As announced in my presentation, some articles will deal about my own trading.
I have several strings to my bow; the one which is currently bandaged is a strategy adapted to the scarcity of my time, which is becoming a luxury this summer. But I am not making arrow with any wood. These strategies are comprehensives and well thought. A very last look to second-hand; my lumbars in the 22A seat stamped Turkish Airlines; I’m not going to lose more time, and I’m sitting down to write my first article.
Gosh… the time ! Because of my initiatory and summer trip, and my various professionals targets, my calendar cases are a chessboard, and its pieces, after 8 rounds of play, as randomly scattered as my free time. According to the Shannon entropy, it makes my availabilities too random to keep any statistic advantages for my intraday trading.
But the time isn’t a problem, nor an enemy, if the trader’s performance and his strategy aren’t matched to the it. The one I have chosen, bear the name of « grossly trading ».
For now, two positions are contributing to keep my focus and competing to be the one that will make me earn the most. I am short on sterling and euro, against Australian and American dollars.
And I am closely watching the GBPCAD. I’m a fetichist atony of market, and this weekly configuration is calling for a powerful upcoming movement. This is one of the rare certainty we could have on the Forex : after a squeeze, no matter the time frame, the currencies pairs will take a direction with strength. Then it belongs to the uncertain : when ? from where ? how far to go ?
Two possible feelings : the emotional elevator – a false signal or a short trend – or a happy outcome. I’m waiting for a trend that would equal the pride and the vanity of the last one. A nice one which will correct the insolent uptrend. I like when things obey to the gravity law, everything that climbed, must go down. An I am more skilled in a bearish market than in a bullish one. This comfort is a conditioning I completely assume : I have learned to trade at the dawn of a financial crisis ! My scarves has been drown in frail uptrends, and my triumphs in huge downtrends. Somehow, Forex has given birth to a zealous salesman, and a shy buyer. I completely assume these biases, which are completely stupids, and which should have disappeared considering my current level of trading.
On the left, a weekly chart of my fetish on GBPCAD; it clearly shows a squeeze which set up as limits 1.86 Canadian dollar upstairs, and 1.81 downstairs.
Beside the weekly chart, a daily one to draw your attention to the fact that we must skip a time frame in that case: if the W1 is squeezing, the D1 will multiply the false start trend that will be lethal without a good money management. Actually there are two options : either we base our decisions only according to the technic, and then, we avoid to trade the D1 signals in favor of exploiting the H4 swings, or we trade the D1 signals, with a low risk or with a large stop out of the range.
I am going to quietly wait that a weekly close will give me the envy to go in. What would suck will be a signal before the come back of volatility… like when you go in a trade just before the european opening : it could work, but it would be easier to go in after the liquidity and volatility come.
I took a position yesterday; a very basic signal. The deviation between the price and its own moving average increased. Technically, the pair was in a weekly squeeze, so it wasn’t ideal, but I needed a daily position to initiate my strategy. I have hesitated to set my stop out of the range; indeed, in order to maximize my wining/losses rate there are two options : stay exposed in a short time (exit the trade quickly) or set a larger stop to absorb an opposite movement. Finally, I have chosen to take two trades : one with a stop at 1.8420, and one at 1.8220, with a risk of 750 and 250 euros.
Chart of the evolution of this strategy.
Some explanations :
– currently the risk of this strategy is entire since the stop is still at its initial position (whole risk = 1 000 euros).
– the « gain latent max » is the max pending earnings : the higher earning recorded while the trade’s duration.
– so you should guess what does mean « perte latente max » (max pending losses).
The purpose of my strategy is easy to understand : to block an earning, then divide it in fractions, and invest them in short term trading to swell my PnL or cash some dollars, while having the same risk. It’s a trading that ventures into relaxation, fun, a pleasant and distracting, but profitable way of trading.
To block an earning, there are two options with their benefits and disadvantages, that won’t be dealt here : to be market neutral (hedging) or move my stop. My choice will depend on my mood and on the charts’ patterns.
