Forex Trading Profit Up 9.6% In February
I ended the month of February up 9.6%. This betters the previous month of January where I was up 6.8%. I consider it an achievement to be up 17% so far in 2008 but I’m not getting ahead of myself to think that the rest of the year will go like this.
What did I do right this month?
- I never risked more than 2% on any trade.
- I knew my stop loss before entering a trade, sized my position, and never moved my stop on a losing trade.
- My reward to risk was typically around 2:1.
- I traded one of my systems pretty consistently (missing some opportunities) and stopped trading two others when I found I was being too inconsistent with following my rules.
I think it was a good idea for me to stop trading two of my systems this month. I may have put them into the mix too quickly without fully trusting them. As I mention in #4 above, I was being inconsistent with my rules and found myself breaking them more times than not. Instead of sticking with them using real money, I moved them back into development and continued trading them in a demo account. I think that if you have any doubt in your trading method or system, it’s best to discontinue using it until you trust it.
What did I do wrong this month?
- I exited some positions before they hit their target. This was due to fear and fear only. There is a simple cure for this. I should just close my trading platform and open it again only once the position has closed.
- I’ll say it again but I started trading a couple of systems before I was ready. It could have turned out bad but it actually did not this time. They systems were profitable but I was still not comfortable with the methods I used in obtaining the results.
- I sometimes got lazy or forgetful this month with one of my trading systems. I failed to place an order when I should have, costing me profit.
If you had success or failure this month, I think it’s important for you to find out what you did right and what you did wrong. It’s imperative to evaluate your performance so that it can be improved upon.
Explore these other Forex related posts:
- Six Percent Loss This Week
- How Many Times Have You Exited a Position Early?
- Dooku Forex Trading System
- My Biggest Mistakes This Month
- 2 Percent Risk with 2R Multiple
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What a Setback!
All I can say is that I had quite a setback today. I'm writing this as my positions just closed out so I'm really disappointed at my stupidity. Quite simply, I was trying something new and I got bit.
I was short on a 3 position GBP/USD trade that was profitable most of the European session yet not enough to hit breakeven or profit targets. Then came the US CPI economic announcement this morning. I have never felt comfortable being in any position going into an important US announcement and this time was no different. I took my stop losses off the positions with the thought that I would close manually 1 minute after the announcement if my positions were down. My reasoning? I wanted to prevent from a false spike taking me out of the positions which had happened many times before only to find out I was right. If anyone was watching the market, you know what happened. The price did spike but got pegged GBP bullish, the complete opposite of my positions. I didn't even have time to close out my positions in a timely manner. I painfully closed all 3 positions at a 75 pip loss each which was 2 1/2 times greater than my normal stop.
This trade hurts for many reasons:
- I went from being profitable by 129 pips in December to -96 pips in December
- Went against my own good judgment
- I was very patient all week and lost it in a minute
- Not only does this wipe out my profits for December but also for November and part of October
So you can see how damaging 1 trade can be and it's not even the money that affects me as much as the mental setback. It's going to take some work to get back to where I was.
The positives from all of this? I don't foresee ever taking my stop loss off the table again. Never, ever. In addition, sometimes I need a big punch in the face to remind me that things like this can happen.
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Forex Profit Loss Index
Continuing the spotlight on backtesting, there are 3 different indexes that can be calculated in your backtested results or your live trading results to give an indication of the chance of success. I mentioned 1 last week, Buy and Hold. The other 2 are the risk/reward index and the profit/loss index.
Calculating the profit/loss index gives you a general idea of the success your trading or trading system is having. A simple example is best suited to illustrate this.
- Calculate all of your winning trades in dollar amount. For this example, I had 5 profitable trades, each $90 for a total of $450.
- Calculate all of your losing trading in dollar amount. For this example, I had 7 unprofitable trades with the following losses: $ -45, -30, -110, -25, -30, -90, and -55. The total losses amount to $385.
- Subtract the losing dollar amount from the winning ($450 – $385 = $65)
- Profit/Loss index = ((Winning trades + Losing trades) ÷ Winning trades) * 100
So the profit/loss index for my example would be calculated as such: ($65 ÷ $450) * 100 = 14.4 %
The profit/loss index for this example is 14.4%. The following key translates these results into something more meaningful:
+100 High Profit/No Losses
+50 Profits > Losses
0 Profits = Losses
-50 Profits < Losses
-100 No Profits/High Losses
Using this key, the above example would be on the lower end of the 0 – +50 range, not great. Ideally, you want the index as close to 100% as possible. If your index is negative, you're losing more than you make. If your index is 100%, your perfect.
