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The Weekly Wrap - Live day trading results - Week ending 24th March, 2012

So if someone comes and offers me a week like this one again, I’m going to tell them where to stick it, despite the good returns to the account.

There is a lot to go through this week, losing streaks, scaling into positions and a 40% win rate. Let’s get started.

Weekly summary

Result: +10.5%

I said it on Wednesday, I’ll say it again, I had no idea this week on what the market was doing. None.

I got the odd morning review right, yet I didn’t have that “feel” for the markets that you can get from trading the same pair, every day. No feel, no confidence to act, no matter how right you are.

I had an 8 trade losing streak, was only right 40% of my trades, yet made 10.5% this week. I guess it only adds to the theory the less you know the better when it comes to trading.

Emotional recognition

The best thing you can do when feeling confused in the markets is to admit that feeling to yourself. Once you recognize it, you can put in place steps to trade according to this feeling.

It is so important to have more than one trading system for different conditions.

Trading is not a single task, it’s a profession that requires multiple skills for multiple situations. We are not only dealing with different market conditions (trend, congestion etc.) but different personal emotional states.

We need a risk-off system, something that satisfies the urge to trade, yet won’t do too much damage should your emotional state not clear itself.

The simple version of my risk off system is to scale into positions on retracements into a trend. Starting very small, I slowly scale into a position, and only on a full retracement would I be in a full position with my usual risk allowance.

This boosts my trade count, but not my actual position size or trade idea count.

This week’s trade count was way up on a normal week, totaling 30 trades, yet I really only traded 15-18 actual trade ideas. Despite not really understanding the market, the best thing I did was understand I knew bugger all and trade accordingly.

OK onward with the analysis.

Loss of the week

I closed 8 losers in a row to start the week! Talk about testing the confidence.

It can be so tempting after taking a few hits in a row to second guess your plan and the market.

Moving stops was always my biggest weakness when I started trading, it is only once I overcame that tendency did any consistent money start to roll in. You must trade to your plan, else you learn nothing of use.

Here is a snapshot of what Monday looked like:

Live trades for Monday 19th March 2012

Four trades, four losses, three of which were stopped out at the designated stop (red circles), the other closed early.

Two of those trades stopped out right at the turning point, that can hurt, but it was the plan, so it was stuck to. As my 6-year-old said to me the other day, “suck it up, princess”. Touché.

There are only two things that can happen if you don’t stick to stops.

First, it reverses, you think you are the greatest, you brag to all that will listen, and you learn some terrible lessons that you will definitely pay for later.

Second, the price keeps going, and you hang on until you are so sleep deprived, dishevelled and smelly you can’t take the pain anymore and take a huge loss.

Neither are desirable for trading survival.

Gain of the week

The gain of the week was a trade of which I don’t usually take, a news trade.

The trade came on Wednesday on the release of the Chinese PMI figures. Earlier that morning we had identified 1.0460 as a pivotal area to watch for the morning.

Earlier in the session, it had held as resistance before finally giving way, providing support to a move to 1.0480 before the release of the PMI figures.

The fact that 1.0460 had given not only resistance but support provided credence that this level was an important one for the day.

The rumor went out on Twitter that the PMI numbers were to come in above expectation, but with the focus so heavily on China and the Australia’s perceived reliance on it, any number below expectation was bound to shake things up.

The tactic to trade this scenario is not new, limit ordering above or below price to catch a sharp news based movement.

The mistake often made, and what makes that type of trade hard to consistently make money from, is the wild volatility in the minutes following the news.

The difference this time is we had a known pivotal level, and a known area where stops were bound to be sitting.

With the factors of a surprise result, plus a pivotal stop area, there was enough liquidity to let price run far enough to not shake you out in the following volatility.

The last down arrow on the chart below shows my limit order to get short, just below that pivotal area.

As a bonus, the exit was a nice one as well. While the position size was small, it still provided a nice 1:6 Risk/Reward trade. Happy days.

CNY PMI data release trade

Time vs Return

In previous wraps, I have summarized the holding duration of a winning vs a losing trade. While this was useful, this week we have a new fancy-pancy (the technical term) return vs duration graph.

What it confirms is the largest winning trade took the longest time, while the biggest losing trades almost always took the shortest time.

Like life, don’t waste your time on losers.

Return vs Duration for week ending 24th March 2012

Full trade list

Here is the full rundown of all trades taken on my live account this week. All times are GMT+11 (Sydney, Australia).

Live trades for week ending 24th March 2012

Total trades: 30
Winners: 9
Losers: 14
Break even: 7

Net result: +10.5%

Personal statistics are calculated as follows: A winner is a trade that gains 1% or more. A loser is a trade that loses 0.5% or more. All other trades are break even.

Happy trading.