Saturday, March 1, 2014

Week in Review: 24th February 2014 to 2nd March 2014

I made a small loss this week. Only opened seven trades and lost three of them. Because the size of my stop losses tend to be bigger than my profit targets, the size of the three losses outweighed the gains from my winning trades. The amount lost is negligible, about 0.2% of my equity.

I also have two positions left open over the weekend. One trade should hit my profit target next week, the other trade has moved against me quite badly. At the moment, it's 75% towards my stop loss. 

Progress towards retirement

Based on my current performance so far this year, I'm about 20%-25% towards my retirement goal. To be able to officially retire, I've set myself the goal of:

a) earning enough income from trading to meet my current expenses
b) an extra 50% buffer on top to build my equity and to cover any income volatility (trading isn't like a regular job where you get a steady pay check. The money you make changes every week, so you'd want a buffer to cover those lean weeks). 

I'm still drawing up my retirement plans. When I retire, I'll probably continue to work 2 or 3 days per week, just to do something for fun, and perhaps to cover my rent, just in case. Having a part-time job to cover essential bills will probably provide a psychological benefit.

System Development

This is a follow-up from my previous post.

Some good news. My backtest on the 'double-top' / 'double-bottom' pattern is about 25% complete. I should be finished by mid-March. I've tested the USDCHF, AUDUSD, and most of the EURUSD, AUDJPY and USDCAD from 2001 to Jan 2014, so that's quite a diverse population of data. 

I added a trend filter and discovered that trading with the trend provided more robust results. I used RSI(14) to measure the trend. If RSI(14) > 50, we only go long. If RSI(14) < 50, we only go short.

Anyway, the backtest is still in progress but here are the results so far for various R:R ratios. This is after gathering 322 sample trades.

Here's the current equity curve, using a reward-to-risk of 1.75:1, $10,000 starting equity, 2% risk per trade, starting from Jan 2001 to Jan 2014.

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