Trading the Signal

 ... and not your P&L. As I'm continuing to review and trade off of the daily timeframe, it's really become a game of minimizing mistakes and finding the easy money setups. After all, that's how you can put on size.

Before jumping into the trade review, I want to talk about cutting losses. I think I've come to the realize that this is key to "minimize" (if this is even the right word) your risk of ruin.

For example, I'll position my stop loss so it represents a 2% loss if the trade doesn't work out. However, it's entirely possible to identify that the trade doesn't work out much earlier.

If I set a 60 pips stop loss and the price moves 30 pips against me with larger and larger candles being painted, that's an indication that momentum is picking up against me. There's no point in stay in the trade and let it breath, hoping that it'll turn in my favor again.

By getting out early with a 1% loss, this gives me the opportunity to enter (barrel) again price re-aligns with my directional bias. I now only need to make back a 1% loss of the previous trade instead of 2% if I let the first trade get stopped out.

On average, I've found that the perfect time to exit is when two candles (days) go against me in a row. When I do catch a trend, the average holding time could be approximately 20-40 trading days. Of course, I'll need to close out if a temporary range forms as I'll get eaten by the swaps.

My shift to trend trading has also produced another benefit - I'm less protective of profits. More specifically, I'm getting better at closing trades based on an exhaustion signal rather than merely to prevent a profit from turning into a loss.

The following snapshots are trades I'm riding out. While there are fundamentally driven reasons for the recent selloff in the US dollar, my entries were primarily based on technicals.

USDSEK Daily

 

USDJPY Daily

NZDCAD Daily

NZDUSD Daily