Good morning folks! I hope you’re all well and had an enjoyable weekend
I’ll admit I didn’t look at a single chart this Sunday, I really felt the need for a break, and I feel great today, I may add that part to my weekly routine now.
Think I overdid the backtesting recently :S
Euro Canadian offered a great set-up this Friday, however, sadly it resulted in a loss. I had previously removed EUR/CAD from my the pairs I trade to increase my average return, but over the last two years it’s been a positive experience trading it so I feel comfortable adding it back to my “roster”
Dollar Yen recently broke out of a descending trendline it’s been “stuck” inside for quite a while, so I’m keeping my eyes on it in case we get a retest of that area of supply. It’ll be interesting to see what happens so I’m keeping my eyes on this one & an alert. It’s probably the prettiest set-up for the week.
For those that are using Oanda as a data provider, you may say, “But Max, we don’t have data going back before 2003, how do you know if there’s a weekly stack” –> I’ll answer, change data source to FXCM you’ll get more data, sure here’s no stack, but I’ve noticed that recently it remained +EV to execute trades even tho they don’t have a stack
This was the only pair I’m watching for a trade today, sorry for the lack of excitement, but it is what it is, I’m going to be quite drastically reducing the number of areas that are of interest to me due to my recent backtest results.
But as I always say, I’m not here to provide you with amusing content, I’m here to track my evolution as a trader 🙂
I am pleased to announce I’ve finished my recent backtest session where I collected 545 trades since 2020.
I did this in order to maintain my skill with the market and see if anything changed and required an adaptation on my part.
Turns out, a few things are possible, a few new entry methods were also identified which is nice, since it enables me to sharpen my toolbox.
That being said, I do want to review one of those entry methods, so it remains on the sidelines for now until I’m able to review every single trade and add a few additional filters on it to (hopefully) increase the strike rate and average return.
In terms of my usual “script” entries, I have found a method to bring down the total amount of trades from 156 to 72 – while increasing my returns by 5%. That personally makes me happy, it means a lot less exposure to the market and less fees to pay.
That also does mean that I’ll be taking less trades, which is something that will give me FOMO a couple of times, but I’ll keep tracking the data to see if any changes are required.
The backtest has also shown me that I would be better off changing my scale in method on the 4hour, I’m actually planning on removing it…
Another important point I’ve come to realize is that I do not always need a weekly stack for a trade to be valid – this will increase the number of trades I’ll be allowed to execute.
I’m willing to share more information on the changes and the actual numbers and strategies I’ll be employing, however, that would be a coaching call, and I will probably charge you for it, EXCEPT if you provide me with a lot of value as well.
Leave a comment here or shoot me an email at firstname.lastname@example.org if you want to talk about having a potential call
AUD/NZD + 1.8R
As mentioned yesterday, I wasn’t taken out by the wick we see on tradingview (at my biggest surprise and joy), so I remained in the position.
Having finished collecting my backtest I came to realize that on top of the daily not being 100% valid, how it originated and the price action we were seeing on similar pairs:
AUD/CHF (clear double bottom on daily + trendline retest)
AUD/CAD (clear daily double bottom and forming an entry that would’ve been previously valid)
AUD/USD (looking in need for a pullback and forming a script entry)
On top of the fact we were rejecting the recent low/previous high and an old high, I took the decision to close the trade early.
Had the trade fitted my criteria to enter 100% after this backtest, I would’ve kept hold on to it until I was either taken out for a win or for BE.
However, this wasn’t a fully valid trade, so I preferred to take the win, and remove all risk.
While I personally do not have a single pair on watch for a potential trade today, here are a few I’m looking at
I’m patiently waiting to see if we get a clear break below this trend line to validate the area of supply.
In quite a similar fashion to AUD/CHF I’m waiting to see if we have a clear close above the trend line / previous area of supply
Dollar Swiss is in a “to the moon” mode, let’s see what happens, I’m waiting for either a clear break lower, or a potential break of this area of supply to create a new area of demand
Dollar Yen is just a question of one additional daily close below the trendline to confirm the creation of the area of supply. So you’ll see it mentioned a couple of times next week I imagine 🙂
That’s it from me for this week.
Time to test a few new filters for my new entries, and then I’m hoping to get at least one day with close to 0 screen time 🙂
Sorry this one is coming out a tad later than usual – I’m feeling a tad tired so decided to stay in bed for a while instead of getting to the screens (that is after having checked the candle closes at 7am)
Anyway, let’s dive straight into it
AUD/NZD + 0.5R
You may remember the AUD/NZD I executed on Friday – the one that wasn’t valid per my trading plan since the daily wasn’t followed by an engulfing candle (it only required 2.8pips difference for it to be valid) so I executed it anyway since it looked like something I’d have taken in my backtest.
