Thursday, December 28, 2017

Sources of positive and negative edges

Just a rough summary that I scribbled in my notebook.

SOURCES OF POSITIVE EDGE (apply as much as possible)

+ trade against retail sentiment
+ trade with positive carry/swap
+ historically positive technical strategies
+ trade in favour of hawkish vs dovish currencies
+ trade higher timeframes
+ possess more trading capital
+ mental resilience
+ anti-martingale position sizing (reduce positions as you lose, increase as you win)
+ longevity (the longer you survive, the more you learn)
+ meditation & exercise
+ emotional detachment from outcomes
+ have other income sources
+ ignore other traders' opinions (trade your edge only)
+ check markets routinely and on time (don't enter late)
+ constant learning & journaling
+ networking

SOURCES OF NEGATIVE EDGE (avoid as much as possible)

- fees and commission
- negative carry/swap
- price gaps and extreme spread (avoid news & trading over weekends)
- no trading plan and strategy
- not following trading plan and strategy
- martingale position sizing (avoid increasing positions after losing)
- emotional investment in trades ("I must win", "I'll look bad if I lose" etc)
- performance anxiety / trigger-shy
- excess leisure (erodes discipline and drive)
- distractions (time and energy are diverted elsewhere)

Thursday, October 26, 2017

Latest update on 2017 results

Just a quick update on my trades for this year.

I'm currently at a -2.95% loss for the year, just below breakeven. I'm not really happy, but it could be alot worse. 

This whole year has basically been a grind around the breakeven mark, falling behind, pulling ahead, and then falling behind again.

I backtested all my systems up to the present and dropped those that stopped performing,. I'll wait until when (or if) they return to profitablity. Waiting is free. 

It's very important to have drawdown rules in place. Reducing your risk during drawdown will allow you to survive until your trading turns around. It's boring, but it has to be done. 

To be honest, I violated my own drawdown rules a few times, and paid the price. If I had been true to my rules, I'd probably be slightly profitable by now. During August, I risked 3% on a single trade when I should've stuck to 1%. I held the trade over the weekend, and the market gapped against me on Monday morning. I lost 5% when price opened way beyond my stop loss, more than the 3% I anticipated. I might talk about this trade in a future entry as it provided a few key lessons - stick to your rules, and maybe reduce your risk when leaving a trade open over the weekend.  

It's also important to find interests outside of trading. During times of drawdown / breakeven, you'll want to find other sources of success or motivation in your life. It could be fitness, knowledge, or maybe a new skill. Don't base your identity solely on being a trader. 

Survive. Play great defence. If you truly are better, you will win in the end. And if you aren't better? A tight defence will keep you in the game indefinitely. 

Thursday, July 6, 2017

Hey hey!

Just a short message. I've set comments to moderated / disabled since this blog has been spammed to hell. Still alive and trading. :)

Friday, December 30, 2016


Hey everyone, here's my performance review for 2016!


This year I made a return of 15.3%. Most of that was made during the first seven months of 2016, which was then followed by slow, gradual drawdown which has thankfully stabilised over the last few months.

Trades taken: 121
Equity growth: 15.3%
Maximum drawdown: 8.61%
Average risk per trade: 1.18%
Profit factor: 1.26

My results from 2015...

Trades taken: 112
Equity growth: 18.77%
Maximum drawdown: 10.55%
Average risk per trade: 1.96%
Profit factor: 1.26

Yeah, my profit factor for 2015 and 2016 are exactly the same. It's not a typo. 

Here's my equity curve from both 2015 and 2016:

2015 - 2016
(click to enlarge)

Take note of the linear regression line, and how R^2 is 0.89. This is from real world results. That is beautiful. If you're wondering why the first half of the equity curve looks more volatile, it's because I traded with higher risk in 2015 (average 1.96% per trade), while in 2016, my risk was nearly half, at an average of 1.18% per trade.

Major developments for 2016

I'm officially a trader
It's time to officially call myself a trader. After half a decade of learning and two years of consistent live trading, I've assembled a very good equity curve that I'm very proud of. That's real, hard cash that I've extracted from the market by myself. It's all real. 

At the start of the year, I opened a public Myfxbook account that I've maintained throughout 2016. It's been an interesting experience, but after a year, I no longer see much upside in continuing the account. I've noticed myself becoming anxious with people watching my trading account. What do I get out of it? I've considered trading other people's money and using Myfxbook to attract investors, but in the end, I feel better trading for myself only. It'd be nice (and lucrative) to trade other people's money, but there's alot of legal and psychological obstacles to overcome that can only erode my edge. And for me, trading is about freedom. So I plan to turn the account to private early next year. 

