Weekly Review April 13; + 34%

Sunday 14 April

Last week continues my slow climb back up from the hole I fell into in March. The account is up +34.6% for the week which makes it up 114.2% for the month. More than double in 2 weeks. Not bad, but I realise that this period has been special due to the BoJ news and the easy money that could be made from it. Attached is the updated account worksheet.

Now, to a post-mortem of my trading this week. First to what is working right for me:

A) I am getting more disciplined at both entries, exits and not chasing trades. There were several trades that I could have taken which I didn’t because they had moved well away from my preferred entry level. In a way, having a small account forces that discipline more easily – I simply didn’t have the funds to take all the opportunities that came up, and I am not going to risk more than my trading rules allow just to chase a trade.

B) I am also becoming more habituated to taking losses early. The great positives about taking losses early are a) one’s mind becomes clear and can view the market more objectively, and b) Very often taking the loss will free up one’s mind and account to take the opposite trade and recoup a good portion of the loss immediately. After all, the loss indicates that I am on the wrong side of the trade, so flipping early will get me on the right side and help recover some of the loss. c) The first loss is invariably the smallest loss a trader will make on a losing trade.

C. Over the past year or so, I have noticed that the close of the New York session produces significant moves in most markets. I often miss a good entry or exit as that time is 5 am in Melbourne. Starting this week I have adjusted my hours so that I will be awake until 5.30 a.m. on most days. This lifestyle issue is one of the most difficult for traders, especially if we live in unfriendly time-zones like Australia or California. I have got used to living on 5 hours sleep, sometimes just 4 hours!

Now for some things that didn’t work out right:

A. In the early part of the move in the yen pairs, I took profit and re-entered a few times which reduced my overall profit compared to staying in all the way until my rules indicated the exit. I consider this an acceptable compromise, given that I am in the process of rebuilding my account after a crash.

B. The AUDUSD short trade after the negative employment numbers was a big loser.  I took a larger than usual position and entered the trade before the candle close, which was against my rules. In fact the candle stopped right at the trendline and then bounced back, so the system actually never indicated a short. And when it went above my Stop level, I was a bit slow to take the loss immediately, and ended up suffering a loss double of what I should have taken. This is a good lesson again in never entering fast-moving markets after data events. One must wait for the dust to settle and the big money to show its hand.

Some comments on the Friday market action:

I was fortunate to stop trading in the early session of Friday. The NY afternoon session market action was very strange, to say the least. I am referring mainly to gold and silver, although the action in EU and UJ was also very whippy. Gold and silver broke HUGE Support levels. This, happening late on a Friday afternoon NY session when Europe and Asia cannot participate makes me conclude that it is mainly driven by option plays and big funds playing around. It’s better for us tiny fish to stay out of the water when the sharks and the killer whales fight. Interesting to note that the AUD, which is strongly correlated to gold and oil, suffered only a mild dip even when gold plunged.  My personal opinion is that the support will hold. There may be a brief dip below and we may spend some time around the support levels for a few days but eventually gold and silver will rise from this and the rise will be spectacular. While the battle for paper gold + silver rages in New York, the Asian buyers will be lining up  their boats and trucks to buy the real shiny stuff at such bargain prices! Given the fundamental picture of unlimited money creation around the world, gold and silver cannot go down. Not even governments can hold it down for too long, if indeed governments are behind this.

The USDJPY failed to break 100 last week and it closed the week at the lows for the week. This is bearish for the pair but I am not going to enter the bearish trade – it’s too late for that. The UJ will break 100 one day soon; only thing is, it’s not clear when that day will be. I will probably spend Monday just observing, I don’t think there will be any good trades until after NY closes on Monday.

Good luck to all traders out there!