PerformanceI am pleased with my trading performance of these first 6 months of trading in 2015. Not only did I make a return on my capital of 25%, but I managed to do it with a relatively low maximum draw down of only 6%. I achieved this by keeping my losses consistently small, while aiming for profits that are 2 times or more the risk I took on any trade. The first 8 trades of the year I traded with 2% risk per trade, but I soon cut this in half to 1% risk per trade. I think small position sizing was key to my success. It took the stress out of my trading, as I knew I would only loose a little on any open trade. Also I started taking the risk out of open trades more quickly by using trailing stops and moving my stops to break even by hand. In the beginning of the year there was a big event that made me realize how vulnerable and exposed one can be trading leveraged financial products in too big a position size in comparison to the account size. The event I am talking about is the event of the Swiss National Bank removing the artificial floor under the CHF-pairs like the EURCHF.
SNB Black Swan eventThe market of the CHF-pairs literally disappeared when the SNB announced to stop supporting the EUR and USD (and other currencies) in order to keep the CHF-pair rates at a set level. This means that anyone who was short the CHF got crushed. Stop Loss orders could not be executed because there where no counter parties willing to take the other side of trades. The EURCHF dropped about 20%. Many traders might have had small Stops of about 0.2% difference to where they got in their trade. But in this case these stops could not be executed and they took a hit of 100 times bigger a loss as to what they had intended. And this is conservatively speaking, I think. Basically, this was the mother of all slippages.
|EURCHF dropped 20+% in one day|
Last week a change to the Oanda user agreement has come into effect, basically removing the negative balance protection for EU customers. I believe US customers remain protected, but I am not sure. Anyway, as of this week my trading at Oanda exposes me also to higher risk when it comes to these unlikely events.