Down
12%. In the first week of 2022. While this was a significant hit, my decision quality did not deteriorate. My mistake was not reducing position size when taking trades during a period where volatility hasn't fully recovered.
This was a painful flip. Neither direction worked out. Structurally speaking, CADCHF was bullish. Price breached above a daily level and price drift indicated that it held supported.
This is a Breakout Continuation play. Specifically, price is overextended and I'm shorting the price breach below the 116.09 level. My initial trade was entered just as price broke below this neckline. After a slight drift to the upside, I scaled in as price formed the bearish bar. This signalled that price is expected to hold below the level. So far so good.
This was another overextended Breakout Continuation play. I entered short just as price breached below the neckline. At the time of entry, this signal looked solid. Price tested this level once before and then made an attempt to trade higher. Since price failed to hold, this was a good indication that downside can be expected.
Since I am documenting every transaction in EdgeWonk, I'll run through some of the key plays in long form.
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| EURNZD 4-Hour |
I've been making a very structural play on EURNZD. Over on the 4-hour time frame, price has been in a range since the end of December. Not only did price fail to trade to new highs after a strong rally, price hasn't been able to make a clean breach over on the daily time frame.
I first entered short on January 3rd as price breached the lower boundary. Given the dominant bearish engulfing bar, I anticipated momentum to pick up on the downside. The planned R-multiple is over 3 so this is a good structural entry.
Price reverted back into range so I got stopped out. Closer to the end of last week, I re-entered short again seeing a clean breakout to the downside. The lower boundary is failing to hold.
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| CADCHF 4-Hour |
This was a painful flip. Neither direction worked out. Structurally speaking, CADCHF was bullish. Price breached above a daily level and price drift indicated that it held supported.
With this directional bias on the daily timeframe, I entered long as price is holding above of the 0.719 level it breached. When price crossed below this level, I reversed my position and entered short.
Based on my observation, this type of reversal is common. When price fails to trade above a breakout, it's generally safe to bet on the downside. Unfortunately, it didn't occur here so this is an anomaly. It's possible that markets haven't fully normalized yet.
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| USDJPY 1-Hour |
This is a Breakout Continuation play. Specifically, price is overextended and I'm shorting the price breach below the 116.09 level. My initial trade was entered just as price broke below this neckline. After a slight drift to the upside, I scaled in as price formed the bearish bar. This signalled that price is expected to hold below the level. So far so good.
After the initial selloff, I moved my stop loss. This ensured that I would close out both positions with a small profit if this move doesn't keep selling off. In this situation, price reverted and both trades essentially scratched.
If I closed these two trades at the low, I would've suffered a much smaller loss at the end of the week. However, I'm glad I didn't close out the trades simply at the sight of a profit. That would've been an indication that I'm trading my P&L rather than the price action.
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| EURNZD 1-Hour |
This was another overextended Breakout Continuation play. I entered short just as price breached below the neckline. At the time of entry, this signal looked solid. Price tested this level once before and then made an attempt to trade higher. Since price failed to hold, this was a good indication that downside can be expected.
For the week ahead, I am anticipating that price will make another attempt to breach this level. If it does, I am still targeting just over a 3 R-multiple (planned).
In terms of journaling the transactions from last week, I did make a slight tweak to my setups in EdgeWonk. I'm breaking down the "BC - Breakout Continuation" setup into two categories to add a bit more differentiation. More specifically, the two setups are "xBC - Breakout Continuation (Over-Extension)" and "sBC - Breakout Continuation (Structural)."
xBC focuses on a shorter term intraday move. After a strong rally or drop, I would look for exhaustion. When price fails to push to a new high or a new low, I will look to capitalize on the reversal.
On the other hand, sBC focuses on structural moves like the CADCHF trade. More specifically, a "structural" move is one where a reversal is likely underway on the a higher time frame chart such as a daily move.
I hope to collect these two metrics to better determine which Breakout Continuation pattern has a higher win rate and payout.