Some thoughts on this week

14.30 gmt

This week has been horrible for me, absolutely horrible. I am left with only 10% of my starting balance, an amount hardly worth trading with. I might have more to write tomorrow; for now I just want to make some observations of the trades today.

I went long EJ and UJ when my system had just indicated a short. That was a mistake but I had decided to try something other than a system trade. I planned to trade off the Kuroda press conference which was scheduled for 6pm Tokyo time. Although there was no news that I could find, the price action at around 6pm Tokyo looked supporting yen weakness, and I went long. Not having access to professional trading terminals like Reuters or Bloomberg, I was trading blind. I happened to catch the precise tops in EURJPY and USDJPY! The press conference in fact happened more than an hour later by which time the pairs had dropped 50 pips and 35 pips respectively. This is a reminder how access to up-to-date news can help a trader, and lack of this makes a trader’s life so much harder.

Another thought is that sometimes the markets, or the circumstances in life are such that it is better to simply not trade. I had this feeling since about mid-February that I should take a break and not trade at all for about a month. Either I set a machine to trade as per my system rules, or if I am personally trading, then I must take some time off markets every now and then.

I am at a cross-roads and have to think carefully what I should do next. Recovering from this debacle is such a huge task that I don’t feel I have the mental and emotional energy to take it on. I’ll take some time off trading (should have done this after Monday ;-( and think about my options.

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13 thoughts on “Some thoughts on this week

  1. Judy

    I don’t know what to say. It sucks. I personally can’t handle the loss like that. I admire you. You are a good trader, you probably need some time off. The market is always there when you are ready.
    Take care!

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  2. fxgai

    Taking some time out is undoubtedly the best thing to do if that’s how you’re feeling.

    Here’s my two cents worth.
    1) Does your equity curve not suggest that you need to change something in order to prevent such a string of drawdowns decimating your account in such a short period of time / small number of trades? I don’t know what your exact risk parameters are, but even if you had traded your rules perfectly, or with a system, is it not the case that events like Cyprus last weekend can still do huge damage? Personally I’m relatively conservative (too much so and I’m slowly pushing myself to take more risk). It seems to me that you may be too far on the other side of the spectrum, and not giving risk enough respect. There is no point in trading if you aren’t going to be in the game after an inevitable string of losing trades. I might be off base, and maybe it’s mainly not following your rules than the risk parameters being the problem, but I’m just trying to put it out there constructively.

    2) I always find reading Mark Douglas to be good for reflection after some poor / unprofitable trading. Another thing that could be relevant is to read about risk management in non-markets fields. For example, fisheries management – when fisheries managers make mistakes (say by failing to consider uncertainties and setting too high a quota as a result) what’s at stake is not just one individual’s trading account, but perhaps the entire commercial fishery or total depletion of a stock or species of fish for all time! And even if the regulatory body sets entirely appropriate quota levels, if they don’t ensure the quotas are honored they could still see the same disastrous outcome. There’s obvious parallels with trading.

    As Judy says, take care.

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    1. ZenFXTrader

      Hey fxgai, thanks for your comments. You have a point regarding risk affinity. I know I am a risk taker, hence I have developed rules and risk parameters for my trading. The problem is not the level of risk I was taking. It is that I did not follow my rules for entry and exit. As another friendly reader pointed out earlier this week, I have difficulty in taking losses. That was the reason for this debacle. My rules clearly indicated a short in UJ and EJ at the start of LAST week, at 125 and again at 124.35 on Friday; and at 96.05 on last Thursday. I didn’t take those trades because it would have meant a loss of around 70 pips and 60 pips respectively, well within my risk parameters. I kept those long trades open against the system rules and against the norm of closing trades on a weekend. If not for that mistake, I would have done well even through the Cyprus debacle. I keep a parallel worksheet with pure system trades, which are theoretical trades (without money) but in real-time, i.e. as a machine might trade. The system has done relatively poorly in UJ for March – only 8% for the month. But it is still a profit. The system results for EU and EJ are great even in March. I have been doing this live-testing in parallel for nearly 9 months now and the results have been very good. So I think my risk parameters as defined are fine. It is the implementation that is at fault. Each instance of loss is due to me not following my rules. I have to think about how to manage my behaviour. If I could automate my rules with an expert-advisor software system, that would be a perfect solution. I’ve looked at MT4 and it cannot automate my rules, since my rules are not indicator-based and MT4 loves indicators. If you know any platform accessible to the retail trader where I can automate an expert-system based on chart patterns and time of day, please let me know.
      Yes, I also find Mark Douglas the best for understanding the mental problems a trader faces and how to tackle them. I think I will have a re-read over the week-end.

