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.

Too Much Of a Blog Thing

Traders and coaches are quick to mention the positives of blogging in relation to trading but few ever mention the negatives. Below are some issues I've encountered.

positives that can turn into negatives

• "Compiling" of Ideas = Endless bellyaching about tiny aspects of trading, resulting in the constant reinvention of the wheel. Just choose a method and leave it alone, once you've built some numbers up you can start faffing around with it.
• "Record" of progress =  Can quickly turn into over-analysis. Yes, record your trade in your spreadsheet, take a screenshot and write a quick comment, even put it on your blog if you want to. But don't think "analysing" each trade for 45 minutes will reveal the holy grail of profitability. Trades should be viewed collectively not individually, your KPIs will tell you what you need to do, your profound thoughts and reasoning will not.
• "Communication" with other traders = Right, this never fucking happens. You may get the occasional comment from some knobhead in Alberta however, you have no idea whether they are genuine or qualified. Stop being cheap and get a coach.
• "Accountability"= More often than not turns into neurosis and can intensify unwanted behaviours you're blind to.

the negatives 

‎
If you aspire to be a trader you will naturally have a high opinion of yourself; you have to think you are better than 90% of everyone else. Therefore keeping a blog...

• Plays to your already large ego: In trading, you need to learn to be wrong, your blog is a place you can always be right, that's an issue.
• Distracts from the main goal: Trading your plan, recording your trades, building your numbers up and learning your KPIs. You could write a blog about all this but you won't. You'll write a blog about how the markets make you feel and your bottom line doesn't give shit about this.
• Becomes an addictive hobby: Let's be honest, trading is boring, in some ways blogging is far more entertaining and rewarding (hits, shares, likes). But do you want to write a successful blog about unsuccessful trading, or do you want to be a successful trader?
• Distracts from rest: To trade well you need to be able to switch off. If in every waking minute you're not trading, you're agonising about it on your blog you're hardly going to have any perspective when you return to the charts.
• Ruins your trade plan: The need for continuous content requires time and too much thinking which often results in you overcooking your strategy (reinvention of the wheel syndrome). 
• Distracts you from the truth: To trade successfully you really have to understand your personality traits. Keeping a blog about your own little world will not help you discover them (I'm talking from experience). You have to figure these out: Your happiness, not your trading must come first; as without the former, you cannot have the latter. You may not even be cut out for trading.
• Stops you from doing what should be done: Should you write another post about how you feel, or just do the fucking Tharp Trader Test you've been putting off for months? Should you write another post on how you want to "experiment" with your trade plan, or should you spend the time recording your numbers properly (MFEs and MAEs included)?! Your blog is a tertiary addition to your trade routine, it doesn't replace any of it and it's the lowest on the list of priorities!

experience

Annoyingly all of the observations above have comes from personal experience, once I even entertained the thought that if I could get my blog popular enough I wouldn't have to make my trading a success; I could trade unsuccessfully and my followers could enjoy my offerings via a sort of schadenfreude (tbh there's some I follow for this very reason).

From following trading blogs for eight years what I've noticed is those that "make it" post far less often, or give it up entirely. While those that aren't making any money generally post prolifically. Personally, I've found the less I post the more successful my trading is, which makes sense. I focus on my trading when I'm trading and my life when I'm not.

Still Plodding Along

update

I am still actively participating in the markets. I took pretty much the whole of July and August off because I was either on holiday, didn't have any trade signals or couldn't locate my interest in the markets. And I got back to trading "proper" in September.

positions

1. Long Copper: Bought in November 2016 on a monthly bullish domino candle, "Trump/reflation trade" or whatever people are calling now. I'm up about 1R, it's pulling back but I'm not particularly bothered. My stop is more or less at breakeven, I haven't got any signals to sell and personally I think Trump will manage to do something vaguely pro-business, so just going to let it run.

2. Long GBPNZD: Bought this first week of September, it's sitting around +1R. Stop's at breakeven, it's going sideways, again just letting it run. I think the GBP is undervalued, Carney is a moron and the Kiwi economy is boring. I'm probably wrong on all fronts but I'm willing to live with that.

3. Long GBPJPY: Bought this second week of September it's sitting around BE. Stop's at 50%, it's going sideways, again just letting it run. Even if the UK is weak I think the BoE will raise rates slowly ( IMO 80% chance of 0.25% hike and 20% chance of 0.5% hike in November) and the BoJ is committed to buying Japanese bonds for well, ever. If I'm right I'll clean up, If I'm wrong, that's what the stops there for.

potential positions

End of the month and I've got some monthly candles to choose from. The bolded FX  is the direction I would be going.

• AUDCHF: Price action is stuck in a monthly range, so no.
• AUDJPY: Price action quite "step-py" which will likely make reaching PT and holding to PT difficult, so no thanks.
• CADCHF: Price action is stuck in a 3-year tight range, no.
• EURGBP: Not a huge amount of profit potential and I am too emotionally involved in this pair. 
• NZDCAD: The range makes PT pathetic.

• GBPJPY: Monthly bullish domino candle adds conviction to my current long GBPJPY trade, so might, on this rare occasion average down on a PB. 
• USDCAD: I like this one. The USD is oversold, Trump sentiment is so low, even him farting would surprise on the upside. The signals good and there is an easy 1:1.5 there. I'll have a go on this.

• EURCHF: I'm going to short this. 1. The signals good on the MN and W1 charts, 2. there's an easy 1:1.5 and 3. What happened in Catalonia today is fucking disgusting.

