Month 3, Day 61 - 36-month forex trading challenge - ignore others.
It's day 61 and the final week of month 3. As September draws to a close, I'm in a period of drawdown. This is frustrating, but an inevitable part of trading. The important thing is to stay calm, composed and to keep executing the strategy.
No trading system wins all of the time. If your edge gives you 50% winners and you can hold these winners while cutting your losers short, you'll make good money. I discussed this on day 39 of the challenge and remind myself on a daily basis.
There aren't many jobs where being wrong 50% of the time is acceptable, but in the business of trading it's just part of the game. Thinking back to my accountancy qualification, the winners are your turnover, and the losers your cost of sales. What's left over is your profit or loss. Good business means recognising when you have things wrong and getting out. As human beings we like to be right, which makes this no easy task. This is one of the reasons why having clearly defined rules documented in a robust trading plan is so important.
Unfortunately, many traders don't have a trading plan. Instead they rely on the opinion of others to make their trading decisions.
Over the weekend on eToro I was asked about my opinion on NZDUSD. I'm always happy to share my thoughts, but am very clear that this never constitutes trading advice.
I have my own goals, edge and rules, which I trade on a very specific time frame. My approach has a specific risk tolerance and on a regular basis my entries will come under some heat before turning in my favour.
Trading is personal and you have to find an approach personal to you. I started out in forex trading having attended a weekend course in London. I was reliant on a signalling service and advised that to make money all I had to do was to make a trade when a signal showed up.
The problem, which I learnt pretty quickly, was that I wasn't self-sufficient and didn't understand the rationale behind this approach or why I was doing what I was doing. This was somebody else's strategy, not mine. What's more, this system took no account of my risk tolerance, and provided little advice on money management and managing correlation risk.
[This trading education company is currently doing the rounds on Facebook. The advert sounds too good to be true and it probably is – you have been warned.]
Not surprisingly, I lost money and ditched this system to find my own way in the markets. My trading approach today, although influenced by what I have learnt over the years from others, is 100% mine.
I can't emphasise enough how important it is to find your own way in forex trading. It takes time and you'll make mistakes along the way, but it's well worth it.
I have no bias on the direction of any given currency pair. At the start of last week I was long NZDUSD, but by the end of the week I was short. This makes it difficult for someone to follow my approach, particularly if they have attachment to one direction of travel.
One of the best trading books I've read is by Nicolas Darvas. How I made $2,000,000 in the Stock Market is a title designed to generate attention, and arguably this claim could be taken with a pinch of salt.
Although I'm not a fan of the title, the book shows how through the power of observation and curiosity someone with no prior knowledge of the markets created a trading system that was specific to them.
Anyway, let's get back to the trades.
I'm currently in four positions – NZDUSD (T43S), AUDCAD (T44S), AUDNZD (T12L) and NZDCAD (T42S).
NZD was the poorest performer last week and on Wednesday of this week the RBNZ will announce the official cash rate and make its follow-up statement. I don't trade the news, but I am aware of it. I have no idea what the RBNZ will do or say, but I know what price action is telling me.
My correlation risk (below) shows I'm exposed to NZD on the short side in three trades. My rules state that maximum permitted exposure in any individual currency is two positions (4% of trading capital), but as T42S is fully protected (my stop loss is at entry having hit the initial target), three positions are acceptable.
Although NZD was bid across the board overnight, this looks to have been a short-term retracement, and it's now back to the offers.
NZDUSD closed under the recent low and the 3-year low on Friday (see the daily chart below). In my opinion, and in line with my approach this could be a signal for further down momentum this week.
This is just my opinion and nobody ever really knows. For the moment though NZD offers are good for my NZDUSD and NZDCAD shorts, in addition to my AUDNZD long.
The retail trader sentiment on NZDUSD is heavily long (78.63%). I take a contrarian stance to this consensus, which adds fuel to my argument for further offers in NZD.
