Forex Experiment

Day 41

Disaster has finally struck, I think it was inevitable. I sensed that this was coming as I've just felt under too much pressure with all the losing days recently. The last two days had been pure frustration due to the lack of movement and it all came to a head yesterday. I had full sized positions on in both the EURUSD & EURJPY and was away from the screens for about 15 minutes. When I came back I had been slammed in what was later reported to be the start of a hedge fund unwind of EURJPY which also hammered the EURUSD.  I was down 50 pips before I even knew anything about it. Frustrated at how long it had taken me to get 3.5 & 1.3 pips the previous days and how easy 50 pips had been taken away, I just couldn't face the prospect of chipping away to recover. So I did the worst thing imaginable, I just let them ride, 'hoping' that they would bounce back up as has been happening a lot recently. Sadly for me it never happened and in fact the selling got worse and worse. When I finally could stomach no more I had lost more than half of the profit made in the project so far and I am now so far back (back to Day 19) I don't think I can stomach recovering in the same fashion. I've decided to review the whole project in light of the 41 days of experience I've obtained and redesign the parameters to address the problems I've faced.

In summary what I want to achieve -
1. Retain the goal of turning $10K into $250K in 1 year.
2. Probably retain the 10 pips per day idea in principle as it's a realistic goal, but I need to remove the pressure of recovering from losing days. Losing days need to be accepted and the way to accept them when they happen is to have a plan and goal that allows for them. Currently I don't really have that and that has led to this self sabatoge through lack of discipline. So I'm probably going to take a weekly view instead of a daily view. For example 50 pips per week instead of 10 pips per day. Not sure if this really helps, I need to think about it, but it might help psychologically which is the key.
3. Whether it's a daily view or weekly view I need to factor in more days of not trading. For example UK public holidays I'm just going to forget about trading along with golden week. I need to factor in more holidays and days where I just don't feel like trading so as to not force me to trade when it doesn't make any sense.
4. I'm going to look into the idea of using auto stop losses. I really don't like using them in forex as you get spiked out so much but yesterday was a classic case in point where the exit decision would have been made for me and I would have saved a lot of pips.
5. The other big problem with the way I'm trading at the moment is that there is always a chance of a big downside hit, like yesterday (although obviously it should never be as bad as it was), but a big upside bonus is limited as I'm taking the small pips every time I can get them. I need to think about how I can possible ride more upside, although so far my experiments with letting profitable whole or part positions ride has not been successful. This is where a weekly view might help me as combining a wide auto stop with a position that can run for a longer period without me watching the screen might be better.

So, the project is sadly on hold until I've redesigned the parameters with the same objective in mind but addressing all the issues I have had so far. I'm sure the end result will be better for it as I've been thinking for a while the way I'm trading at the moment is too hard to sustain over a long period.

Day 40

Start Balance                     $16,053

Today's Profit Target             $209.29 (Day 37)
Required Position size         207,000 (JPY), 172,600 (USD)

Trades

1     +86,300K         EURUSD        *1.6 pips         (2:43)
2     +103,500K       EURJPY         *1.8 pips         (3:17)
3     +86,300K         GBPUSD        *-6.3 pips        (2:49)
4     +103,500K       EURJPY         *1.2 pips         (1:39)
5     +207,000K       EURJPY         5.1 pips           (0:17)

* half the full sized position. this is the equivalent no. of pips if the position was full sized.

Total                      3.5 pips ( $75.22 )

End Balance          $16,053

Project Status 

Day 40 end target  $16,830
4 Days Behind (dropped back 1 day since yesterday)
$703 behind schedule or 33.57 pips on tomorrow’s pip value.

Comments

I didn’t trade too much today but what I did was a complete waste of time. It was May day bank holiday in the UK  and I figured because of the previous weeks holiday in Japan & China that the Asian session wasn’t going to be up to much either. So I decided to just skip Asia and try and trade the the first half of the US session where I figured there would be the most action. Waste of time, it was like watching paint dry, there was hardly any movement at all and typically the only fast move on offer was against me in the GBPUSD

I watched the market for 3 hours and could hardly stay awake from the lack of activity. It was very frustrating and I just about managed to end the day slightly positive after being behind most of the time. I feel like  I’m totally out of sync with the market at the moment and I’m still struggling to have the confidence to put a full size trade on. I managed only one out of the five trades today but at least as it turned out I got the right one.

