Sunday, September 1, 2013

Week in review: 26th August to 1st September 2013

I've finished this week in the red. I lost two trades, which included one on the NZDUSD that I had opened a few weeks ago. I also won some, but because of my inverted R:R ratios, my wins couldn't overcome my few losses.

Since I began trading from July 2013 (start of the Australian financial year), I've made a slight loss of -0.5%. It's not a big amount, but it is discouraging. I'm well within my drawdown limit, obviously, but the last few weeks have wiped my gains for the last few months. 

Incorporating fundamental / sentimental analysis

I've spent the last week going over fundamentals and checking how to incorporate it into my trading plan. My thinking is as follows: use fundamental analysis to determine a bullish / bearish / neutral outlook on a particular currency, and using my technical systems to manage any trade that aligns with my fundamental analysis. 

Fundamental analysis is tricky. While the data behind fundamental analysis is objective (e.g. unemployment %, GDP growth, manufacturing orders etc), the interpretation of this data can be very subjective. I'll post some more thoughts on how to handle this data interpretation in the future.

But the following setup caught my eye. It's an example of combining both fundamental and technical analysis.

Here we see the USDJPY converging, as shown by the two trend lines. We can expect fireworks as the currency pairs heads close to the point of convergence. Non-farm payroll (NFP) is coming out this Friday, which coincidentally (?) takes place just before convergence. Depending on the nature of the NFP announcement, we can then use technical analysis to determine how to proceed. 

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