuit of excellence in my approach to the markets.
A period of drawdown, as I appear to be currently in, doesn't automatically mean disaster, providing it is controlled and within acceptable limits. Mine is, and I'm fully aware that to make money from the markets you have to risk capital in the first place.
Although my targets are financial (£50K to £1M in 36 months), my daily focus is not on the money, but to follow my trading plan and rules. Since the beginning of the challenge I've been continually asking myself how I can fine-tune and improve my rules to get me out of losing trades quickly and stay in winning trades longer.
Referring back to an earlier surfing analogy, when you catch a wave (take a trade) you can never be certain if it will steer you safely to shore or dash you against the rocks. What's certain is that you have to catch the wave – sitting on the beach gets you nowhere.
A few days ago in relation to my NZDUSD (T10L) trade I fine-tuned my (early) exit rules:
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.]
This is self-imposed pressure in line with the challenge, but the difficulty is that the forex market is not an ATM / cash machine. You can't just turn up to make a withdrawal anytime you like. The market pays you when it's ready, and on many occasions surprises by swallowing your card!
This morning I'm thinking back to 2008 when I started my own recruitment company. Along with my two fellow founding directors, we'd all left secure jobs just before the financial crisis hit in September. We'd resigned at the top of the market, and to use a trading analogy, were the late buyers in a market about to turn.
It was a scary time, and for a while we didn't think we'd make it. After a few months of making no money I remember my colleague Danielle saying she was off to get a part-time job. I reminded her of the focus needed in any new pursuit and that diluting this focus so early on would only serve to diminish our chances of success.
Having a 'Plan B' is not always a good idea. Yes, you could argue that if things go wrong you have a pre-planned safety net, but the problem with having a secondary plan is that it takes your eye off 'Plan A'.
The Vikings were fearsome warriors and the history books tell us that arriving on new shores with a mission to conquer, they would burn their boats. This resolved their commitment to the challenge – with no way home it literally was, do or die. The burning boats also sent a powerful psychological message to their enemies – how terrifying to face a foe so committed.
Danielle was a Viking and didn't take a part-time job, and it took us roughly six months to make our first recruitment fee. The investment in focus, time and energy was worth it – the business is still going strong today and when I left in 2013 had a turnover of £1.5M+.
Almost three months into the 36-month forex trading challenge, having not hit target in months 1 and 2, I'm feeling a little like Danielle did back in 2008. I'm on my own and there's no one to have a word in my ear. Life teaches us lessons for a reason and it's up to me to remind myself of the important of focus.
As far as I'm concerned, the greatest Englishman who ever lived was Admiral Horatio Lord Nelson (I've mentioned him a number of times in previous blog posts).
He said: 'That perseverance in any profession will most probably meet its reward.'
In my book, perseverance means no Plan B, and today the challenge continues. There can be no wavering, no uncertainty and certainly no giving up – only perseverance and the pursuit of excellence in my approach to the markets.
A period of drawdown, as I appear to be currently in, doesn't automatically mean disaster, providing it is controlled and within acceptable limits. Mine is, and I'm fully aware that to make money from the markets you have to risk capital in the first place.
Although my targets are financial (£50K to £1M in 36 months), my daily focus is not on the money, but to follow my trading plan and rules. Since the beginning of the challenge I've been continually asking myself how I can fine-tune and improve my rules to get me out of losing trades quickly and stay in winning trades longer.
Referring back to an earlier surfing analogy, when you catch a wave (take a trade) you can never be certain if it will steer you safely to shore or dash you against the rocks. What's certain is that you have to catch the wave – sitting on the beach gets you nowhere.
A few days ago in relation to my NZDUSD (T10L) trade I fine-tuned my (early) exit rules:
- On TREND trades having entered on a close beyond the 200 SMA, if price closes back past the 200 SMA against the direction of my trade I will exit the whole of my position. [Note – from day 72 I've removed this requirement due to whipsaw price action regularly experienced around the 200 SMA.]
- On any of my strategies, if my trade has not shown a paper profit within three candles (12 hours) and has closed beyond my average stop pressure plus 10 pips, I'll exit the whole of the position. If I'm within my average stop pressure plus 10 pips, but not yet seen a paper profit I can give the trade another 12 hours, before exiting in full if the trade still hasn't shown me a paper profit (24 hours in total), even if price hasn't crossed beyond the stop pressure plus 10 pips line. This threshold will be identified by a turquoise dashed (small) line I will now add to my charts. [Note, once my trade has evidenced a positive close beyond my entry this exit rule falls away. I still have the red dashed (small) line placed halfway between my entry and initial stop where I ask myself the question – does this trade still make sense? In addition, I have my staged exit rules signalled by EMA crosses.]
I entered on the candle close below the 200 SMA using my TREND strategy. On the very next candle, price closed back above the 200 SMA.
This was my signal to exit with a very small loss, but I didn't – why I'm not sure. For some reason I decided to ignore rule 1. above and rely instead on rule 2.
The turquoise dashed (small) line is my stop pressure plus 10 pips. The subsequent three candles (12 hours) stayed inside this level and I therefore gave the trade an additional three candles to show some paper profit and close below the low of my entry candle.
After another 12 hours (24 hours in total), at 6am this morning I exited the position in full for a very small loss (0.18%, instead of 2% if my initial stop loss was hit). The exit candle also corresponded with a close back above the 200 SMA, with AUD receiving bids across the board.
I can always get back in, and if price closes back below the 200 SMA it's still a valid TREND entry signal.
So what have I learnt? Well, as my mission is to lose less when I lose, and win more when I win, on this occasion exiting in line with 2. above has helped. However, I did make a mistake – I should have exited using 1. above (close back above the 200 SMA) and not waited for exit rule 2. to kick in. Somewhat ironically exiting on my time-based (24 hours) rule got me out at almost exactly the same level, so no harm done.
Having tested these rules in battle, they will now be written firmly into my trading approach and be followed to the letter moving forward.
A quick update on other trades I'm currently in.
EURJPY (T11L) >
This trade is struggling and I may need to lighten up on 1/3 of my position if the 10 EMA crosses below the 30 EMA.
AUDNZD (T12L) >
This trade is progressing nicely (fuelled by AUD bids). My initial target (T) is at the top of the daily trend line and I think there is a good chance it will be hit. There's nothing to do, but to sit and wait.
NZDCAD (T42S) >
Again, this trade is progressing nicely and is c.50% on the way to the initial target (T). I'm mindful that this target sits below a SIG. LEVEL 1 low where we could see a bounce. NZD has been consistently weak in recent times, and I think there is a good chance price could get below this level and fall much further. As always, only time will tell!
So that's it for today. I'll catch the 10am close, but am out at a networking lunch and will miss the 2pm one.
Let's see where we get to by the end of Friday!
*********
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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