However, as mentioned it already wasn’t really valid, but in my current backtest I’ve noticed that those zones actually rarely work out, they actually have a -EV value
So I closed my initial 4hour position.
I usually wouldn’t adapt based on a test I’m doing with only a 100 or so data samples addressing this issue, however, the fact that it wasn’t 100% part of my trading plan from the get go makes me a little shy.
The 1hour scale in however remains live, I had the possibility to move my stop to BE and let the price run, so that’s what I did.
Strangely enough, those entries actually are +EV even on this set-up, so I decided to hold on to it.
While I am not really interested in this zone, for me this zone has already been “played”, I remain interested in the fresh zone slightly below it
This pair is definitely making me laugh, last week I’d probably have said it was the best looking pair for the week, now I’m losing my excitement for it, I personally dislike when we see so much sideways price action before an area of interest, it feels like it will uncoil in a rather explosive manner
You may have been surprised to see I am not in GBP/USD for a long, but sadly the stop sizing was way too large for me to be interested in executing a trade here, so I remain out of this position. I won’t be looking to trade this area now. Only including it on this watchlist to keep you folks updated
In a similar fashion, Kiwi Yen provided an entry this morning, however, the stop sizing was also way to big for me to be interested in executing a trade here, so I remain out of the position. Patience is key. And also is knowing which rules are important 🙂
Dollar Swiss remains on my watchlist, we are definitely approaching the area of supply and saw some clear deceleration in the recent price action, which makes me a lot more comfortable executing a trade here
That being said, I dislike old zones, which is something I’m testing atm, and they do appear to have a lower EV than others.
Gold is worth mentioning today, we’re currently forming a double bottom patttern, however, recently we’ve seen those fail a lot more times than succeed, so it’s likely that price will head lower towards our area of demand.
Let’s be patient 🙂
That’s it for today’s watch!
Don’t hesitate to leave a comment if you have any questions or want to go over your trading plan / backtest!
Broke my rules to execute this one, but it was purely due to 2.8 pips. Had the daily candle closed a tiny bit lower,
Here’s the daily:
And the 4hour (I also executed a 1h 20 scale in)
I’ll keep this one short for today
Pound Dollar is the only pair I am looking at for a potential long today, we’ve reached the area of demand, while the weekly stack isn’t the most gorgeous – the monthly is very obvious so I’d feel comfortable executing a trade here
Australian Kiwi (which has been in the red more or less for the integrality of the time) is sadly no longer.
I remain in the belief is was quite a good trade, there was a clear break and retest of a trendline/phase line.
That being said, it is what it is and there’s nothing I can do about it.
In terms of hindsight, it could be worth looking to see the impact of a bounce off the entry point, but that being said, I previously collected data on the benefit of closing trades that spent over 24hours in the red, where I found that it wasn’t worth closing it early. The difference between a full loss and -0.7R is ten times smaller than the potential reward, so even if only 1 out of 9 trades end up being winners it’s not worth it
Aussie Canadian was way to slanted for me to be interested in taking a position yesterday, it remains on my watch in case it forms a clear double bottom
Still waiting for the price to reach the area of supply before looking for a short
While we nearly reached the area of demand I have yesterday, we didn’t, so it remains on my watchlist for a potential long if we get a clear double bottom
Silver provided an entry last night, however, having never taken a live trade on it I’m only taking the trade on my demo account in order to test the sizing hence why it’s not in my trade updates
Gold is slowly approaching an area of supply that has a monthly stack. I’llbe patient
Looking back at it with pure hindsight, I remain happy I executed this trade.
While it’s not the prettiest set-up I have ever seen due to the counter zone not being the cleanest, it remained valid in my rule book so I have no issue with it.
One thing we have to learn to survive in the trading arena for a long time is to take Ls like a professional.
If we expected to never lose money in the market we wouldn’t be able to make any – even high frequency firms sometimes incur losses.
Nothing is guaranteed.
Remember trading is a zero sum game, in order for you to make money some is losing money, so it’s only normal to lose time to time.
Heck, my trading strategy has a winning rate lower than 50% yet it remains profitable.
Anyway, nothing I’d do differently so I’m happy to have executed this trade.