Day 39

Day 39

Start Balance                             $16,016

Today's Profit Target                     $209.29 (Day 37)
Required Position size                 207,400 (JPY), 171,500 (USD)

Trades

1     +207,400K     EURJPY         2.7 pips         (0:42)
2     +103,700K     EURJPY       *4.0 pips          (0:29)
3     +103,700K     EURJPY       *-11.4 pips       (1:07)
4     +103,700K     USDJPY       *4.1 pips          (0:22)
5     +103,700K     USDJPY       *-5.0 pips         (4:35)
6     +207,400K     USDJPY       -5.4 pips           (4:29)
7     +85,750K       EURUSD      *-2.6 pips         (0:07)
8     +85,750K       USDJPY      *0.5 pips           (3:32)
9     +85,750K       GBPUSD     *7.6 pips           (0:05)
10    +85,750K      GBPUSD     *4.0 pips           (0:02)
11    +85,750K      EURUSD     *7.3 pips           (0:30)
12    +85,750K      EURUSD     *-4.7 pips          (0:05)

* half the full sized position. this is the equivalent no. of pips if the position was full sized.

Total                              1.3 pips     ( $36.45 )

End Balance                  $16,053

Project Status 

Day 39 end target  $16,613
3 Days Behind (dropped back 1 day since yesterday)
$560 behind schedule or 26.77 pips on tomorrow’s pip value.

Comments

I didn’t trade yesterday as I had a massive hangover after celebrating Liverpool’s champion’s league semi-final win so today I should have been feeling fresh and raring to go. I can’t say that I really was though. Confidence is still missing and I could only bring myself to put on 2 full sized positions out of 12, the rest where all half sizes.

This day was really a tale of two sessions, pre & post non-farm payrolls announcement. I didn’t start until late afternoon near the start of the European session and it should really have all been over on the first trade. Greed got in the way as I had 10 pips on the very first trade and a few minutes of opportunity to take it. However, I got greedy thinking I could get a lot more out of it and paid the price. I ended up selling it in two halves for a measly 2.7 pips in total after it starting retreating. After that I lost confidence and switched to half sizes which turned out to be a blessing as the 3^rd trade was a disaster and I lost 11.4 full pips on it. Apart from that big move there wasn’t a whole lot of movement anywhere as the markets where gearing up for the non-farm payrolls release. Up until the release I had held onto a very large position in USDJPY which looked the best chart technically but it didn’t move and I ended up having to close it out before the announcement for a loss. At announcement time I was down 13 pips.

I don’t normally trade NFP as it’s too late in the day really and with Oanda widening the spreads you can only trade after things have settled down. Besides that I think it’s really just a crap shoot and even too volatile for my scalp trades until any kind of direction looks established. But I didn’t start until late today, and because I was down at the time I figured I could see if I could trade it post announcement. I had also received an email invitation to a webinar sponsored by GFT, details below

Trade Non- Farm Payrolls LIVE with Wayne McDonell - FXstreet.com, FX Bootcamp & Trade the News sponsored this extraordinary event. Don’t miss out on a great opportunity to learn keys to trade this economic report and ask questions to experts while the market is moving!

Despite major problems with the audio on the HotComm s/w they used it was actually a very interesting and educational session. Wayne  didn’t provide exact entry or exit signals but talked through his approach and what he looks for in trading the news. I think I picked up quite a few good ideas from his talk. I didn’t actually follow his trade plan but apart from the regrettable last trade of the day I managed 3 successful trades post NFP. The NFP number was 88K which was way down on what was expected and way down on last month so it was clearly USD negative. The first trade I took 10 minutes after NFP and I got 7.6 pips in 5 minutes in the GBPUSD, the second I got 4 pips in 2 minutes shortly after the first trade also in the GBPUSD, and the 3^rd trade I got 7.3 pips after holding on to it for 30 minutes. As it turned out I’d got out near enough the top of the EURUSD and my last trade I tried to get in on what I thought was a retracement but it had run out of momentum and quickly moved down. So I ended up the day with 1.3 pips, which could have been better, the last trade was unnecessary as I should have been happy with 6 pips for the day at that time. But after being 13 pips down going into the last 4 trades I’m not unhappy. The most interesting thing was that 1.3 pips actually equates to $27 on my current position size but due to the length of time I had my JPY shorts open during the day I ended up getting $36 for the day, a full $9 was interest earned in having those positions open.