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      1. Mikey

        Making such a loss would cause most of us extreme dispair and self loathing. The fact that you can still post and respond shows great strength of character. Even after your loss, continuing with a 10k account and building it up would be interesting and inspiring for your readers. I do trade real money but at much, much lower levels. If I could build-up to a 10k account in a year or two I’d be over the moon! Even when the loss/win in monetary terms on any trade is insignificant I still find it to be emotionally taxing because I want to succeed as a currency trader so any loss/win is significant.

        To test my ideas I have my own test software but also program in MQL for MT4. I believe that any system that can be quantified should be programmable in MQL, it has access to all of the chart data including time, it’s merely a matter of programming inginuity. Most MQL that I’ve seen is technically trivial, but it doesn’t have to be.

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      2. ZenFXTrader

        Thanks for the comments Mikey. It seems I have the skills to make money from trading, but I am even better at making disastrous mistakes. I hope people following my experience learn from it, hence I keep writing my posts. I will write up a more in-depth post about what my thoughts are, after this disaster.
        I have an IT background and I have looked at MT4. It’s got decent programming features but the interface is very clumsy. Also, my observation is that all brokers who offer MT4 are shady outfits. But even if I were to open an MT4 account, I don’t think MT4 can be programmed with my system. MT4 relies on indicators which can be written in equation form, but does it have the ability to draw a trendline, or recognise a support / resistance level? My first investigation about 4 years ago resulted in a NO answer.
        I don’t know when I can recover to my starting balance. At the moment I am seriously considering giving up the whole effort. It is very mentally and emotionally taxing, and frustrating. I know that becoming emotionally detached from the money aspect will improve my ability to trade as per my rules and will result in consistent profits. Developing the ability to remain detached is so hard!

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  3. anil

    I share yr downturn
    I hv been in the same boat———-but hv recovered 75% of my losses
    I started with 2x——made to 4.5x——–came down to 1.5x——now back to 3.2x
    I hv followed yr progress & can comment if u want me to.Also,u can comment on my mistakes e.g.
    a)itchy finger—–curbed 90%
    b)overtrading—-curbed 90%
    c)stop losses—-still do not put any stop losses
    d)stuck with some historical yen crosses.U may be the right person to advise me
    U hv my e-mail if u wish to communicate–be nice
    However,I wl understand if u do not want to

    U may see my website where I made my money ———-globalinventions.co.uk

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    1. ZenFXTrader

      Hi Anil, thank you for your comments and I welcome your feedback. I don’t have any issue if you want to post your comments here, or by email to me at zenfxt (at) gmail.com.
      How did you curb your itchy finger and especially over-trading?

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  4. Daniel

    Hi Zen, how about with the 100+k that you have withdrawn since December? Can you not top up your account into 50k using that profit? Is it not the case that your net result since June is still positive, although its very small?

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    1. ZenFXTrader

      Daniel, I trade for a living. The withdrawals are my earnings, I consider them spent. Yes, I’m slightly positive since June, but I consider money withdrawn not available to the account any more. Adding money now would be the same as meeting a margin call.
      I have to rebuild this account, or consider it bust and start afresh all over again.

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  5. Daniel

    I think you’re right that your problem is because sometimes you don’t take loss. But the reason why you don’t take loss is because sometimes it’s too big. Even if you are discipline and take loss when your system told you to do it, the total loss from your trades which normally are very positively correlated (long eu, Ej, and UJ) will cost about 20% of your account. I think this is too much, it should be 5% max. You need to get to a state where the winning of a trade or the loss of a trade is not life changing. In your case, you have a week where you doubled your account size, I consider this as life changing. Even when you make a new resolution, you still consider a normal return is 50% and good return of 100% per month. I don’t think this is normal. If you start with 10,000 and make a consistent return of 50% per month for 1 year, you will have 1.3 million at the end. If your system is that good, you could sell to big banks and they will provide you with 100 million capital and give you 20% cut of all the profit you make. I think you are a very good trader, but want to achieve success in as short time as possible, which could be dangerous if you can’t take losses.

    I hope you can recover!

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    1. ZenFXTrader

      Daniel, you are right when you say ‘you want to achieve success in as short time as possible’. And that is a reason why my trade size is relatively large. I agree. But if I were not to let my emotions make decisions sometimes, if were to simply let the trades work out strictly as per my system, then even with the high value at risk and the correlated trades, the final result is extremely positive, over 50% in EU and EJ, an about 20-30% in UJ and AU per month. I believe it is possible to make +50% a month if I trade like a machine. even after taking occasionally large losses my system rules have always returned a positive outcome for each month over the last 9 months of live testing. I just need to have rock-solid faith in my system rules, my analysis, my test results.
      The other reason why I sometimes don’t take a loss is I follow the events and take a bet on what might happen, ignoring the system. This is what happened last December when I took a position against UJ on the weekend of the Japanese election. I expected a ‘buy the rumour, sell the fact’ response in the market, but in fact it turned out to be ‘buy the rumour, buy even more on the fact!’. The charts tell us where is the weight of money going, and I should never ignore that signal.

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