Fading Yen - It has gone parabolic
- Thread starter gmst
- Start date
Hey gmst got his way with the helping hand of Cyprus, of course the lesson he will take away is "its good to have a loss compound exponentially, after all it all comes back to mama". Worst lesson ever and probably a huge net loss, no matter he makes money on those last counter trend trades or not.
Oh, my post was not directed at anyone or post, it just my own opinion. I use charts myself, so technical trading is great for timing. If there are no overwhelming fundamental forces, then technical will be dominant in price movement.
But when the Central Bank is actively participating to push it into a certain direction, the technical will not help you much except to get your into the trend on pullbacks. If you try to counter trend trade fundamental moves, it could be very painful and fruitless.
Every technical counter trend indicator has been ringing on the Yen for months, and the trend just destroyed every one of them.
I closed the remaining 2% risk at 95. 1% was from 93.5 and another 1% was from 93.25.
So, loss on these = -(1.75% +1.5%) = -3.25%
So, total loss on the USDJPY trade = -(3.25% + 3.82%) = -7.07%
I wrote in my first few posts that parabola should have collapsed within 15 days from the trade start date. So, the whole premise behind the trade became suspect within a fortnight of posting the trade. I continued to carry over the position instead of closing it, as I have engaged in a very different kind of trade management here in this thread and it was also a learning experience for me.
Final Result: Parabola didn't collapse and I lost 7%, whereas my worst case loss was 13%. Looking at overall idea, its execution and opportunistic trades taken along the way, I will give myself a B- here. Trade over and I am done with this thread!
Thanks everyone who participated. Though the discussions became very intense and somewhat personal along the way, but it is my view that it is better to engage in intense debate rather than everyone just saying Agree Agree. This is one point where ET shines over every other online forum out there.
LOL
So now the guy whose $1 (not a typo) "journal" (moved to chit chat for lying about results) is an expert on what works?
http://www.elitetrader.com/vb/showthread.php?s=&threadid=254267
Well done for getting out, although honestly I would give you a D for not getting out quicker on the full position in violation of your trading rules. But I hope you learned something and the most important thing is that you have the bulk of your capital remaining to fight another day. You were a little lucky because of the Cyprus situation you got a chance to "finesse" the exit but it doesn't bode well for yen that the rally was so feeble and USDJPY is back near 96 already.
Thank you for sharing this trade with others and hopefully you will be more successful next time you share a trade idea with other ET posters.
I could be way off base here, so if so, I apologize. And, analyzing in hindsight is always 20/20.. so it goes. These are just my views, also for my own benefit. Respectful/cordial discussion is appreciated.
My thought is that a trading plan's stop loss strategy should be determined by technical factors, not some percentage or dollar amount. Position size should be governed by determining the correct stop loss size first from a technical perspective first. Thus, position size is dependent on a combination of technical factors and risk capital.
Here, it seems the flaw first and foremost was that the trade idea was poor. Scaling against the tide right as the multi-decade trendline was broken was a poor decision. So, managing such a trade already had built in difficulties, and so the evaluation of the execution should take these factors into account.
In my view, the idea to just 'stop out' randomly because a bunch of people on a trading forum are preparing you for a luau puts the grade close to a D or D-. I am not sure why it makes sense to let the market establish a possible support/resistance level in an open losing position, and then get out mid-way on a slight retrace. Why take all that risk, only to try to save a hundred pips or so on your stop level? Or, looking at it from the other perspective, would you have gone the other way at the final stop loss level, if entering a trade from flat? I most certainly would not have done so, and I doubt many people here, at least those trading off technicals, would have, either. Yes, the Yen could certainly pop to new levels here, and would have hit your new stop (beyond the recent extremes!), but I personally would rather have payed the piper to find out.
This attitude very much is intimately tied to your *original* position sizing relative to the *original* stop loss level, juxtaposed with the *new* stop loss level in terms of percentage difference and newly adjusted risk to capital.
Therefore, I do not commend you, gmst, for getting out here. You already had a plan and bent it slightly (seems you tacked on maybe 25% to your stop loss, overall), and this might have been the right move. The initial position sizing determines your level of risk. Bending a trade's stop loss such that the difference between the average entry and initially theorized stop and the newly set stop is not enough to significantly affect your percentage of risk capital at risk could be the right move, in my view. Again -- this should be done when the original trade idea is solid (it was not, again, just my view), and the position sizing is appropriate for the amount of capital at risk (I am unsure in this case), allowing the trade breathe, if needed.
Just my two cents. I appreciated your documentation of this trade very much.
Thanks for your comments. As you rightly said, the premise of the trade was in question from within a fortnight of taking the trade. I also got a bit worked up during the trade and it seemed that with all back and forth I was losing a sense of direction. I thought it best to get out here. For the next few weeks, I would be focusing on some of my other projects that have been pending like automation of my strategies.
Thanks benwm for your observations as well.
sure, you are right, had OP started with such
a) trading in alignment with price action (which he did not, he grossly ignored all fundamentals, plus price action)
b) had properly scaled his position as a function of volatility, momentum, his views AND a proper stop loss as function of such volatility and momentum.
Having ignored all that and gotten himself deep into the red disqualified the trade already from ever having made a C grade or higher. If you mess up big time on a professional trading desk, basically displaying to everyone you violated pretty much every sane and intelligent approach to trading, and drag down the whole desk PnL with you, then when your boss tells you to get the hell out then you do get the hell out, no arguing, or else you can pick up your sorry ass on the street couple days later. Not that this 100% transfers to this example here, nobody is his boss here, but still I think benwm, myself and a few others meant well with him to urge him to square his position. He did not even listen then but started to get into lengthy discussions why its good to sleep over huge losses, why its good to tie up precious capital in losing positions, why its good to keep a losing position on the book despite it still being counter momentum. In such times such trader shows clearly he has kind of lost reasonable judgement skills and is either revenge trading or even worse, trading purely based on hope. In such case it is ALWAYS BETTER TO GET OUT RIGHT AWAY. My 2 cents.
a) trading in alignment with price action (which he did not, he grossly ignored all fundamentals, plus price action)
b) had properly scaled his position as a function of volatility, momentum, his views AND a proper stop loss as function of such volatility and momentum.
Having ignored all that and gotten himself deep into the red disqualified the trade already from ever having made a C grade or higher. If you mess up big time on a professional trading desk, basically displaying to everyone you violated pretty much every sane and intelligent approach to trading, and drag down the whole desk PnL with you, then when your boss tells you to get the hell out then you do get the hell out, no arguing, or else you can pick up your sorry ass on the street couple days later. Not that this 100% transfers to this example here, nobody is his boss here, but still I think benwm, myself and a few others meant well with him to urge him to square his position. He did not even listen then but started to get into lengthy discussions why its good to sleep over huge losses, why its good to tie up precious capital in losing positions, why its good to keep a losing position on the book despite it still being counter momentum. In such times such trader shows clearly he has kind of lost reasonable judgement skills and is either revenge trading or even worse, trading purely based on hope. In such case it is ALWAYS BETTER TO GET OUT RIGHT AWAY. My 2 cents.