Goals for 2017

Plugging leaks
At this point, it's no longer about finding the "perfect" trading system. It's about finding and plugging all the leaks that erode my edge - physical, mental, financial, psychological etc. I'm taking inventory of everything. If it harms me, I'm letting it go. 

Reduce work hours?
If I can maintain my trading results, I can look at reducing my working hours in my RL job. That's the dream of all traders, right? :) At the least, I've got options. I have one foot out of the rat race already. It's a very good place to be. :)

And that's that! A profitable year is a good year. 

Friday, December 9, 2016

Week in Review: 5 Dec to 11 Dec 2016

Hey everyone. I only put on a single trade this week, which I fumbled as I'll explain below.


I'm not happy with this trade. Not happy at all.

Basically I saw a good bullish setup on the NZDUSD. According to my system, a reward-to-risk of 0.5R to 1R was ideal. I tended towards greed, and aimed for a 1R reward. My profit target was below the next resistance level, so I thought it was still reasonable.

(click to enlarge)

Retail sentiment was slightly bearish (55%), which tilted the odds towards a bullish breakout.

(click to enlarge)

Price did breakout in my favour, and reached 75% of my profit target. And then the European Central Bank statement came out for that day, causing the NZDUSD to tank. I wasn't aware of this until an hour later when I logged on, at which point I promptly closed the trade near breakeven.

Mistake #1 - Being away from the charts during a big news event

I was away from a live chart and didn't realise how big the reversal was until an hour after the ECB statement came out.

Mistake #2 - Being casual about big news events

I honestly didn't think the ECB would influence the NZDUSD that much. I need to be more mindful of central bank statements, as central banks are the biggest players in the forex market. Anything that can move the EURUSD can spill over onto other pairs as the EURUSD is the biggest currency pair in the world. Plus the ECB and the US Federal Reserve are the two biggest central banks in the world. Respect.

Mistake #3 - Not taking profit before a big news event

Price was between 0.5R and 0.75R before the ECB statement came out. It was within my profit-taking "green zone" for this particular system. My policy is to close profitable trades before big news, especially when it is near my profit target. But because I was away from the charts, I wasn't aware of the situation and didn't close the trade at a profit. 

Mistake #4 - Being too greedy

While the reward of 1R was technically good, news events should be taken into consideration as well. Will my trade have enough time to reach its profit target before news comes out? If the answer's no, then a tighter profit target might be better (in this case, 0.5R to 0.75R). 

My loss was very minor (-0.1R, or -0.15%), but it's the mismanagement of this trade that hurts more. It was pointless. I did have the option of keeping the trade open as it only fell back to breakeven, but I felt the psychological pain would be alot greater if the trade turned against me completely and hit my stop loss. I'll take the very small loss and consider it a cheap price for these lessons. :)

Sunday, December 4, 2016

Review of November 2016

I ended November slightly positive, growing the account by 0.65%. However, this doesn't balance the loss I made back in October (-2.5%).

Trades: 7
Account growth: 0.65%

I'm on track to finish 2016 with a return of over 10%. In fact, if December is friendly to me, I can finish with a 15% return. 

My number of trades for November was low, 7 vs my monthly average of 11. Out of curiosity, I checked to see how the number of trades per month affected my monthly performance.

Average number of trades for winning months: 10
Average number of trades for losing months: 12.33

Number of trades for best month (4.45% return): 4
Number of trades for worst month (-2.93% return): 18

Essentially, during losing months, I'd trade more often. I put this down to being more loose with my signal criteria. When you're losing or find yourself in doubt, TRADE LESS!

During November, I paid greater attention to retail sentiment, which reduced the number of trades I put on. I also kept my risk very low for the month, capping my max position size to 1%.


My research for November was very dry. I didn't develop any new leads or insights. It's becoming a struggle to find new angles to research. 


The markets will tend to settle down as Christmas approaches. I plan to stay out from the 19th of December, and re-enter after New Year's Day.

Good luck to everyone, and have a merry Christmas! 

Monday, November 28, 2016

Daily Trade - 28 Nov 2016

I'm preparing to go long on the USDCAD with a buy limit order at Friday's low. Price action is quite choppy, but this is good for limit entry orders.

(click to enlarge)

Retail sentiment is 69% bearish, which is good.

If triggered, I anticipate this trade to close within 2-3 days. There's no major news on the horizon for the next 72 hours.