Gnome's Trading Diary

What an "interesting" week (I'm stopping on Thursday as I'm off on holiday tomorrow). In terms of performance it was pretty terrible with a net result of -2.26% but that rather belies the strides that I've made this week. I've started keep a strict "what I should have got" score so that I can more accurately gauge the potential of the method at that came in at a stonking +4.2% so I know that what I am doing is basically sound. So how do I explain this huge discrepancy? Partly it's an issue that I've had for a long time of jumping out of trades too early. Sometimes I grab a small profit rather than letting it run a bit more, other times I scratch the trade only for it to go on and make a profit. This must have cost me at least 2.5% in profits alone. There was also a really stupid trade where I put on a position in Cable, completely forgetting about a forthcoming news release which would otherwise have "veto'd" the trade. That cost me 1.4%. I also started experimenting with a small counter-trend strategy but have now abandoned it - fortunately it didn't net cost me anything to try it out. One other method which I've tried out but have now abandoned is the approach of doubling up on deeper retracements. This has the obvious benefits of getting a better average entry on a deeper retracement but of course the downside is if the market keeps going you're left with a huge loss. I took such a hit this week for a crippling -2.5% - had I stuck to my standard 1% risk I would have had a much better week.

Despite the poor headline performance figure I'm actually rather pleased with my trading because I feel that I've made some really good progress. On Thursday after reviewing the difference between what I was getting and what I should have got I vowed to hold positions to their full profit target as clearly I can't be trusted to judge it myself. I managed to hold on in a Eur/aud trade even though it came within half a pip of my target before backing off a considerable way. Eventually it got there I'm pleased to say and I know that without this new discipline I would have taken profits after that near miss at a far worse point. I've also manage to get clear in my head a couple of details on the strategy which I realise weren't that clear: the idea of "veto'ing" a pair from a trade if something doesn't stack up - this is often because its' trading into support or resistance on a larger time frame or of course if there's an impending news release! Also judging what sort of pull-back to expect depending on how far the market has already moved - very often it's the pairs that haven't actually moved as far yet, i.e. the laggards, which are the best ones to play for a pull-back. I've also started to get clear in my head a new entry technique for nice fast-moving markets - this should come in hand on some occasions, especially my news trading. I'm also starting to work on what the market needs to look and behave like in order for me to do my scalp trades.

Weekly Summary
Total Weeks: 22
Total % Profit: 10.8%
Average Profit per week: 0.49%
Distance from Equity High: -2.26%

I've off for a well-deserved break next week but I'm more optimistic than ever that I can make this trading viable.


Gnome

Wow, what a volatile week! I started the week on a 2.26% drawdown from equity highs. After having missed so much stuff last week I decided that I was really going to go for it and to take all my signals. The result was a massive series of losses and by mid week I'd lost a whopping extra 5%! Then Draghi failed to deliver at his press conference and in the ensuing melt down I started to make back. In fact for the rest of the week I made money consistently and ended up only -0.8% down. At one stage when faced with such losses I was starting to think that I'd have to go right back to trading smallest size again, in effect start again from scratch so I'm very pleased that I've managed to trade my way out of that mess. The one part of my trading that has remained consistent is my news trading and it was this that brought me all my profits this week whereas my standard pullback trading just lost money.

Getting losses like this to me means that I'm doing something wrong so I really need to sit up and take notice. The bottom line is that if I just blindly take all my signals come what may then it's not a winning proposition. To me what makes it all work is the context in which the potential trade occurs: what sort of trend is this pullback occurring in; what's happening on the larger time frame; where is the support/resistance located? All these sort of things define the context and I am coming to believe that really it's the context that makes all the difference. Sure, my entry methods are giving me a bit of an edge but on it's own it's not really enough to generate the consistency that I'm after.

For me, the development of my trading approach is an on-going iterative affair. Each week I sit down and analyse what I've been doing wrong and then decide how I'm going to approach the next week. I'm not entirely sure what approach to adopt for next week yet. Suffice to say, the gung ho approach clearly is not for me and I think that I'll go back to a more thoughtful and considered approach.

One bright spot in all this is that through closely following these markets I've come up with a new ultra short term approach which is looking very promising especially in highly volatile markets such as post NFP. I'm not sure whether I'm ready actually to put money on it yet but I'm going to track it closely for next week.

Here are the stats for the week

Weekly Summary
Total Weeks: 23
Total % Profit: 10.0%
Average Profit per week: 0.43%
Distance from Equity High: -3.05%

I've not done an update for several weeks so sorry about that. Usually in such cases it's because things have gone rather pear-shaped by in my case it's the reverse: things have been going very well, which is nice. There have been a total of 5 weeks trading since my last update and I'm pleased to report that they've all been positive ranging from +0.8% all the way up to +2.5% this week. After my rollercoster week last time I reported I realised that the key to success for me is being very selective as to when I trade by considering market context, market tone and higher TF's. When conditions are poor (as they have been recently) I can trade as little as 3 trades in a week and it's this discipline which is making me the money. This week I increased my size again and am pleased to report that I feel pretty comfortable with this new amount.

I'm starting to look at a longer-term trend following approach and have put on a couple of tiny trades to test the water. This could nicely complement my current short-term day trading.

I'm still tending to get out too early on trades: this morning I bailed on a trade taking +0.6% when I should have got at least +1.5%. But in general things are going well. I had an excellent Non-farm Payrolls report today, taking a total of +1.6% from 2 lovely little scalps in Dollar-Yen.

My trading statistics are as follows:

Weekly Summary
Total Weeks: 28
Total % Profit: 17.1%
Average Profit per week: 0.61%
Distance from Equity High: 0.0%

As you can see I'm at new equity highs which is always where I like to be. My average profit per week is creeping back up nicely though I'd really like to get it up above 1%: my rolling average over the last five weeks is +1.4%. Remember all this is with risking 1% per trade though I'm thinking in due course of extending this to 2% once I get to trading full size on my account. I know that I'm not officially looking at it but my Sharpe Ratio is now a nice 3.2

All in all it's going along nicely and I'll keep increasing the size every few weeks as long as I don't hit any snags.

I realise that I've not posted in my journal for several months now. This is mainly because things have been going rather well and I hadn't felt the need to unburden myself.

So what's been happening in the intervening months? I've been carrying on making money and increasing my size. My stats are now:

Weekly Summary
Total Weeks: 46
% of Weeks that ar Profitable: 74%
Total % Profit of Account: 29.2%
Average Profit per week: 0.64%
Distance from Equity High: 0.0%

My weekly Sharpe Ratio is a stonking great 3.7 which I'm very pleased with.

In terms of methodology I'm still trading a variety of techniques. My news trading is going well, I do regular scalp trades and short-term pull-back trades. I'm currently in the process of refining a long-term (for me) swing approach for when the markets are quiet. This is making some progress so I'm trading it at 20% of full size at the moment. Still risking a maximum of 1% per trade (or 0.5% for scalp trades) though I think that when I'm finally trading at full size I'll double this. I've got lots of ideas for strategies which I need to "refine". This refining process involves trading them in tiny size until I get the basics right and then in slightly larger size until they start to make money consistently before they get to be a fully-fledged official method.

So all in all it's going great. This year I'm up 5% already and from next week I'll be at a new larger trade size again. The size is now large enough that the money amounts are becoming quite significant. I want to make sure that I can handle these larger financial swings comfortably, knowing that I can make back any loss without too much problem. I'm at about one quarter my full maximum account size now. So, onwards and upwards!