2020 Review

What does 2020 mean to me? Despite the pandemic, it marks my first year of fully committed trading. I haven't reached the stage where I can quit my full time job to pursue trading full time. Heck, I'm not even consistently profitable yet. This is why I classified it as "fully committed trading" rather than "full time trading."

Even though I ended the overall year with a loss, I do think that I've made tremendous progress. Let's break this down from the futures and FX perspectives.

Trading Futures:

I probably went through more Topstep (yes, that's their name now) resets than I care to admit. I was impulsive and reckless, which was a somewhat costly lesson. However, the resets were probably much cheaper than having to blow up a personal trading account. While I don't have a personal account trading futures, I am glad I didn't fund one as that would probably have been blown up.

Although I struggled to fine tune my futures trading strategy with volume bars, I recently developed a strategy that relies on two signals. After several failures, I'm glad I finally devised something that I can focus on fine tuning and call my own. My development doesn't stop here, but I am glad that I came out with some progress to show for this year.

My goal for next year would be to achieve that funded account and continue optimizing the VWAP-Reversion signal along with the VWAP-Fakeout signal. One additional focus I will need to dedicate would be optimizing my exits in order to fully ride out the daily trend.

Trading FX:

I think there were quite a few lessons here. I think it's best to go through this quarter by quarter.

At the beginning of Q1, I struggled a little but was able to capitalize on gold when there was a rush for commodities. This was when the panic selloff occurred as the coronavirus began to spread out of China. The play on currencies was quite unpredictable, even when I analyzed it in hindsight over the past week. More on that in a moment. I ended Q1 with a slight profit.

Q2 was when I really struggled. Quite a bit of overtrading occurred here as I took punts here and there without a real system. As a result, my equity graph was just in a downtrend with some upticks as I secured wins here and there.

Had a bit more discipline in Q3. This was when I stuck to an even stricter risk rule. $100 risk if we're looking at a higher time frame setup. This can be bumped up to $200 if it's a structural move that I've identified over on the daily time frame. On the other hand, risk was reduced to $50 on smaller moves such as 3-3.5 R rather than 5-6 R. I was also more patient, which lead to taking better setups and almost lead to a complete account recovery.

Unfortunately, Q3 was also my downfall in Q4. This lead to overtrading and punting again. I ended up taking more trades than I should've thinking that the levels formed on the lower time frames were valid. Not only did I return all the gains made in Q3, I donated even more. December was definitely my worst month as I traded on tilt. This lead to taking more trades with $200 risks and eventually one with $800. I was chasing and, admittedly, taking reckless bets. This really screwed up my expectancy and I should've halted rather than continued. Lesson learned. Taking larger size has never ended well for me.

What's Next?

The end of 2020 was a costly setback, but my trading development doesn't stop. I will focus on risk management even more in 2021. Since December was probably the only month I really traded on tilt, this is something I believe I'm capable of avoiding. I also believe that I am even more confident in my setups after the time that I've put into my replay sessions.

While I won't go into too much detail into the signals that I watch for, they essentially focus on price reactions off of key levels. Specifically, I focus on price drifts to see whether a level is expected to hold, invalidate, or proceed with a false breakout. I believe these price characteristics will continue to be optimized with the replay sessions.

Speaking of replays, I stopped trading for the past two weeks. Instead, I focused on replaying the daily time frame. This is something that I will be incorporating in 2021. If I identify the key levels and how price plays out in real time, I believe this can drastically help with setting a directional bias. In addition, any overlapping bars or unpredictable ranges will also help me determine the pairs that I should be avoiding.