Sunday, January 31, 2016

Review of January Campaign

I finally opened a myfxbook account (found here), and will be basing my monthly reviews on its statistics.

January hasn't been great. The majors became choppy, particularly the EURUSD, and I finished in the red, with a monthly drawdown of -3.42%.

Trades opened: 9
Profit factor: 0.74
Account growth: -3.42%

The 4H Timeframe

I tried to forward-test a system that I had developed on the 4H timeframe, and often found myself trading with or against positions I had already opened on the daily timeframe. Basically, I was hedging or adding to my swing trades on the daily timeframe, so there wasn't much point in trading the 4H. I think signals on the 4H and daily timeframe might be too correlated, so I've shelved research on the 4H timeframe for the moment. If you are a swing-trader and want to trade a shorter timeframe, then the 1H or 30M is probably better. 

Next month

In February, I'm planning to reduce my maximum position size to 1.5% until I'm back at breakeven.

Thoughts on Myfxbook

The psychological pressure from opening a myfxbook has been less than I predicted. It's actually forced me to be more accountable for my trades. If I open a trade, there better be a good reason, as it will turn up on my results. This has reduced the temptation to do anything stupid. 

Monday, January 18, 2016

Myfxbook account

Just putting it out there. Feel free to follow my trading results! 

Trading rules:
Timeframe: Daily
Pairs: USD Majors
Method: Technical Discretion
Position size: 1%-3%
Drawdown killswitch: 50%

I intend to keep my positions between 1% and 3% of my equity, which is pretty aggressive. If I hit 50% drawdown, then I'm killing the account and halting trading. Last year's drawdown was 10.55% after 112 trades. Hitting 50% drawdown is unlikely, especially since I tend to use 1:1 R:R ratios. 

Sunday, January 10, 2016

NFP reaction

US non-farm payroll was released last Friday, and job creation had beaten expectations by nearly 50%. Looks like greenshoots in the US economy, right? Unfortunately, wage growth remained stagnant, and much of this job growth was in temporary jobs. Overall, the NFP figures were good, but not good enough to push the EURUSD down (I am currently short EURUSD). 

Thursday, January 7, 2016

The importance of discipline

I missed out on taking a signal this morning, simply because I'd forgotten one of my trading systems that I had recently developed. This was due to me taking two weeks off over Christmas and becoming disconnected with trading. That mistake cost me $300 in lost profit today. Very expensive.

Sitting out of the market for an extended time might cause a trader to become rusty. If you do decide to take time off, try to maintain the same trading routine, but without actually taking the trade. You want to remain as sharp as possible, so when you do return to live trading, nothing has changed. 

Monday, January 4, 2016

Review of December Campaign

I can't believe it's 2016! 

December was relatively quiet. I chose to sit out of the market midway through December as Christmas approached.

Trades opened: 5
Profit factor: 4.07
Account growth: 4.54%

I only opened five trades, which is really quiet. I definitely could've traded more as the week before Christmas was volatile enough to trade. I think I was too conservative in deciding to sit-out half the month.

Major Developments

I recently finished designing a new system for the 4H timeframe. The backtest covered the major pairs and consisted of 248 sample trades over the last 2.5 years. I looked for very large pinbars (range > 1.5 ATR(6)), and found those that formed at 08:00, 12:00 and 16:00 tended to perform well (the time is based on NY close), especially if the reward-to-risk exceeded 1.67-to-1 (entry is the break of the pinbar, with my stop loss placed at the end of the long wick). 

Here's an example equity curve for reward-to-risk of 1.67-to-1, using 2% risk per trade, initial balance of $25,000.

(click to enlarge)

At the moment, I only trade the daily and weekly timeframes. If I can start trading the 4H timeframe, then my number of trades per month will increase significantly. Lets hope! 

One thing I noticed is that lower timeframes seem to require a higher reward-to-risk to be profitable, while the daily and weekly timeframes tend to favour smaller reward-to-risk. It's just an interesting observation. I wonder if this pattern will hold in my next 4H system.