Aussie Canadian is approaching an area of demand, while it is true that I’d prefer to see the lower zone be reached, it is the second one that has a clear weekly stack, therefore I’d be happy to execute in whichever zone.
Let’s be patient and wait for a set-up that fits our trading plan
Writing this, I’ve come to realize I missed a short opportunity on the 20th
I’ll have to go back through old posts see why I missed it, it would be currently running risk free with my stop at BE, damnit.
Update: I checked for the three days preceding the trade and I did not mention AUD/CAD a single time so I must’ve absolutely missed this area. Will have to review my daily process – I may be going too fast relying on my weekend analysis
Aussie Kiwi is also on my watchlist, this one is for a potential short and not a long tho.
We have a clear weekly stack, a clear break of a trendline, so all in all I believe this is rather straightforward?
Canadian Yen is also on my watchlist for a potential short, you may recall that the long stop size would’ve been too big for me to be “allowed” to execute the trade according to my rule so I remain neutral on this pair for the moment.
The main issue with taking a trade on Cad Yen is the lack of very clear weekly stack, the weekly zone is slightly higher, there’s a potential monthly zone, but I clearly prefer weekly zones.
Let’s see what happens
Let’s see if Euro Yen heads back to the area of supply
I used 0.25 of my usual R to execute a long on AUD/USD yesterday with my new strategy that I am currently forward testing / executing
It has sadly resulted in a -1R
I’m not too surprised or worried about this outcome. My data set already contains a LOT more trades than a single one, so having one extra loss isn’t meaningful. It definitely would’ve been nice to bank a win on the first trade purely for my ego but I’m not in the trading game for my ego, but to execute a profitable edge in the market over and over again
AUD/USD New Trade
Aussie Dollar did however create an extremely clear double bottom formation on the four hour chart tho which enabled us to enter on my normal strategy looking for a potential long
While it;’s definitely not the sexiest counter zone I’ve ever drawn, it seems to hold on correctly and we have a clear weekly stack
I happen to be looking for a potential 1hour scale in as well
Let’s be patient and see if Aussie Dollar will be more cooperative with us this time
As I was adding the taggs to this post, my alert triggered telling me I am now in the one hour scale in.
Let’s hope for the best and prepare for the worse!
It’s always better to think you’re about to hit the biggest drawdown you’ve ever experienced than to think you’re about to get on a tear.
You may remember that I had USOIL on my watch and tried to execute it, but I was unsure of the sizing or the correct representation of it in IC markets & hence removed my orders?
It’s currently behaving well, the one hour scale in would’ve been at BE running nicely.
I have no regrets not executing this trade tho.
(Yes I am personally keeping an eye on this set-up to see if I can be comfortable executing trades on the XTI with IC markets. hence why I still have a demo account to execute trades on time to time)
Canadian Yen provided us with an entry however the stop sizing was too large for my trading plan so I remain aside from that position.
Euro Yen is in the exact same situation as Canadian Yen sadly, it offered a valid set-up, however, the stop required was too large for me to be comfortable with it, so I remain out of this position. Sticking to my plan.
I did not execute Dollar Singapore since I haven’t been able to draw a clear weekly stack on this level so I remain out of it.
I drew the RR just to have an idea of how it behaves
That’s it for today!
TLDR of today’s post:
Stick to your trading rules, you should only (and very rarely) adapt if it’s really +EV to do so. If your backtest tells you something….
Why would you throw thousands (or hundreds if you’re still a rookie that hasn’t put the hours in) of hours away? Heck I’ve no joked spent over 2,000 hours building / refining this trading plan
If I was to charge the hourly rate I offer as a consultant I’d be freaking rich at this point 😀
Good morning folks! I hope you’re well and had a good night sleep!
My desk is really creaking this morning so I’m starting to get rather tilted I have to admit ARGGGG
We saw USOIL provide us with a valid entry at the daily close, so I put my alarm on at midnight (giving it one hour to settle the spread) and woke up to execute the trade.
However, I came to realize I had never before executed an oil trade on this account with the IC platform I’m using, I believe all my trades on it were back on my previous account or when I was with FXCM
This led to some hesitation since I know that commodities can be sized differently than traditional FX pairs, so I wanted to take a 25% R position instead of taking my usual 100%R to make sure the sizing was correct and to feel a lot safer about the overall position.
That being said, I came to realize that (after going through 4 different oils) that XTI so the equivalent to USOIL on tradingview (CFDs on WTI Crude oil) required a 0.5 lot sizing.
Which was more than the 25% of my usual R told me to use.
