Tuesday, November 3, 2015

WEEK IN REVIEW: 26 Oct to 1 Nov 2015

I ended last week slightly down. I opened five trades, with one winner and two losers, and two left open over last weekend. 


This trade was a small winner (0.5R). I spotted a bearish engulfing candle / pinbar, and went short on the break of its low. I took profit at 1.53000. Price moved down a bit further, and then rebounded back up.

(click to enlarge)


This trade was technically sound. I went short on the break of a low volatility retracement candle. If you look at the chart, it would seem as if price never touched my stop loss. However, a major news announcement occurred on the 27th October (NZ Trade Balance), and the bid-ask spread widened to 34 pips. The chart shows bid prices, but if you changed it to ask prices, the high of the 27th October would've been 34 pips higher, showing my stop loss getting triggered. The NZ trade balance was very different than what was forecasted (-$1.2b vs -0.8b) so this would explain the wide spread. This was a bit of a "black swan".

(click to enlarge)


I was quite unlucky in this trade. I spotted a low volatility retracement candle, and went short at its low. I was hoping to see the most recent swing low get broken, and aimed for a reward of 1.5R. Price rebounded a few days later to take out my stop loss, and then stopped. Price massively gapped downwards on Monday, so I missed out on some very nice profit. Ah well! That's how it rolls. 

(click to enlarge)


I opened two other trades, short EURGBP and long GBPCHF. They were left open over the weekend. Will post their results once they close.


I fumed quite a bit over my AUDNZD loss. You can avoid spread spikes by closing trades before a major news event, but since I'm a swing trader, that'd mean exiting and re-entering all the time. I don't think that's feasible. I've traded for a relatively long time now, and these huge spikes (30+ pips) are pretty rare. You can account for these "black swans" in your backtests by increasing your transaction cost assumptions.

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