On the surface, this calculation can seem kind of useless but what it does best is give a clear meaning to all of your profits and all of your losses. How would you otherwise interpret a number like $65? Yes, it's a profit but in the example case, not a very good profit.
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My End Of Month Forex Results
I'll mention what I've been busy with in a moment but let me recap November first. I ended the month of November in the black at +14 pips. It isn't much but nevertheless, the third month in a row with profitable results. Over the previous 3 months, I've managed to take 747 pips from someone else's grip. Consistency is the key and the goal in everyone's trading; I'm slowly starting to believe this is possible in my trading. Of course I always have my doubts on whether trading Forex is a viable option to wealth growth but I have to believe that trading full-time is possible. I've received so many emails over the past year from many traders and most have not obtained success. If you believe what "they" say, that only 5% of traders are actually profitable, then I can understand this. There is obviously no way for me to prove who really makes money but from all of my conversations, but I'd say maybe only 1 or 2 have achieved a success that one may strive for. I've also received emails from long time traders that are convinced that there is no way you can make money trading Forex. They are absolutely and positively sure of this. I don't believe this or I wouldn't be writing this post. One thing I am certain about is that it takes a lot of time and effort to learn how to trade. I can only estimate that the amount of time I've spent learning (everything from reading, trading, writing) exceeds 3000 hours. That's about 50 hours a week for 65 weeks. So this is already my full-time job, but unfortunately I have 2 demanding full-time jobs. I only want 1.
Anyway, I had a nice start to December with a 90 pip profit trading the GBP/USD today. The pound has been "pounding" the dollar since last week with its sights on 2.0000. I wouldn't be surprised if it hit that mark next week. What a resistance level that sounds like, 2.000….
I'm out of time right now so I'll have a post in a couple of hours related to what I've been busy with.
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Forex Trading in the Black
Ending the month with a profit gives me a feeling of progress and success. It is nothing more than that though because what your P/L is at the end of the month doesn't matter in comparison to what you've done in the previous 6 months, 1 year, or more.
With 1 day left in the month though, I have exactly 40 pips of profit for November. It's funny that after having 30+ managed positions opened this month, my 1 position last night which profited 78 pips pushed me into profitability. In fact, there were several times this month where my P/L was back to 0. This is just the way things work. You can put tons of time and effort into trading and after managing multiple positions during the month, you might wind up right where you started. It's obviously better than losing though. Either way, sometimes things work out and sometimes not. I think the more trades I place, (as long as they are "good" trades where I did not deviate from my plan) the more beneficial is to me as a trader. If I made 1 trade this month that profited 300 pips and that was it, I don't think I would be furthering my chances of becoming a day trader. I'd much rather be at +40 pips after 32 trades this month than up 300 pips (if I had only made 1 trade.) If I was a longer term trader, 1 trade for the month might be fine but that's not what my goal is here.
You can see my past and present performance at http://www.forexproject.com/My_Forex_Goal.
I know there is still 1 trading day left but I will trade Thursday even if it means finishing with a negative P/L. If I do finish with a positive P/L though, that would be 3 consecutive profitable months. In September, I ended with a profit of 286 pips and in October with a profit of 447 pips. Since tracking this run of performance results since June of this year, my total P/L is at 477 pips. When you really put it in perspective, 477 pips over 6 months is not going to win me any contests or get me out of corporate America but I'm inexperienced and I'll just have to tag myself this way until I get a couple of more years under my belt. If anything, this only proves how difficult Forex trading is and I've dedicated tons of effort towards doing this.
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Week 5 Forex Performance
I took a 3 day break from doing anything forex related over the Memorial Day Weekend. Sometimes 3 days isn't even enough time off from this craziness.
My Week 5 performance basically wiped out most of my gains from week 3 and week 4. I had 6 profitable trades, 6 unprofitable trades, and 1 scratch. I lost a total of 69 pips or $619.40. Eventually having a poor risk/reward will come back to bite you.
What am I going to change this week? Not much. I am going to try to let my profits run this week. I don't have much more to say right now about this. I just don't.
The newest Commitment of Traders report from Friday is processes and can be found at http://www.forexproject.com/Forex_Volume/
We have some economic announcement's this week that could be nice market movers, the FOMC meeting minutes released on Wednesday and the always interesting Nonfarm Employment change on Friday.
