Review week 24 and looking ahead at week 25

Last two weeks have shown mainly choppy side ways markets. Not an optimal environment to trade my method. I should have stayed out of the markets all together, but I was so confident and so eager to trade after the huge gains in May, that I entered some trades, that at that time looked OK. In reality I was still being blind, not noticing signals the market was giving me.

Review week 24

So let's review the trades I made. From now on I will review my trades in the perspective of  capital gained versus capital risked. If you are not familiar with this concept, I suggest you read this post. If you want to read about it more in depth you can go to the books section and check out the book "Trade your way to financial freedom". In short: 1R is the Risk I take per trade. (In most cases) I risk 2% of my total equity. This means that last month's return was 18,5R or 1 made I8 and a half times of what I risked per trade. So far the return in June has been -4R.

I shorted the GBPUSD on a pin bar rejection of the 21 EMA and a resistance level in the direction of the trend. I placed the entry at the 50% retrace of the pin bar. My entry was triggered, but price moved about 20% shy of my target and then on Friday: boom! Price shot up. What did I miss here? Well, only the fact that I was trading into a support level, that I so carefully mapped out and on whicht the downside of the pin bar I traded found clear support. So I was trading into a long term and short term support level. Not good. At least I should have kept my target more close.
Brent Oil -1R + 0R
I placed two short orders on Brent Oil. The first was based on the inside bar of  Tuesday and the other on the pin bar of Wednesday. The problem is that the market just went sideways going into this weekend with all the uncertainties surrounding the Greek elections and the outcome for the Euro zone. Now that's some news event with effect. The first order got tagged and stopped. Luckily I managed to get out of the second trade at break even on the low of Friday.
With this trade on the AUDUSD I deviated from, missed, forgot about the most vital part of my trading method. The trend was no longer a down trend as the 21 SMA was not sloping down anymore, but was flat.  And obviously this didn't work out.

So recap:
Last week: -3R = -6%
First week of june: -1R = -2%
May: +18,5R = 37%
As I lost more then 5% and / or 3 trades in a row I will take a break and re-asses what I am doing.

Less trades, more profit

As this all played out I read an interesting post by Nial Fuller: Low-Frequency Vs High-Frequency Forex Trading. Here is what I commented on his website:

Makes total sense, especially after last month, which had excellent trend trading conditions. My trades ended up one winner after the other. I know I should not have traded as much as I did last two weeks, but I was so confident after all those winners that I just had to trade: all losers. Looking back the quality of the trades of last two weeks were far less then that of the trade opportunities in may. So yes, I am gonna try and sit tight and wait for those high quality and high probability trades to present themselves.

Volatile times ahead

Another great article I read is: How To Trade This Weekend & What To Watch Out For by Chris Capre. I think he is right in saying it is interesting to see how the Greek elections and the ongoing Euro crisis are going to effect the markets and that most likely volatility will increase the coming months all through the end of the year.

So with the idea of volatile times ahead I find it even more important to only focus on the most obvious, high quality trade setups that I am comfortable with.

Calendar week 25

country date name
Australia 20120619 01:30:00 RBA Meeting's Minutes
United Kingdom 20120619 08:30:00 Core Consumer Price Index (YoY)
Germany 20120620 06:00:00 Producer Price Index (YoY)
United Kingdom 20120620 08:30:00 Bank of England Minutes
United States 20120620 18:15:00 Fed's Monetary Policy Statement and press conference
Canada 20120622 12:30:00 Bank of Canada Consumer Price Index Core (YoY)
Canada 20120622 12:30:00 Consumer Price Index (YoY)
GMT Source: