Trading the Coronavirus and Other Developments
It's definitely been a while since I've made a post, but rest assured that my trading development hasn't ceased.
With the day job getting in the way, I admittedly have not had the luxury of fully keeping up with the markets. Unless you've been living under a rock, the markets have been quite volatile over the past few weeks. The major pairs have experienced whipsaw patterns, which you can observe with pairs like USDJPY. Naturally, my trading has struggled as technical levels don't hold up nearly as well when the markets are news driven.
Focusing on the pink rectangle, the up arrow marked the point where I was originally looking to enter
long. This pair has been making higher highs and we're nearing a moving average crossover. I largely believe that the trend has reversed. This was further confirmed over on my Heikin-Ashi charts where the averaged closing bars failed to breach new lows. Concerned about the fundamental factors, I closed this trade at the down arrow fearing that the level resistance level would hold up. I flipped my sentiment despite the fact that I established the reasons why I believed the trend was up. As a result, I missed out on this amazing move.
With the day job getting in the way, I admittedly have not had the luxury of fully keeping up with the markets. Unless you've been living under a rock, the markets have been quite volatile over the past few weeks. The major pairs have experienced whipsaw patterns, which you can observe with pairs like USDJPY. Naturally, my trading has struggled as technical levels don't hold up nearly as well when the markets are news driven.
January was especially rough for me as I didn't reduce my position sizes quick enough. In one of my earlier posts, I talked about how I will have to vary my position size based on the risks observed. As I was still taking risks of 2% per trade, this drastically increased the size of my losses.
February started off very well for me. I remained patient and captured quite a few high quality signals. Unfortunately, volatility picked up in the latter half of February and my mentality wavered. Instead of trading the signals, I started trading my P&L a bit more. This led me to flip flop my sentiment. Not only did I take on smaller losses, I also missed out on probably one of the biggest trades that I've been eyeing.
Focusing on the pink rectangle, the up arrow marked the point where I was originally looking to enter
long. This pair has been making higher highs and we're nearing a moving average crossover. I largely believe that the trend has reversed. This was further confirmed over on my Heikin-Ashi charts where the averaged closing bars failed to breach new lows. Concerned about the fundamental factors, I closed this trade at the down arrow fearing that the level resistance level would hold up. I flipped my sentiment despite the fact that I established the reasons why I believed the trend was up. As a result, I missed out on this amazing move.
Overtrading is still a bit of a problem for me. Given this volatility, I still have fear of missing out even though I need to remember that cash is a position. I started grinding out poker more - playing four tables at the same time and successfully making it in the money.
I've talked about this before and I want to talk about it now because I do believe that poker helps to put me in a better mentality. It helps me reflect my personal trading style too. Here are some takeaways from my recent experiences:
- Losses are part of the game - you're going to win some hands and lose some hands. Depending on how strong or weak your hand is, you will need to determine how big of a bet you're willing to take. This is just like trading. There's nothing wrong with taking a 2% position size when you have a strong signal and a 0.5% size when you see a weaker but valid signal.
- My flop rate is very low. Depending on the table, I could be seeing the flop less than 9% of the time. However, my showdown win rate is fairly high. They are almost always above 80%. I don't necessarily wait for AA or KK all day, but I do play hands based on my position at the table and the pot odds I'm getting. This SHOULD apply to my trading and I need to be very conscious of this. For the EURUSD trade, that was a big move and I should've stuck it out. If I'm wrong, then I'm wrong. However, I can't fear being wrong. I often need to remind myself that it's okay that I'm not taking any trades. It's okay to be watching on the sidelines and waiting for the right moment to strike. It's better to take one very high probability trade than several low probability ones. There's no one right way to trade. My reasoning for not trading on the lower timeframes is to filter out noise. I don't want to be competing with the algorithms that take advantage of this volatility. My trading style has always been to look at big accumulation pauses and reversal signals. I need to be conscious of this and eliminate the fear of missing out. Instead of focusing on "what could've been", I need to focus on the next trade.
With that said, I've been giving some serious consideration into EdgeWonk as a journaling tool. Since the broker I use, CMC Markets, doesn't offer any performance analytics, I honestly don't know how I stand in terms of average wins/losses, win rate, profit factor, etc. I think I also need to explain the reasoning behind every single trade. If I can't explain that, then I shouldn't be taking a trade in a similar situation.
More recently, I've aggressively reduced my position size down to 0.5% per trade. While this reduces my potential absolute profits, it also reduces my losses. I think this is a necessary and conscious step to take in order to adapt to the markets. Otherwise, I would be throwing everything I've developed this far out the window.