Yesterdays blog caused a flurry of emails, especially from the members of the first group, all stating that they had seen the same drift towards the shorter time frames and the more risky Counter Trend trades and agreeing that we should move back to the earlier style of longer term trading that was so successful for me.
The big advantage is that we caught the drift to the shorter term and Counter Trend trading of the last two months in reasonably quick time.
I consider that our results for the Fund last year was only barely acceptable. Even though we did so much better than any other asset class, I personally, am still disappointed with my results last year. The 2000 pips and 40% annual return was nowhere near my previous years results.
Even though the Crisis caused major damage to stocks and property (losses of 30%-40%), we should have done better. I have NEVER had an unprofitable Quarter, and we are still easily in profit for this current Quarter.
But in the last two months we were drifting towards the wrong trading style.
We are coming out of the Financial Crisis and the markets are returning to pre August 2008 conditions. So it is time we went back to my 2005 - 2007 trading style where I made huge returns. The strategy is reasonably simple:
We trade only with the trend.
We only buy on dips to the Support Line (in a bull market)
We use the Anti-Hedge strategy EVERY time. (without fail).
We compound up our trades
We have missed some of the trend. But the main part that we have missed has only been the last two months, since Sept 3.
When the market touched the Daily Support line.... from 1.2460 (March 3) and 1.2886 (April 21).... on Sept 3 at 1.4191, that was the big clue to jump into the bull market on the Daily. I was so focused on the 4H trend that I missed it…in the next three days, the market jumped to 1.4600. ..and has continued to move up.
I am now starting a much stricter trading regime where we get back to proper Trend Trading.
Edit 8.00am NY time Market is at 1.5035. I will be waiting for the next retracement to complete before I take the next trade. It will be a Long trade. I will NOT be taking any Counter Trend trades down to the Support level.
Emails
Email 1
I am glad you are moving back to your original style of trading. I think the majority of the group would prefer the longer time frame since that is why most joined, to trade the way you outlined on Forex factory. The squeaky wheels are likely in the minority. Thanks I didn't realise over the last two months just how much I have been moved away from my original trading style. I am going back to the longer term buy and hold (and add to the positions) strategy. Even though I am still easily in profit for this quarter, the previous strategy was so much more successful than this attempting to trading up and down the charts just for the sake of trading more actively.
Email 2
Wayne, Your 40% return for the Fund was earned using only a very low 2% of the account on each trade. You should be proud of an excellent performance result. My Managed Stock Account here in Canada with one of the best (?) Banks in the world lost 36% in value during the crisis. You have earned an excellent result in a disasterous year of the near meltdown of the worlds financial sysytem. I know that did well compared to the other assets such as property, stocks and other investments, but when I look back on what happened in the forex market and how I have traded in the past, I still see a lot of missed opportunities.
I always trade risking 5% of my account on each trade which means I would have had a 100% profit if I had followed only your trades. I made some other reckless trades but it was your trades that kept me in profits. And I know some traders are risking much more than 5% of their account on their trades. Yes, I watch some traders on the forums who risk 20% (and more) of their trading capital on each trade. If I had used 20% of trading capital on each trade I would have earned 400+% for the year...But I would also probably have gone bust somewhere in the future...LOL … Anything more than 5% risk on a single trade is irresponsible MM
MESSAGE FROM JACKO 471
It is 1.00am NY time Thursday October 22 and the market is at 1.4994
The market rise to 1.5046 yesterday was a surprise to me. Given the price action in both the Asian and early European sessions, it certainly looked like it was ready to break that trend line at around 1.4900.
It was a case where I let a "considered opinion" that we may have been in for a break of the Support line down to the standard longer term 300 bar Support line (at 1.4650-1.4700) over-rule the trading strategy (The basic strategy is: Buy in the direction of the trend on pullbacks to the Support line).
The market is now some way from the Support line, so we need to be patient, wait for it to get to the Support line again, and get the entry right on the next trade
Edit 3.00am NY time Market is at 1.4975. The effect of breaking the 1.5000 barrier has been a quick and rapid deflation of interest in the Euro. I am waiting for the market to move to the Support line again. The Support line is currently at 1.4940. I will be looking for confirmation of the trade direction BEFORE I place any trade.
Edit 8.00am NY time Market is at 1.4983. Over the last couple of months I have felt a growing pressure from some of the more active traders to trade more frequently and on smaller and smaller time frames. As recently as today I have been looking at a Support line on the 4H charts that is LESS that 100 bars. But I am also seeing a correlation between moving to the smaller time frames and a deterioration in the quality of my trades. Over time, I have moved FROM being in a trade for longer periods of time TO being in and out of trades all the time. I want to get back to trading in a style where I can be in a trade with the trend and adding extra positions.
The issue that I am really struggling with is that many of the traders in the group want to trade much more often than I do. I can understand that some traders still feel that the more trades you take the more profits they make. They want to trade quicker to compound their profits. However, the better trading solution was to take a long position and add to it.
Furthermore, trading the shorter time frames for the other traders is now starting to impact on MY results, so I am taking steps in the next couple of days to rectify the situation.
I have spoken with each of the more adventurous traders and I have come up with what I believe is a reasonable compromise I will be moving to a two part trading system. The first will be MY trades which will be on the 4H and longer Daily trades, and a secondary set which will be for the more adventurous traders (and they will NOT be my trades, but only trade suggestions)
Edit 12.10pm NY time Market at 1.5002 I am watching to see where this market will move so that I can buy at a good position
Emails
Email 1
Hi Wayne, i have a question. You often look for the market to retrace to an extent so that you can get in at a "cheap" price. But how can you tell whether this is really a retracement that allows you to get in cheap, or if it's actually the beginning of a larger move in the opposite direction? Normally a retracement is the area down to the Support line. If It convincingly breaks the Support line then it usually indicates a change in direction.
Often, when i try to get into the market at "retracements", i find that they're beginnings of bigger moves in the opposite direction and the market keeps going against me until i'm stopped out. That happens... usually if you are fighting the trend. I have actually been guilty of that same sin myself in the last two months and have just taken steps to address the situation.
I am seriously regretting that I have stayed down at the 4H level for the last couple of months...I think that if I was trading on the higher timeframes, I would not be "reacting" so much to any down turn in the market and would have been sitting in a Long trade and just adding to the position as I went. When the market touched the Daily Support line from 1.2460 (March 3) and 1.2886 (April 21) on Sept 3 at 1.4191, that was the big clue to jump in on the Daily. I was so focused on the 4H trend that I missed it…in the next three days, the market jumped to 1.4600.
Email 2
Once you have entered a trade, you use the expression "now I'm going to let it play itself out." I'm slowly discovering how important that is. I have a tendency to second guess the reasons why I entered a trade and then abort the trade. Making a decision in the heat of the trade is the worst time to make that decision...I have learned that the hard way in the distant past . It will work both ways...you will still have some losses and some wins but the huge majority of the decisions made BEFORE entering the trade will have been made for the best reasons , rather than those decisions made in time of panic
Email 3
Hi Jacko… I am curious as to why you are using Oct 15 (1.4967) and Oct 18 (1.4919) as the resistance when you are using the 4 Hr. chart. Your resistance levels are more in line with a 1 Hr. chart. Yes, If you see todays blog, you will see that I have finally started to put a stop to the constant demands on me to trade more often on smaller and smaller time frames. I intend to move back to the 4H charts using 300 bars and then back to the Daily charts as soon as possible. These shorter time frames are causing havoc on my trading.
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