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*Good morning/afternoon everyone!*
While the euro remains bid and risk is still on, we have not seen the continuation that we had hoped for after the French election last night. With that in mind, the euro hasn’t pulled back materially yet so the outlook is still positive. We still like AUD, NZD and USDCAD could be a fade again at 1.35
*The MAIN THEMES I see today are*
USDJPY trying to hold 110
EURUSD trying to hold onto gains
CAD weaker but nearing resistance
AUD and NZD strength
*Currencies we plan on day trading and the direction*
*These could change during the day, but for now
We will be trading around these themes –
These will change after US data
+USDJPY, +AUD, +NZD
neutral GBP, EUR
rally up to and looking to fade 1.35 USDCAD
USDCHF Sell-limit 0.99600
TAKE PROFIT 0.99300
Here is the trading record of my personal account in 2016. When you look at it the Twin Drawdowns of about 10% each in March and December respectively jump out at you right away.
Was this the result of faulty strategy?
Adverse market conditions?
None of the above.
This was the result of nothing more than sheer pridefulness and stupidity. In both cases, I traded without a stop and even worse than that I traded at my normal trade size on the initial trade which in turn resulted in massive losses when I eventually closed out the trades.
Let’s once again examine exactly how this slow motion car wreck occurs.
Let’s say your normal trade size is 1X equity and you risk 0.25% per trade. But then you decide Nawww! This trade will come back so you lift the stop and let it float. Soon you are -0.5% underwater so you add another unit and now you are at 2X equity on the position. You keep doing that every 50 pips or so until you are at 6X or 7X equity into the position and in the meantime the currency is in a freefall of 150 pips or more with no retrace in sight. Now in a matter of hours you are down -5% to -7% on your account and essentially starting at the screen like a deer stares as headlights. You have one last fateful choice to make – double down in size or cut losses now. Inevitably, you will opt out for choice number one, because – there is no way that the currency can fall 200-250 pips without a retrace – right?
Of course it does and now you are truly fearful for your account so you just cover at market usually at the low. That’s how you get 10% Drawdowns. They are almost always a function of stupidity rather than some unusual market action.
The only thing I can say for myself is that I was a little less stupid on the second drawdown. I didn’t double down and I exited the long EURUSD trade without trying to break even. Had I not done that my loss could have ballooned to 30% or more and I would have given back the whole year.
As a result of that nasty little loss, I put in a new rule that I only trade without stops for positions 1/10th my usual size. Anything that starts out at normal size or bigger gets a stop. Always.
So my resolution for 2017 is very simple – be less stupid. That way I could target 30%-40% in 2017.
In the meantime, the overall data for the account was actually quite good. I did about 1600 trades or a run rate of 2000 trades per year and my average expectancy net of all costs was 1.1 pips which brought me to 20% for the year. I’ll take that.