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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4 Tips To Increase Profitability
I was reading an FXstreet session transcript and wanted to post the information contained about determining trends mainly because it is similar to how I gauge what the trend is. This method applies to trading shorter time frames since it only takes into account the previous two days. What data do you need to determine the current trend?
- Pivot Point
- LOPS1 or the low of the previous session
- HOPS1 or the high of the previous session
- LOPS2 or the low of the session before the previous session
- HOPS2 or the high of the session before the previous session
I define a session as one day. Here are the trend criteria:
Possible Uptrend with range-bound bias
- Price above pivot point
- Price below HOPS1 and HOPS2
Possible Downtrend with range-bound bias
- Price below pivot point
- Price above LOPS1 and LOPS2
Strong Uptrend
- Price above pivot point
- Price above HOPS1 but below HOPS2
Strong Downtrend
- Price below pivot point
- Price below LOPS1 but above LOPS2
Very Strong Uptrend
- Price above pivot point
- Price above both HOPS1 and HOPS2
Very Strong Downtrend
- Price below pivot point
- Price below both LOPS1 and LOPS2
The 4 Tips To Increase Profitability are:
- Effectively Determine the Trend
- Use Indicator Signals
- Use Price Behavior
- Consistency is the Key
http://transcripts.fxstreet.com/2007/01/4_tips_to_incre.html
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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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Uneventful Week Trading
It has been a pretty uneventful trading week for me so far. The lack of any major economic announcements this week will mean a lot more waiting during the US session.
I have managed to squeeze out 11 pips so far on 3 trades but I remain on the sidelines with no longer term trades. I've been looking at the charts the past couple of evenings but they seem totally foreign to me right now. I cannot seem to make sense of anything and I'm not going to jump into anything until they do make sense.
The poll from last week asked the question, "How many pips did you make or lose last week?" It garnered 14 responses which showed that most of us did pretty well last week:
8 respondents were profitable, 5 unprofitable with 1 losing 100+ pips, and 1 respondent broke even.
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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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This week PROFIT GOAL REACHED!
I carefully reached my profit goal in Week 4:
| 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 |
| 4 | 61 | $506.8 | 18 | 9 | 7 | 2 | 19.8889 | -16.8571 |
This week, I profited 61 p. If anyone remembers, my goal when I started Rob Booker training was to make a total of 60 p each week. Trading 1 lot at a time isn't going to allow me to do this for a living but increasing this to 3 or 4 lots will. I personally feel that a lot of people go into trading forex (myself included) with the thought that they need to profit many many pips each week. When I say many pips, I'm thinking over 200 or so pips a week. I hear how many traders not unlike myself profiting over 400 p for a given week which is absolutely possible but you also have to be honest with yourself. Can you consistently make 400 p a week? I don't think it is possible! Imagine the additional pressure you're putting on yourself when you're expecting even 200 p a week. I find that keeping a pip target low and then raising your lot count is a more realistic expectation.
The above trades were all day trades. I do not have any position trades open and really haven't in a long time. My goal is to continue day trading and then find position trades on longer term charts.
Making 61 p isn't easy. I made 18 trades, profiting on exactly half. I was very careful today and hesitated to make a short AUD trade which would have hit my target (30 p had I made the trade) because I was at +51 p and was satisfied with ending the week here. I did see another trade this morning though and took the chance of going long on the USD/CAD. I was still very careful placing a tight stop and only looking to stay in the trade if it went a little my way I got out of the trade quickly for a 10 pip profit bringing my total for the week at +61.
To be totally up front, I really haven't sent Rob Booker email in weeks nor have I been following his "Chart School" all that closely. I've been discretionary trading all week just like last and I don't know if it is a coincidence or not that I have been profitable both weeks. I'm not trying to apply any new techniques but just trying to become more intimate with the techniques and indicators that I already have. I haven't stopped learning or exploring new techniques or indicators but it really is just for exposure and because I feel the need to learn new things regularly.
I'm away until Sunday and will be back then to get ready for next week. I hope everyone caught some good trades this week. Take care.
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