Forex Trading Performance

This week didn't turn out all that bad mainly because I didn't lose. 

News Trades accounted for -51 pips or $51.00.  Remember that I'm only trading a mini-account to test out the platform. 

I started discretionary trading again this week and overall profited  48 pips or $418.20.   

I felt more comfortable as a trader this week more than I ever have but it was not without mistakes.  My biggest mistake that I've had problems with in the past reared its ugly head again; Closing a position due to fear.  I really only did it once but it cost me and here are my trade logs that document this fear:

1.  6/18/06 17:43 EDT -> Sell Trade on USD/CAD at 1.1220/1.1225.
2.  6/18/06 17:43 EDT -> Set fixed exit to 1.1260
3.  6/18/06 17:43 EDT -> Set fixed limit to 1.1050
4.  6/19/06 19:43 EDT -> Close Position 1.1212/1.1217

So I am out of the position.  What happens next?

6/20/06 – USD/CAD opens at 1.1218, closes at 1.1167
6/21/06 – USD/CAD opens at 1.1166, closes at 1.1074, reaching a low of 1.1033

So I gave away 170 pips.  That's pretty huge.  That is $1700.00.

I'll admit that I haven't forgotten this or I wouldn't be mentioning it but we have to learn from our mistakes.  I don't think this affected my judgement the rest of the week because the very next trade I profited 92 pips. 

The 1 problem I have with making this mistake is that it is becoming a trend.  I must force myself to think like Forex2Stay.

Forex2stay had these great words for me that I share with you now:

For me it's all about the mindset.  When I enter a trade it's not about how much I can win, but how much I can lose.  Once I figure out my SL, and determine if that fits my MM, I'm okay with the trade.  Mentally I have prepared myself to lose 1% of my account.  At this point I'm done with it.  If I lose I lose.  I've already mentally prepared myself for it. I know you've heard this before, but it's the price of doing business.  I just view it as an "Operating Expense".

Another Forex News Trade Loss

I had a quick news trade loss as the market moved mostly before the announcement and not after.  Loss of 12 pips (6 pips x 2 lots)

This concludes a week where news trades lost 51 pips for me on a total of 5 trades.  I got the big bagel…  0 wins, 4 losses on 2 news trade announcements.  

As always, my performance is documented below for the 3 weeks I've been automated trading the news.   3 weeks, +29 pips.

http://www.forexproject.com/Forex_Engine_Trades/

http://www.forexproject.com/FX_Engine_Performance/

Week #	Pip P/L	Gross P/L	Total # of Trades	Total Winning Trades	Total Losing Trades	Total Even Trades	Avg. Winning pips	Avg. Losing pips
1	58	$58	2	2	0	0	29.0000
2	22	$22	5	2	3	0	20.5000	-6.3333
3	-51	$-51	4	0	4	0		-12.7500
Total	29	$29	11	4	7	0

Same Setup but a Loss

I'll explain later but I want to bring up the subject of entering and profitable exiting based on a particular setup earlier in the week and then entering the same setup when it shows up AGAIN at the end of the week.  This happened with my USD/CHF setup that I profited 92 pips from 2 days ago.  I entered short again last night and was stopped out (-25 pips or so.)  Look at the chart.  We have broken out above of the bearish flag.

I'll wait for the pullback and maybe go long next week.

 

 

 

Manually or Automated Forex News Trades

I've received numerous emails from traders using FX Engines who are discouraged by the past weeks results.  I am not discouraged for several reasons.

I don't think trading the news manually is better than automating it.   I also want to stress that trading either way requires a certain amount of discretion.  Just because your trades are automated doesn't mean that you don't have any options available to you.  For instance, you can automate your trades by using a Conservative, Moderate, or Aggressive method.  This week might have been a great week to use the conservative or moderate engine which I have mostly.  If you use the aggressive method day in and day out, you have to expect a greater level of risk where you may be entered into a trade on the first price tick.

The results this week are going to happen whether you trade manually or automatically but you might have lost more trading manually.  Last week was an absolutely terrible week for trading the news manually the Rob Booker way but profitable trading automatically.

I think the biggest thing is the risk reward.  I've traded the news manually using Rob Booker's stategy and I can tell you that he trades the news commonly with a 30 pip target and 30 pip stop loss.  That's a 1:1 risk/reward as you all know.  Not good.  In addition, I also believe that it is difficult if not impossible to use a 10 pip stop trading manually. 

In the previous 3 weeks of trading the news, I'm up 41 pips on 10 trades with a win % of 40.  If you trade 3 lots in a standard account, that's $1230.00 in 3 weeks.  In addition, the stress factor is much less. 

I'm not saying that automated news trading is the holy grail in Forex because there isn't one. I'm also not ready to say that this method cannot provide consistent returns.  I've said this before but this is not the only thing on my toolbelt.  It's just another "trading system" that if proves to be profitable can be used in concert with your other methods.

Durable Orders is released at 8:30 today.  I'll be using the moderate engine as I have mostly used this in the past.  Hopefully we will get some price spikes with no reversal.

Initial Claims News Trade

The initial claims report is released at 8:30 am this morning.  This has been my most successful news trade over the past 3 weeks with a total gain of 59 pips so we'll see how it goes today. 

Riverman from forexforays.com stated in a comment regarding FX Engines:  I kept getting caught by wild whipsaws in the price right around the
news event, which on more than one occasion ended up triggering trades
in both directions and taking out both my short AND long stop-losses.