Perhaps the trader who made the following comment on eToro over the weekend will be forced to eat his or her words:
'...if simongforex shorts NZD it will probably go up again...'.
I should note that this trader is long NZDCHF and carrying a 50.62% loss on their position. They're also down 29.32% for the year to date.
With good reason the title of my blog post today is 'ignore others'.
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.]
No trading system wins all of the time. If your edge gives you 50% winners and you can hold these winners while cutting your losers short, you'll make good money. I discussed this on day 39 of the challenge and remind myself on a daily basis.
There aren't many jobs where being wrong 50% of the time is acceptable, but in the business of trading it's just part of the game. Thinking back to my accountancy qualification, the winners are your turnover, and the losers your cost of sales. What's left over is your profit or loss. Good business means recognising when you have things wrong and getting out. As human beings we like to be right, which makes this no easy task. This is one of the reasons why having clearly defined rules documented in a robust trading plan is so important.
Unfortunately, many traders don't have a trading plan. Instead they rely on the opinion of others to make their trading decisions.
Over the weekend on eToro I was asked about my opinion on NZDUSD. I'm always happy to share my thoughts, but am very clear that this never constitutes trading advice.
I have my own goals, edge and rules, which I trade on a very specific time frame. My approach has a specific risk tolerance and on a regular basis my entries will come under some heat before turning in my favour.
Trading is personal and you have to find an approach personal to you. I started out in forex trading having attended a weekend course in London. I was reliant on a signalling service and advised that to make money all I had to do was to make a trade when a signal showed up.
The problem, which I learnt pretty quickly, was that I wasn't self-sufficient and didn't understand the rationale behind this approach or why I was doing what I was doing. This was somebody else's strategy, not mine. What's more, this system took no account of my risk tolerance, and provided little advice on money management and managing correlation risk.
[This trading education company is currently doing the rounds on Facebook. The advert sounds too good to be true and it probably is – you have been warned.]
Not surprisingly, I lost money and ditched this system to find my own way in the markets. My trading approach today, although influenced by what I have learnt over the years from others, is 100% mine.
I can't emphasise enough how important it is to find your own way in forex trading. It takes time and you'll make mistakes along the way, but it's well worth it.
I have no bias on the direction of any given currency pair. At the start of last week I was long NZDUSD, but by the end of the week I was short. This makes it difficult for someone to follow my approach, particularly if they have attachment to one direction of travel.
One of the best trading books I've read is by Nicolas Darvas. How I made $2,000,000 in the Stock Market is a title designed to generate attention, and arguably this claim could be taken with a pinch of salt.
Although I'm not a fan of the title, the book shows how through the power of observation and curiosity someone with no prior knowledge of the markets created a trading system that was specific to them.
Anyway, let's get back to the trades.
I'm currently in four positions – NZDUSD (T43S), AUDCAD (T44S), AUDNZD (T12L) and NZDCAD (T42S).
NZD was the poorest performer last week and on Wednesday of this week the RBNZ will announce the official cash rate and make its follow-up statement. I don't trade the news, but I am aware of it. I have no idea what the RBNZ will do or say, but I know what price action is telling me.
My correlation risk (below) shows I'm exposed to NZD on the short side in three trades. My rules state that maximum permitted exposure in any individual currency is two positions (4% of trading capital), but as T42S is fully protected (my stop loss is at entry having hit the initial target), three positions are acceptable.
NZDUSD closed under the recent low and the 3-year low on Friday (see the daily chart below). In my opinion, and in line with my approach this could be a signal for further down momentum this week.
The retail trader sentiment on NZDUSD is heavily long (78.63%). I take a contrarian stance to this consensus, which adds fuel to my argument for further offers in NZD.
Perhaps the trader who made the following comment on eToro over the weekend will be forced to eat his or her words:
'...if simongforex shorts NZD it will probably go up again...'.
I should note that this trader is long NZDCHF and carrying a 50.62% loss on their position. They're also down 29.32% for the year to date.
With good reason the title of my blog post today is 'ignore others'.
*********
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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