So the week in review. I got 40 pips out of 4 days trading, so that’s good. I made a new milestone with the bank up 60%. I had no losing days with 22 winning trades out of 35 for a win rate of 63%. I started the week 3 days behind and I finished 3 days behind. Quite satisfactory really considering the other things going on this week, Oh! Yes did I forget to mention that LIVERPOOL  are in the Champions League Final. Again. .

Day 38

Start Balance                     $15,661

Today's Profit Target             $201.28 (Day 35)
Required Position size         202,400 (JPY)

Trades

1     +100,200K     USDJPY         *1.5 pips          (3:02)
2     +200,400K     USDJPY         5.1 pips            (0:04)
3     +100,200K     EURJPY         *-6.2 pips         (1:56)
4     +100,200K     USDJPY         *9.0 pips          (1:29)
5     +200,400K     EURJPY         7.8 pips           (0:23)

* half the full sized position. this is the equivalent no. of pips if the position was full sized.

Total                      17.15 pips         ( $353.13 )

End Balance          $16,016

Project Status 

Day 38 end target  $16,398
2 Days Behind (pulled back one day since yesterday)
$382 behind schedule or 18.24 pips on tomorrow’s pip value.

Comments

Today was another day with some pretty volatile behavior. The markets this week are very unforgiving.  I assume the lack of participants is resulting in much bigger, faster, swings and without any prior indication in terms of news or chart patterns providing clues.

This blog seems to be increasingly about what should have been done in hindsight but hopefully I’m learning from this and making better trade decisions with the knowledge. Today I was convinced that the USDJPY was going to break through 120 as the USD had been getting some support over the last few days. The chart looked very supportive of this view so this was the pair to focus on today. With more confidence I should have just put one full sized position on when I did and been patient, my entry price was 119.85 so there was excellent potential to get a lot of pips quickly if it triggered stops through 120. After 3 hours of waiting I started getting impatient as there was little real movement and it was frustrating as every time it popped up it was just as quickly pushed back down. Trade 2 I took while trade 1 was open and it was a very fast 5 pips from 119.86 to 119.91. After another 15 minutes I lost patience and closed out the first trade for a few pips as I was getting worried maybe it wasn’t going to progress and may actually fall instead as the EURUSD & GBPUSD had started to tick up. There was also a lot more movement in the EURJPY and it also looked primed to go higher. Switching pairs at this point could have been a huge mistake but it did turn out well in the end. After waiting through 30 minutes of little movement in the EURJPY position I regretted switching pairs and re-entered the USDJPY for 119.92 (in my share trading past, this is something I’ve always struggled to be able to do, i.e. re-enter a position at a higher price after selling out of it, but for whatever reason I find it psychologically a lot easier in the currency market where the concept of ‘value’ for a pair has no meaning to me).  1 hour later and neither pair had moved and then out of the blue I got slammed in the EURJPY, just like I did in the EURUSD the day before. The pair sank 20 pips in less than 5 minutes. It looked very similar to the day before, i.e. a quick fall through a thin market so I took the view that a quick bounce was on the cards. And just like yesterday I had banked enough credit to be in a reasonable position to try it despite sitting on a large open loser. The bounce up came but it was a very nervous first 10 minutes as the first bounce failed and I was starting to look at being seriously in the red. Another ten minutes later and both the EURJPY & USDJPY took off upwards together. My large EURJPY position recovered from being 5 pips down and I banked nearly 8 pips. At the same time I closed out the half sized EURJPY for a loss of 6 full pips (at the worst point this was 12 pips), but the best of all was the USDJPY which did exactly what I had predicted at the start of the day and surged through 120. I closed it for 9 full pips (18 pips really as it was half sized) at 120.10 just 4 pips off the top before it retreated. It actually collapsed down to 119.6 a couple of hours later before marching all the way back up again. After the scare with the EURJPY and the extreme volatility I was very happy to get out for the day with 17 pips but if I'd have stuck with my conviction at the start and took the full position in USDJPY at 119.85 I could have got 25 pips and with a lot less stress. This market is really hairy at the moment and I’ll be glad when Golden week is over.

So in summary I pulled a day back today and a new milestone was achieved with the bank now up 60%. I’m still 2 days behind but I’m still happy to try and chip away back to schedule.