The waltz the crisis have danced for the last years, made a gainful effect on the most dealt pair of currencies. Such as musical notes which persist to evolve between the two limits of its musical score, the music played by the euro is contained between 1.20 and 1.60 dollar. This trisomic sinusoidal is the result of various actions of central bankers and governments. Sometimes the euro is too high and penalizes exporter states, which don’t share the Berlin’s policy of low wages, at the limit of self-denial, and don’t have the cost of German work. Sometimes it is too low, and penalizes imports, what increases the cost of living.
Various other process come into play, including the fact that at 1.20 dollar, foreign investment in euro, or even acquire the unique currency, is easier than at 1.60. Conversely, at 1.60, we can buy a larger amount of dollar. Thus and naturally, and especially because of that, the euro has only brimmed from up to down for the good health of my money.
Indeed, my strategy for this currency is very simple : inside the extreme area that flirt with 1.50 and 1.20, I use to take huge short and long position, with or without large stop, depending the charts pattern, and the economic context (politic, public and industrial pressures and complains about the evolution of change rates). These positions are initiated after some trades taken in a counter trend way, while the euro is reaching its extreme area, with a symbolic leverage that afford me more than 5 000 pips of draw down 🙂
The last one i have taken was the 28th of april. According to the standard deviation for the last 6 years, the movement use to evolve more and more in lower elevations. Thus, in 6 years, 66% of the time, the euro has evolved between 1.29 et 1.41 dollar.
So I have taken a short position, without any signal, at 1.3840 with a stop set at 1.6, that to say a 2160 pips stop loss, for a 500 euros risk, whether 23 cents for each pip, and a 37 000 dollar position value. To convert, i have chosen the price of my stop, whether 1.60 dollar (500/2160 = 0.23 euro, whether 0.37 lot at 1.60).
The plan was simple : to hold my shorts and keep selling an hypothetical uptrend, without surpass a total risk of 5 000 euros, keeping the same stop close to 1.60 dollar. Then, around 1.50, I would have taken some daily short signals
Finally, considering the price distribution, I attempted to go in a downtrend around 1.4 dollar. This was the strategy set up with my students at the end of april. Unfortunately, few of them followed this weird, but well thought, strategy.
This is how I took my first short signal on the 10th May at 1.3767, with a stop set at 1.41, for a risk of 1 000 euros. I didn’t do what I was supposed to do during the fall; My stop was supposed to follow the top that the downtrend have marked out, then divide the gain protected by this trailing stop, and reinvest it on intraday signals. I started to be active only when the pair came out of its compression, my fetish pattern (phase 1 on Bollinger Bands); then, I moved down the stop of all my orders (both shorts on the euro I had) to 1.3660, that guaranteed a 360 euros gain; thanks to a clever calculation, 360/10, I have determined that I will have to risk 36 euros on my next 10 trades to reinvest my earnings.
So I decided to set every 25 pips, an order with a risk of 36 euros and a stop at 1.3660; since i didn’t have the time, I didn’t want to take care of any signal or to look for a good timing; I worked hard beside to make my new training for beginners, which takes a lot of time and energy since my perfectionism is an undomesticated obsession.
There were eight entries taken between the first order at 1.3546 and the last one at 1.3346. I felt the tide was turning on my charts, so just came out of all my trade at 1.3397, on August the 8th. I splited the risk like that :
360/10 = 36. I set a risk of 72 euros (36*2) for my first trade, and 18 (36/2) for my last one. Indeed, you probably know that the later we come in a trade, the more that increases the probability of loss. That to say a decrease of 6 euros per position (first trade 72 euros, 66 euros second, then 60 and so on up to 18). What made me win around 220 euros (218 and some dust to be precise).
I have also taken an other daily signal after a new squeeze.
So, today I cashed in 220 euros, and I still have an open position with three trades, and set a common stop at 1.35, that currently protect 800 euros for the first daily trade gain, about 80 euros for the initial one, and a very nice 370 euros for my last one taken at 1.3554 with a stop at 1.37 dollar. Wheter a current total risk of 2 140 euros, for a protected gain of 1 250 euros and 220 euros cashed. I’ll be glad when this strategy will award me twice my risk.
I will give more details for monitoring the GBPAUD position, since it is present and real time, it will have more interest than the last position.
And to end it the best way :