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2 Weeks of Gains Gone
Just like that…. my gains from weeks 3 and 4 are gone and I'm sitting at -79 pips for this week. It is quite frustrating that I worked so hard for a little pippage over the previous 2 weeks only to see them disappear in 4 days. 1 step forward, 2 steps back.
WARNING: The additional commentary below is very scattered and I'm just spewing it out of my head so it may be contridictory.
I have not been overly impulsive, stupid, or emotional with the trades I've made this week. There were some trades where I exited early only to see the price continue in my direction but there were also trades that I exited early and then saw them turn against me.
This leaves me at another important juncture in my forex trading career. When I reach this point, I always ask the question, IS IT EVEN POSSIBLE FOR THERE TO BE LONG-TERM SUCCESS FOREX TRADING? I wish I could answer this question now but the longer I do this, the longer I fear what the answer may be. Just thinking about working for Corporate America the rest of my life is depressing. This fact alone can motivate me to continue because I know that in this world of trading, even though I've been trading for almost a year, this is still considered very beginner.
It's times like these when risk/reward seems like the most important thing in the world.
I've put so much time into learning how to trade Forex that I really think I'm at the point of no return.
The highs and lows of trading is something that is not easy to take sometimes. What I have to ask myself and what you have to ask yourself is if it is getting harder or easier to take as you do this longer. For me, it seems to be getting a bit easier but not enough to quantify.
Look at my true risk/reward over the last 3 weeks of trading:
| Week | P/L | Gross P/L | Avg Winning Pips | Avg Losing Pips |
|
3 |
15 | $111.1 | 12.8000 | -18.8333 |
| 4 | 61 | $506.8 | 19.8889 | -16.8571 |
| 5 | -79 | $-748.9 | 9.7500 | -23.6000 |
Look at the Average Winning column and Average Losing column. If I average this weeks 3,4,5 my average winning pips are 14.18 and my average losing pips are 19.76. This risk/reward isn't going to cut it. Why is this happening?
- I'm scared. I'm scared to give up tiny gains. I exit my positions too early.
- Rob Booker does not encourage great risk/reward for his trade strategies. They are essentially 1:1 which means you have to have more winning trades than losing trades.
- I'm trading the smaller time frame charts
Either way, it sucks that no progress has been made in my forex trading on paper. I have learned a lot over the last year but until this is realized in money, I cannot consider this "project" successful.
I can see why there are so many damn mentors, training websites, and signal services. If only 10% are successful trading, then you have the other 90% saturating the market with services that they provide because they couldn't cut it.
So what is the point of this post. It is a venting session that everyone needs and all of you need to try. I feel much better now. Feel free to click on the Submit Content link on the left menu to post your vent. I will happily post it on the front page of the site alongside mine.
The week isn't over yet and I'm making it sound like it is so things may be different tomorrow, maybe better, maybe worse.
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What was your Profit/Loss this week?
There is a new poll on the top of the right column of the website. What was your Profit/Loss this week? Be honest. I'd be interested as well as others in seeing the results.
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Asian Session May 8th
Journal Entry
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I decided to trade the Asian session and shorted the USD/JPY. I was just stopped out at 0 profit/loss.
I shorted the pair on a break of the support trendline and a break of RSI trendline. It was good entry execution. I waited for the price to break the trendline and then waited for the 15 minute candle to close. After I was up 20 pips, I moved my stop to break even at 111.52. My limit was still 111.05, right above a lower support line. The trade was up as much as 28 pips where I typically would have closed the position. Tonight, I wanted to show a little restraint and patience so I waited. The pair never made it back down before stopping me out for a scratch.
Should I have taken the 28 pip profit? Would you have?
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Frustration Bottling Up
I'll admit that the frustration of losing is bottling up. I did manage to end the losing streak by getting a couple of smaller pip wins today after my 30 pips loss. I ended the day -15 pips. I sent a message to Rob this afternoon stating my frustration and he had 2 suggestions for me:
- Stop trading the EURO! He thinks the currency pair is a "turd" and that it hardly moves. He told me to stick to the GBP which has been moving big time over the last 2 weeks.
- Decrease my lot size on a day with no economic news whatsoever. I only traded 1 lot, followed my rules, and only lost 30 pips so it ain't so bad
I sent a follow-up question asking him what pairs he likes to trade most.
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