Size Matters
There's a pretty significant milestone today. For the first time in quite a long while, I'm beginning to feel as if I got my read back.
At the start of the year in January 2022, I immediately took a string of losses. I made a few over-extension plays that simply did not play out. Bummer. After that, I sort of hovered around a loss. At one point, it reached -15.90%.
More specifically, today marks the day I recovered from two brutal months and then some. Here's my EdgeWonk, which I started back up at the beginning of 2022.
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| EdgeWonk 2022 |
At the start of the year in January 2022, I immediately took a string of losses. I made a few over-extension plays that simply did not play out. Bummer. After that, I sort of hovered around a loss. At one point, it reached -15.90%.
Close to three months later, I finally feel as if I've found my groove. I'm making quality reads where I can be right big and wrong small. This led to the whipsaws shown on the right side of my graph. Sure, I can take on a string of losses. But when I'm right, I'm really right.
As I gained more confidence in my stats, which sits at a 56% win rate along with a profit factor of 1.39 this month, I've been adding more size. This means I've been scaling into bigger positions when momentum picks up in my favor.
Size does matter. However, when to add size is determined by confluence. It is for me, at least. Here's what I meant by using the USDSGD pair as this was a trade I took live.
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| USDSGD Daily |
As annotated on my chart, price tested the previous 1.3668 high and failed to close above it. It can almost be regarded as a fakeout signal and that reversal is potentially underway. Confluence occurred when I switched down to the hourly timeframe.
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| USDSGD 1-Hour |
I can summarize this entry decision in two key points:
- Price made a lower high after an uptrend. The buying pressure is exhausting, which I also witnessed on the daily timeframe. By entering short here, it's preemptively betting on a price breach to the downside.
- As price breaks below the 1.36365 neckline, I scaled into this position by adding more size.
In hindsight, I could've ridden this trade a lot lower. But, I didn't. It's because I saw a bullish spike without price significantly hitting new lows, which I view as a sign of continuation failure. This is especially true considering that price is trading around previous lows.
My aim for the rest of the year is to continue making these multi-step scaling plays and strategically adding size. While this post certainly isn't intended to get my hopes up, it does highlight my progress in the following ways:
- Recovering from a drawdown close to 16% rather than trading on tilt and potentially wiping out.
- Trusting my expectancy to add size, especially when spotting the "correct" levels when assessing where momentum will likely pick up.