Monday, December 30, 2013

2013 in review...

With 2013 drawing to a close, I think it might be a good time to reflect over the last 12 months...

The Good

+ Officially going pro. My biggest achievement for this year. I finished the Australian financial year in profit (end of June 2013), so I had to register myself as a sole trader to the tax office to declare my winnings, and hire a professional accountant. I have my own Australian business number (ABN) certificate which I proudly hang on my wall. I'm officially in business, although my capital reserves aren't sufficient to live off full time (yet).

+ System development. I developed quite a few mechanical systems over the last year, especially on the weekly charts (Daikoku, Al-Kutbay, Ek-Chuah, Cernesus and Set).

+ Integrating fundamental analysis and discretion. I think this is another major development. My faith in a 'holy grail' or pure mechanical trading has subsided over the last 12 months as I witnessed for myself the pitfalls of mechanical trading. Price moves because of fundamentals (which ultimately determine order flow). Technicals are useful in determining entries and exits. I think combining both is key to becoming a professional trader.

+ Finding my favourite currency pair (the AUDJPY). The AUDJPY is sexy. It's one of the most volatile pairs during Asian trading hours, and it's excellent for carry trades (although it has been eclipsed by the NZDJPY). The spread is also competitive. Living in Australia, I also have a good grasp on the AUD side, and can make fundamental plays more easily than other pairs.

+ Quietly accumulating capital from my day job. I've been dollar-wise and avoided big expenditures, but I've also been penny-foolish (main culprit = energy drinks and food courts). 

The Bad

- My performance has been way below expectations for the past six months, primarily due to me experimenting outside mechanical trading and putting my systems aside. For the last six months, I haven't been using the mechanical systems I've created throughout the year. Between July and December 2013, I've been at breakeven trading discretionary and/or experimenting on the lower timeframes.

- Putting backtesting / system design ahead of actual trading. I think if you spend too much time on backtesting or designing systems, you begin to forget about 'live' trading. I found myself slipping back into rehearsal mode and trading 0.01 microlots, if that makes sense, even though I've designed some trading methods that look profitable and are ready to trade live.

- Realising my data is a bit more dirty than I thought. I mainly use Forex Tester 2 for my backtesting, and discovered that Forexite shaves at least an hour off Friday. This doesn't really matter on the weekly chart but it has made me less confident in mechanical trading (dirty data was one of the pitfalls that I'd observed, and why you shouldn't be completely reliant on mechanical trading).

The Ugly

- The lower timeframes aren't as scary as I thought. Many gurus like to label the lower timeframes as 'noise' but there is still market structure. I haven't found a way to trade the lower timeframes profitably, though. I've also found the return on time very poor. 

- I'm beginning to think that it's going to take alot longer to achieve financial freedom. This means that I have to set my financial goals lower. So instead of fantasising about my own million-dollar penthouse, I'd be happy to buy a decent RV to travel and live in. This has kinda sucked the passion and excitement out of me.

Overall, the last 12 months have been good. Not as great as I envisioned, but I think better than most noobie traders. Here's to 2014. :)

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