This has not happened to me yet but I can see how it could.  He also stated that the initial excitement of the platform has faded and I have to agree with him.  Don't take this as meaning that I don't think it can make me pips because I really think it can (and it has so far).  As I've said so many times before, with a 10 pip stop loss and the potential of catching a news trade that has a large price spike, I don't think you're risking a lot.  I think the excitement has worn off more because there really isn't anything to trading the news.  I subscribe to an engine and it automatically triggers based on price action.  I'm not looking at charts, or calculating risk/reward, targets, or stop losses.  I'm really doing nothing!  Where is the excitement in this?  The excitement is in that 1 minute or so when you catch 30 pips and then it's gone.

On another note, check out Riverman's post from yesterday, "Signs you may be overtrading."   I can say from experience that he isn't the only recovering overtrader. 

Chart Patterns and Murrey Math Trade

I caught another good move last night on the EUR/USD 1 hour chart.  There was a clear triple top right above the 7/8 Murray Math Line so I shorted the pair:

 

 

 

 

 

 
My target is the 4/8th MM line at 1.2573 which has not been hit yet (13 pips away) but I've moved my stop up to the 5/8th line to retain profit.

 

 

 

 

 

 

 

Trade Journal for USD/CHF Trade

I have created a trade journal video for my latest Forex discretionary trade that closed today with a 92 pip profit.  If you feel like being bored for a couple of minutes, take a look.

Swissie Trade

First Discretionary Trade in Weeks

I made my first forex discretionary trade in weeks yesterday morning.  I followed my plan to the tee and came out on top with 92 pips of profit.  What did I do right?

Found my Setup 

As I stated a couple of weeks ago, I was going to be studying chart patterns on the Daily or 240 minute charts.   My setup is based on the daily chart below.  The USD/CHF had been trading within this bearish flag for weeks now.  The price had recently bounced off the top channel line and slowly started to descend.  Providing further confirmation was the 3/8 Murrey Math Line which from my limited knowledge is a difficult line to penetrate.  In addition there was a bit of divergence between MACD Oscillator and price.  

 

 

 

 

 

 
 
Stop Loss 

I placed my stop loss above the high of the previous 2 daily candles and above the 3/8 Murrey Math Line at 1.2456.

Limit 

With all of the indecision in the market, I decided to move to the 4 hour charts and exit at 2/8 Murrey Math line which would be a 92 pip limit.  

Risk/Reward 

Entry at 1.2421 with 35 pip stop loss.  Target of 92 pips.  2.6 Reward/Risk.

Psychology 

A common mistake of mine in the past was to close out my position when it showed a bit of profit.  This is due to fear that the market will move back against me.  In the past, I probably would have taken the trade off the table last night when I was up 50 pips but I knew that this was definately not the right thing to do.  The right thing was for me to ride out the trade and wait for the target to retain my very good risk/reward.  I did wait and at about noon today, my target was hit. 

Now the stupid thing for me to do would be to get overly excited about this successful trade.  I am by no means doing so.  I just want to make a point that when you plan a trade before you enter and stick to your plan, you can at a minimum feel good that emotions didn't get the best of you.  If you win the trade, it's even sweeter. 

The Breakeven Stop Loss

I am interested in the subject of Breakeven Stop Losses because when a trade goes my way, I typically will move the stop loss to breakeven so that there is no longer any risk to me.  Typically what I find happens is that my stop loss gets hit and I don't win anything and don't lose anything.  Is this a good thing?  Not at all. 

There may be a pretty good reason why this happens to me.  I think it is because I'm selecting an arbitrary pip target.  For example, after an open position goes 20 pips in my favor, I move the stop loss to break even.  Since I used technical analysis to enter the position, to determine my limit and initial stop loss, I should also use technical analysis to determine my break even.  I'm not doing this.  In addition, I'm only trading 1 lot at a time.  Typically traders will use breakeven stops in conjunction with an exit of some portion of their multi-lot position.  So if I had entered a position with 2 lots, I may close 1 position at a 20 pips target and then moved the last lot to breakeven.  That way I would at least make 20 pips on the trade if the price moves against my last position and stops out at breakeven.  I should also mention that I recently read somewhere (I forget) that you are destined to lose if you only trade 1 lot at a time.  I may look into this more and make it a future post.  The problem is if you have limited initial capital to trade, you may not have an option to trade multiple lots.  Most would say then don't trade at all and wait until you have enough capital to trade in multiple lots.  

I don't know if this is the problem or not so I decided to get out there and search for some opinions of other traders regarding a breakeven stop.  Here are some of the things I've found. 

• Joe Duffy from futuresource.com does not use breakeven stops because he states that typically it creates too tight of a stop loss.  His experience tells him to move the stop as the trade becomes profitable but not all the way to breakeven. 
• Davide123 a senior member from the Forex Factory Forum states:  "You see, tight stops of the magnitude being discussed here make no
  sense to me in a market with such a wide trading range. I don't think
  you can make consistent profits, and therefore a living out of trading
  fx, unless you rearrange the way you think about the whole business and
  give your trades enough space by putting your stops at strategic places
  and leaving them alone to get hit if that happens to be the case. The
  trick, IMO, is to cut down on the number of times you think you have to
  win, and increase your tolerance for the frequency of losses (within an
  acceptable level drawdown, of course)."
• Tradenexus.com states that a breakeven stop should be placed once the price crosses a "transition point" which was part of the Turtles trading technique.
• A lot of what I read about breakeven stops are related to multi-lot strategies.  IE: When you have reached your first profit target, close out half the position and move the remaining to breakeven.

I think the point here is that I'm trading not to lose instead of trading to win.  As previously stated, trading 1 lot also makes it very difficult if not impossible to have any exit strategy other than closing your position once your target is hit.

Unsuccessful News Trades

I went with the recommended Forex Engines today and things did not go well.  Whether you win or lose during news trades, it usually happens very quickly sometimes in the blink of an eye. 

 

 

 

 

 

 

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