Trades 29 and 30

Here are two trades I closed recently.

trade 29: long copper +1.6R

This is the longest I've ever held a trade and I wonder perhaps if I should have held longer. The full holding time of this trade was 13 months, so more an investment. I bought on a huge MN domino candle that coincided with my thoughts that commodities would boom in late 2016.

• Entry: Copper was in MOTR L1 (strong buying) price had declined heavily, based then printed a MN bullish domino candle that closed above the prior highs and 200 and 20SMA. I bought at the close of this bar.
• Stops: my initial stop was at the lows of the domino bar. I then move my stop to 70% at the close of the first bar. I use a 3 bar time stop, closing the position if it is not in profit after 3 bars. When the position reaches +0.7R paper profit I move my stop to 30%. I didn't use a TSL, although I'm looking at using domino candle lows.
• Exit: The trade hit my PT of 1.6R.
• Notes: I am happy with this trade. throughout the 13 month hold I had plenty of opportunities that encouraged me to sell. MOTR changed a few times and price stalled at certain levels. However, I learnt here that the trade isn't invalidated simply because the vehicle is no longer in a buying environment. If you think about it, it makes sense that as it moves favourably it will leave the ideal buying environment; it would be more worrying if your system was telling you to buy at prices that offered diminishing returns. You have to expect and accept this will happen when you are in a trade you expect to hold. Having "faith" in the underlying trade idea is very helpful (that commodities were in a bull) but crucial is in trade risk management. If you manage a trade correctly there should really always be more upside than downside that you're exposed to.

trade 30: long USDCAD -0.3R

I bought the USDCAD against MOTR because the entry was on the MN chart. I have noticed that good MN candles often overpower the current MOTR and so in this scenario I was trading with my rules which are to always trade in the clearest strongest direction. I bought a decent MN pin bar that coincided with my thoughts at the time that the USD was undervalued.

• Entry: MOTR S1 (strong selling) but bought as MN candles are often stronger than current MOTR. Bought MN pin @ MN Demand and 50SMA.
• Stops: my initial stop was at the lows of the pin bar. I then move my stop to 70% at the close of the first bar. I use a 3 bar time stop, closing the position if it is not in profit after 3 bars. When the position reaches +0.7R paper profit I moved my stop to 30%. 
• Exit: After reaching +0.8R in paper profits price reversed and hit my 30% stop for a -0.3R loss.
• Notes: Despite a small loss I am very happy with this trade and I would have no qualms about taking it again. This shows that if you manage your risk effectively you can expose your capital to slightly riskier opportunities without really taking on any more actual risk than you would ordinarily.

2018 Thoughts

update

Long story short, this blog is about supply and demand and in the final quarter of 2017, I struggled to see any areas that I really wanted to exploit. With the obvious exception of bitcoin, to me, it was all a bit boring. But I guess that was to be expected what with all the new highs made throughout the year. I wanted a new idea to get excited about but to paraphrase the coach, "doing nothing is a position", he neglects to mention it can also be very boring.



                                           

2018 themes

• Continued Global Recovery: With global GDP expected to reach 3.8% in 2018, strengthening data from the EU, US and EM (beware of RUS and TUR), central bank balance sheets still expanding (for the time being) and new US fiscal policy (tax cuts) - risks are still lowish. EU and JAP still offer value, US looks overvalued but I wouldn't discount it with the tax cut bump. 
• A Significant Inflation Shock: "Would be just about the worst thing that could happen" says DB. Inflation is certainly picking up in the UK and EU, the ECB has mentioned there's a good chance it won't continue QE after September 2018. While in the US inflation was unsettling absent for 2017 but Trump's tax cut could stoke it. With bond yields already very low, the rise in zombie companies (those unable to service their debt if interest rates rise) and overvalued stocks, this would be the catalyst to disrupt the former theme.
• Slower GDP (update 07/01/18): Read about this in the last FT of 2017. An interesting (contrarian) point made about the potential for slower GDP after 10 years of recovery/growth and economic data being at constant highs. Slower GDP coupled with the potential higher inflation above could create the storm to bring the bull to the end. Admittedly this is not necessarily the most likely outcome for 2018 but still something I|'ll have an eye on.
• Political Uncertainty: If I've learnt anything from 2017 it's that it's hard predicting market reactions to politics, particularly when everytime a politician farts it is deemed as news. Honestly, I think I am going to try and ignore the lion's share of these column inches in 2018.  Italy's general election will take place no later than 23rd May 2018, this will be on my radar. As for "Brenaissance", I'm bullish on the UK but appreciate there's much uncertainty going forward. So I see the current trend of weakish GBP and ergo strong FTSE continuing.  
• Bubbles/Bitcoin: All great bubbles form during periods of easy money, with interest rates low or falling, liquidity in abundance and feature an "asset" that is very difficult to value. They also often predict the future. Tulips - Holland’s flower industry. Britain’s 1840 railway mania - the new transportation technology. Dot-coms - the internet. BTC /Blockchain - digital payments? However, to be early is to be wrong.  It is obvious that most of these ICO enterprises will fail. But equally, others will thrive. A bear market would help - shake out the weak hands and bad businesses - until this happens I am cautious. To me, BTC isn't a currency, it's a digital commodity. 1. price is very volatile 2. payments that can be handled are very low 3. governance problems 4. transaction costs are very high 5. electricity used in the process of mining BTC is staggering. Is it worth $15,550? To me, no. But is there value in it? I would argue, yes. Some argue that blockchain is the real investment here and they're probably right, but I think any investment vehicle that bypasses boarders and offers privacy will have a market too. So for me, cryptos are here to stay. BTC and ETR have gone parabolic but there are many other cryptos out there now, who knows which will survive and be the FAANGS of today?

 

personal goals

• Add Shorter-Term Options - Reinstate EOD trading: Since being employed full time my trading has slipped to just weekend and end of month sessions using primarily the W1 and MN charts. This has had its benefits but I am starting to feel that I would like to be a little more engaged again, even if just for 5 to 10 minutes each evening. So I will make a note of currency pairs that are in MOTR and trending, place them in "Long" and "Short" portfolio's and will review them EOD (around 2145 GMT) for potential trades.
• Add Longer-Term Options- Stocks and Shares ISA: The wife and I keep talking about this, we need to utilize our ISAs. Even if it is just getting diversified via some investment trusts. 
• More Varied Newsfeed -  Reinstate Twitter: For the last third of 2017, I went on an anti-twitter drive. I was fed-up of being constantly glued to my phone. However, unintentionally this has limited some "inspiration" for trade ideas.
• Better Planning of Foreseeable Events - Create Major Event Calendar: Much like an Economic Calendar, a spreadsheet of upcoming political events will help sort the wheat from the chaff.
• Create a News Checklist: Of the few articles that create "that spark", I would like to run them through some kind of checklist to get the most out of them. Something like -  what are the main points, what is the obvious outcome and why, what is the contrarian outcome and why and what is the most likely outcome and why.  
• Get more KPI's - Build my numbers up:  Your numbers will always tell you what you need to do but in order to get them you must execute your trade plan and record your numbers.