EURGBP daytrade prep

Quick reminder of I why I hate day trading: do your prep, wait all day, have a couple of furious wanks, nothing triggers...

Learning to Trade pt3

In part 2 I tried to speak about the importance of trading in your own vision. In this final part, I wanted to talk about ways we can refine our vision and edge.

(Links to part 1 and part 2 if your interested)

play like an amateur; enjoy the game

Ultimately this is a zero-sum game, so you must enjoy the competition! To do this you need to go beyond the one dimension of your own game. Your opponent is always going to have a completely opposing view to yours. They are going to try and run your stops and make you doubt your strategy everywhere they can. They will do this wittingly, purposefully trying to throw you off your game and unwittingly, by simply being true to their beliefs. So you need to...

1. learn your style's strengths and weaknesses
2. understand how and where others will try to implement their style and exploit yours by getting into the habit of seeing every trade from both a bull and a bear's perspective 

Once you start to develop this broader view, you will begin to compete intelligently rather than emotionally. Win or lose, you will build self-respect and confidence, because you're playing the game for what it is. If you lose, you gave them nothing easy, if you win, you took part in making the trade a success. Amateurs understand and enjoy these battles and accept that losing them from time to time is the price of competing. In fact, more than that, they say "well done, I see what you did there"or "tut" at themselves for failing to do something they know they should have. It does not throw them off their game, it only makes them enjoy it more. Because this is the game.

Personally, I believe I am just about at this stage.

the pro: never stops learning 

Now the following is purely conjecture as I am certainly not at this stage but as I understand it; where the Pro differs from the amateur is in their acceptance that they will always be a student of the market.

One thing I would say with a little more certainty is, again, that as I understand it, this where the serious back-testing should commence if you're so inclined. I say this because this is what my coach has always alluded to in his instructions which to paraphrase were: Find a system that you understand, forward test it to see if it suits you and to learn some KPI's, as it's starting to fall into place come and see me again so we can review it  and you can spend some time backtesting to further refine your edge/KPIs.

We can continue our education by.

1. Continuously recording our data and learning our KPIs
2. Continued studying of the world and market events
3. Journalling our trades and thoughts and exploring them
4. Getting independent input and coaching in regards to our strengths and weaknesses
5. Start comprehensive backtesting to further extend our KPI knowledge and insights into our method. My buddy has written a great post on backtesting on his blog
6. Work with other traders to help, test, push and encourage good habits, better practices and fresh ideas. Something I was thinking about in a previous post on building a Trade Team

Learning to Trade pt2

This is part two of my three posts on Learning to Trade. I felt inspired to write them after a couple of conversations with fellow retail traders.

In the first part, I tried to explain how I have found viewing trading as a game a more useful mindset than approaching it as work. I will try and expand on this here...

(Link to part 3 if you wish to continue reading)

l-plates: knowing how to play a game is very different from knowing you can playing the game

Knowing the rules and the processes is the first part of learning anything, and technically, you will be able to "play" but you aren't going to be able to compete. To compete effectively in anything you need to build a healthy self-respect and confidence that you can only gain from truly understanding the game.

To me, after having learnt the processes, most traders, including myself, enter into one of two failure states. The problem as you will see, is that these two states are not based on your beliefs or in reality.

state 1: blind-trading

Blind-traders bastardise a setup up from a book, video or coach that they like and assume because they like it, that they believe in it. They work hard at adapting the setup into a strategy and because they don't want the work to have been in vain the "belief-lie" becomes bigger. They end up with a setup that is good but a system they have no faith in. Because of this lack of faith, they then start a campaign of constant "setup-tweaking". However, this means they are never able to learn their KPIs because the unit of measurement is always changing and so, the blind remain blind.

state 2: the testers

Testers hide behind backtesting, looking for the perfect way to exploit their "edge". But the problem is this trader hasn't spent any significant time trading it in real-time and are in a "reality-lie"; they have no idea if it suits their personality, or whether they can even see their setups when under the pressure of the market. So, when the rubber eventually hits the tarmac, the months of work have been for nothing, they have a "successful" strategy that they are unable to execute.

Personally, I spent about 7 years fucking around between these to states.

your way

In my opinion, it doesn't really matter what style you choose as long as you believe in it. Muhammed Ali believed boxing was a war of attrition, while Mike Tyson saw it as a pistol draw. Neither style was infallible but they worked because they believed completely in their way. And to me this is the first step to truly playing any game; you have to play the game your way.

1. Decide how you believe the market works. Not how a book or your coach says (nb a good coach should make you decide yourself), why do you think markets move? what are you absolutely certain about? This is where you need to build everything from. From your beliefs/faith, not science, backtesting etc.
2. Now you need to find or develop a style that allows you to trade the market in that vision.
3. After finding your style and like my coach says, you then need to forward test it to 1. see if it suits you 2. see if it is practical to execute and 3. learn some early KPIs to make some basic adjustments to better your edge. 

When I did the above roughly 18 months ago my trading transformed, my results went to break-even and slowly eked into profit and most importantly I lost the execution anxiety that had plagued me for years. I was able to enter trades when I saw them, I now have less issues holding through retracements and can manage and close them with far less emotional involvement. It was completely liberating. The irony is I was just doing what my coach had been telling me to do for two years.

I can't emphasise enough how important it is to trade the market in your vision.

Personally, I believe the market moves because of supply and demand (orders), central bank policy (because central banks control the supply of cash and interest payments) and sentiment ("uncertainty" and "stabilised uncertainty" create fear of losing it (FOLI) = supply, or greed, fear of missing out,(FOMO) = demand).