I usually do a post-mortem of all my trades at the end of the week, to see what I did right and what I did wrong. I compare this with the mechanical system trades that I record in a separate worksheet. This helps in two ways: a) it validates the system trades and tells me if the system rules are working well; b) it shows the mistakes I made as well as the right actions I made. This reinforces the lessons I have learned and those that I still need to work on.
Here is a list of my trades of this week.
The main lesson from this week is that I should expect a period of consolidation / range trading after a big move up or down. Markets don’t turn around immediately after a big move reaches a significant support or resistance – markets thrash around for a pretty long time before one side becomes a clear winner. The more I trade, the more I feel that I should simply stay out of a pair for a day or two after that pair has had a major move. If one has to trade early in the week after a big move the week before, the style should be day-trading for small moves, not swing trading.
Now to my trades:
UJ shorts and EJ short on 13 & 14 May: Resulted in losses of -23 pips,-6 pips, -52 pips: this was based on price showing a loss of momentum after the big run-up last week. The trades were essentially correct, especially the second short at 101.96. I should have given the trades more time to play out. In this case I should have waited at least 2-3 days to see what ranges develop, and then trade the edges of the range.
EU and GU longs on 13 May: Again based on loss of momentum and expecting a bounce or turn. As with the yen trades, the idea was right, but I should have traded as a range trader, not a swing trader. As I myself have said often before, the first bounce will never be a complete turnaround – expect the pair to test its recent highs/lows again. This is a common theme in strong trends: The trends retrace between 38-50% of the last swing before resuming the trend. The logical way to trade this insight is to take profit at the 38 or 50 Fib and reverse there, where we can expect the bounce to end. I didn’t do this, as this is not a written rule of my trading system. I will add this rule in – on the first bounce off significant support or resistance, take profit at the 38 Fib and reverse with a tight stop. Both these trades were profitable for a while as they retraced 38% of their last down-swings. That is where I should’ve got out and reversed. I didn’t get out as I was following my swing trading signals, which was the mistake.
When the bounce trade got stopped off, I should normally take this as a signal to go short. I didn’t go short early when my first trades got stopped out. I don’t really know why I didn’t reverse when first got stopped – the only thing I can think is that I was convinced the pairs would bounce more. I ignored the charts to follow my opinion. That is another error.
I went long EU & GU again on 14/15 May – the entry was too late. The same mistake – trading swing style in a range trade, this time after the bottom of the range had been identified by the earlier test. The correct entry was at the time of the re-test. I was in swing trading mode and waited for the confirmation which made the entry too late. Also, did not exit at the 38 Fib.
Finally on Friday I got the message that EU and GU were still headed lower ;-( and I finally went short. Ideally the short should have been when these pairs hit the 38 Fib retracement of the last swing – get out of the long and reverse into shorts.
I did try a second UJ short but the buying pressure in UJ is very strong still, so I immediately got out it and went long. That was a good decision. As also the decision not to close the very poor EJ long entry at 132.61! The last EJ entry was upon a break of the upper resistance, but there was no follow through and I ended up buying at the very peak of the range. Fortunately the buying pressure in UJ has kept the EJ well supported too and I may yet end up making a profit on this very poor EJ entry.
For comparison, here are extracts from my systems trade log for the month of May. The last column is the profit/loss in pips:
Total Profit = +259 pips.
EURJPY: still long from 128.45 on 30th April. Up +350 pips at 132.05.
Total profit = +482 pips
Total profit: +364 pips.