Therefore instead of executing the trade live directly, I wanted to take the position on a demo account with the full R to make sure that the position (i.e. P&L) was behaving correctly.
Sadly there was very little volume at that time of the night so it was extremely hard to be sure it was the correct position size.
Instead of taking the risk of waking up with a position 5 times bigger than my usual R I decided to leave my demo trade on and decide further actions once price moved a bit more and I could observe the impact it had on the fake trade.
Turns out, I had used the correct position size so I could’ve executed live.
That being said, I’m quite glad I didn’t.
I prefer to be safe than greedy.
All that to say, I currently have two orders on USOIL
One is at the original entry price, the second entry is for a potential scale in on the hourly chart
Let’s see what happens
NOTE: As I was writing the rest of this blog post I came to realize that on tradingview my first order would’ve been triggered but not on my broker so the data feeds aren’t exactly the same which makes me uneasy.
I’ve decided to cancel my two orders.
I dislike anything that makes me hesitate but it appears I was wrong and XTI isn’t the perfect representation of USOIL.
While I’ve mentioned a couple of times I am currently developing a new entry method I am now quite happy with my dataset to be executing (small) positions with it to forward test the results.
The backtest looks promising, and I’ve collected quite a lot of data which makes me comfortable executing this position
The fact that it is underwater, is I have to say no surprise, I believe I’ll be able to fine-tune my entries further along
Some of you may be wondering why I didn’t execute Aussie Dollar last night, the reason is simply because I’ve noticed the strike rate and average return of trades to drastically drop once we’ve seen more than 2 sideways candle on the 4hour
I am no longer looking for an entry here but figured it was worth mentioning
In a similar fashion, Euro Dollar also provided an entry last night, however it was definitely too low for my liking hence I didn’t execute it, I am no longer watching this pair
Waiting for a potential double top
Waiting for a double top
A few more pairs shall be on my watchlist tomorrow, their zones are currently being validated.
Take care folks
The TLDR of today’s post was:
If unsure, I prefer to stay out of the market.
Rule number one is to protect capital from undue risk
Rule number two is to never forget rule number one
I’m currently in quite a deep backtest session as you may have noticed and quite enjoying life there.
I have created a script indicator that I find quite interesting, if it’s something that interests you, let me know in the comments!
FX Trade Update
Gold + 2R
You probably know that my trading plan calls on my to take my wins at 3R instead of 2R so why change that? I know the overall return is better off when I take my profit at 3R
However, in rare occasions, I’ve come to notice that if we see several rejections from a key level I’m better off adapting my plan.
You can notice we rejected this area four times recently, which is usually a good sign of interest in this area.
Coul I hold the position for the entire time? Yes, I still think it has a 50% chance of reaching my TP even tho we have a strong support just below us.
However, I think there’s a 50% chance that we could reach my stop at breakeven –> Which means the expected value of holding was 1.5R –> when by closing it when I did my expected value was of 2R.
Obviously, we can never really know what the exact odds are. I can however tell you that in 28% of the time price reaches 2R in a backtest of over 350 trades it goes back to BE rather than reach the 3R –> So in those circumstances, it remains worthwhile to keep holding
2 Vs 0*0.28+3*(1-0.28)
2 Vs 2.16
In this case I estimate the odds of a reversal to be higher than on average. Hence my decision to close the position early
While I can’t remember the quote properly it goes something like this
To become a master,
You first have to learn the rules,
You then have to apply and internalize those rules,
Once you are a master,
You know when to ignore your rules
– Me butchering a Quote
Anyway, I’m definitely no master, but I’ve mastered my trading plan, I know the numbers I have found in my backtest etc etc so I’m allowed to break them.
When you begin, just stick to them.
Trust me on that one. I can tell you exactly how to trade, make it 100% mechanical, and yet you won’t succeed if you don’t follow my trading plan up until you’ve mastered it.
Well that was a darn long tangent, but I think it was an important one.
Good thing I don’t have many urgent tasks to get done today that took me a while
Canadian Swiss reached our area of interest yesterday however it sadly didn’t provide us with an entry that fit my trading plan.
It remains on my watchlist in case we have a clear double top and an entry by Monday night, otherwise I’ll remove it
Euro Dollar is also on my watchlist for a potential long. While it’s not the cleanest trendline, indeed it’s definitely more of a phase line & a clear correction it does still kinda fit my rules so sharing the chart in case you’re interested
Pound Aussie reached the area of interest however, it still needs to reach the weekly stack before I am interested in a potential short
Clear price action above the area of demand. I’m just being patient