Oh! And did I mention Liverpool beat Chelsea to make the Champions league final which made today’s pips even more sweet especially as I only had 4 hours sleep before getting up to watch the game, hardly ideal preparation for trading. I’ll be getting well pissed tonight to celebrate so there might not be any trading tomorrow.

Day 37

Start Balance                     $15,449

Today's Profit Target             $201.28 (Day 34)
Required Position size         199,400 (JPY), 166,800 (USD)

Trades

1     +99,700K     EURJPY          *2.5 pips      (0:50)
2     +83,400K     EURUSD         *-9.4 pips     (6:41)
3     +83,400K     GBPUSD         *3.8 pips     (1:02)
4     +166,800K    EURUSD         5.4 pips      (0:48)
5     +83,400K     GBPUSD         *4.7 pips     (0:09)
6     -83,400K      EURUSD         *-2.3 pips    (0:23)
7     +166,800K    EURUSD         5.9 pips      (0:07)

* half the full sized position. this is the equivalent no. of pips if the position was full sized.

Total                      10.65 pips ( $211.73 )

End Balance          $15,661

Project Status 

Day 37 end target  $16,186
3 Days Behind (same as yesterday)
$524.94 behind schedule or 25.74 pips on tomorrow’s pip value.

Comments

I knew things would be even more quiet today in Asia as the Hong Kong, Singapore & China markets were all closed in addition to Japan’s Golden week but I didn’t realize how much of Europe was on holiday as well, apparently it was labour day, whatever that is? 

Despite it being quiet I managed to eke out a few pips on the first trade in the Asian time. I was also feeling very confident that the EURUSD was going much higher today after analyzing it in every possible time frame so I put on a position in Asian time and let it ride. I was sure this was going up but not sure enough to go full size, my confidence is still AWOL at the moment. The half sized position turned out to be a blessing in disguise as this trade was the victim of the true evil of the currency markets and I couldn’t begin to do it justice without an image.

The attached image shows what can happen at any moment in the currency markets, funnily enough this never seems to happen to me in the right direction though. Fortunately this is the first time I’ve been clobbered this bad so far in this project, but it has happened to me on several occasions in other accounts, usually in the GBPUSD. I had this position open for nearly 4 hours when out of the blue it sold off 30 pips in less than 5 minutes (the image is a 1 minute chart), up until that point it had been oscillating around about +/- 8 pips around my entry price, the red line on the image shows were my entry level was. This sell-off happened without any news whatsoever. The news service that I receive through one of my brokers said that most traders were at a loss to explain what happened. But I guess the markets being quite thin due to all the holidays probably contributed to it. I was very lucky that it was only half sized for a couple of reasons. One was that it meant I didn’t have to sell it straight away, I was 6.3 pips in credit at this point so I had a bit of room left to move. But secondly it allowed me to trade against the sell off if it spiked up. I was actually away from the screens when this happened (bad timing) and came back as it was attempting it’s second attempt to move back up (2^nd large green bar at the bottom of the dip). At this time it had recovered about 8 pips from the bottom so I was around 23 (11.5 full sized pips) down combined with my 6.3 pips in the bank meant that I wasn’t in too bad shape. But I was pretty frustrated after being so patient and waiting for hours only to see it go so far into the red so quickly. I took out another full size long position thinking it might continue to move up quickly and I could get some quick pips. As can be seen on the chart It did move up quite orderly but it took a lot longer than I would have liked to get 5 pips out of it (trade 5), I don’t average down as a rule, as I think it’s usually a very bad practice, but if quick scalp trades look on offer I’ll often take them before closing out an existing losing trade. Of course my original position was also recovering some of the loss at the same time so things weren’t looking so bad. In the end I closed out the original for an 18.8 (9.4 full size) pip loss which wasn’t a great result, I could have got out much better but just got it all wrong. My original view on the EURUSD turned out to be correct as it later went on to make almost a new high so I could have actually kept this and made a really good profit on it, but that’s another story.

I had a break at this point as the thin markets were not to my liking and only being 2 pips up I knew I had to come back to the market later when the US opened to finish the job. Two more half sized positions had me chipping away up to nearly 5 pips and then I decided on one last full sized trade to end the day. This was as the EURUSD was pushing up near to it’s previous high and I got 6 pips very quickly to end the day with required pips. Looking at the chart the next day, the EURUSD had sold down 60 pips in the hour following nearly hitting the high. It really is no wonder it’s so hard to make money in this market.