Week 24: Half Way

As we have reached the end of the first half of the year I thought it would be a good time to reflect on the previous 6 months. A lot has changed with my trading and I have made many improvements.

I rebuilt my trading method from the ground up and everything is more structured than ever. There wasn’t much wrong with the way I traded before but I’ve always wanted to continue seeking improvement. Due to the maturity of my trading method, deconstructing my entire process was the only way I could find areas to improve. Here are some examples of the improvements I’ve made:

1. Trade Plans – Most of my analysis is done on the weekend and the trading week is mainly about execution. I’ve written about trade plans in the past and I cannot stress how important they are for clarity of thinking and accountability. I’ve introduced some new standards (specific price action cues) for drawing trade plans which makes weekend analysis easier to follow during the week.

2. Better Trade Log and Journaling – I made my own custom trade logging and journaling solution because I found “off the shelf” solutions to be unsuitable. Many of them required too many clicks to input simple data and had poor layouts. Some even had dashboards that displayed information which had no utility apart from looking aesthetically pleasing. By creating my own template in Word and Excel, I’ve got the perfect solution for my trading that not only displays information the way I want but also speeds up the tedious task of logging trades.

3. Observations – An extra 6 months of experience has given even more insight into how markets work and what makes them move. I’ve noted many significant observations and some of them have become the foundation for taking trades. I feel more comfortable than ever in knowing when to trade and exactly what to look for. It is not usual for me to wait days before making a single trade in FX and I’m fine with that whereas others may get frustrated and take sub-par opportunities to make up for the inactivity. One of the things that I’ve noticed is that I often revisit filters and rules to see if they still hold up or if I’ve made a mistake implementing them. There have been a few that I’ve had to undo (i.e. Time of day/Day of the Week/Stats linked to old setups) so it worth bearing in mind that commonly held beliefs are sometimes wrong and everything has to be tested.

4. Information Flow – I must admit that I didn’t start the year off well in terms of being at the cutting edge of new information. It was like I took a break from reading but now I’m back in the flow of things. I’ve pruned my twitter/feedreaders and added better sources. I’ve also went back to devouring books which has given me a noticeable boost in creativity and new ideas outside of the trading world. Some of the books I’ve read in the past few weeks are Tools of Titans by Tim Ferriss, Spellbound by David Kwong and Born a Crime by Trevor Noah.

5. Stocks – I’ve recently added stocks to my watchlist. As these trades tend to be longer term in nature (holding for weeks and sometimes months), there’s plenty of time to research and plan the trade so it fits in well with Forex. I’m quite satisfied with the performance of these trades so far and believe there’s a lot of potential here.

I’m looking forward to the next 6 months with this new configuration.

Thoughts on the Trading Week

There were some good opportunities this week and a lot of traders that I talked seem to have also traded well. I noticed there was increased volatility due to economic news which led to more trades than usual. One of the trades I made this week was shorting EURGBP:

This trade was a little bit of a throwback to my intraday trading days with classical chart patterns so it was good to see it being combined with my new and improved trading method.

On the surface, it may look like a typical Head and Shoulders pattern but there is a lot more going on, particularly with the precision of the entry which picked the high of day on Wednesday and, more importantly, how the trade was identified and validated.  There are a lot of problems with trading classical chart patterns on an intraday setting i.e. Not all Head and Shoulders patterns work and many will be missed as it’s very draining to watch patterns emerge. They are also often visually imperfect and only look clear in hindsight.

Overall, opportunities were not very difficult to identify this week, it was just a case of executing and holding the trades until their targets.

I added 8 more FX pairs to my watchlist this week so I am now trading 20 markets in total and, to my surprise, it’s all been quite easy to manage.

I tried to add more markets earlier in the year but found it difficult to focus. I think the main reason why I can manage it now is because my trading planning and identification process has improved significantly.

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