Greg's Forex Journal

I put about five hours into the screensaver and making charts. I got my computer back (brand new hard drive and new motherboard in the past two weeks), and I’ll be able to watch Tuesday and trade during the day on Thursday.

Attachment: Something I found interesting. I made it more as a series of charts to show me how PA and other analysis are a lot more useful and consistent than these classic patterns.
 

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Watched the market with small pockets of time last night and today.

I just reached a new level in my development – I’m reaching a point in my chart analysis (especially the EUR/USD hourly chart) where I draw too many lines I know will be respected. Because of this, my dotted yellows (intraday) and dotted reds (daily) are actually incredibly impeding. My new colors are dotted yellow (daily), dotted gray (intraday), and black for lines I’m unsure will hold (anyone who uses Oanda knows that these are practically invisible on the stock blue).

Today’s thought: for those of you who don’t know this in forex, the hourly chart is King. Yes, you should be using the chart that is most relevant to the trend, market movement/organization, etc., but the hourly dominates in this world. Why? It’s quite simple really. Nobody really cares when the world turns around that Pacific Ocean line that separates the days, and more importantly New Zealand and Eastern trading is overall irrelevant – whether it is low liquidity, less traders, tradition, major currencies, and probably definitely a combination, it really doesn’t matter. So, we turn to the London business days because it holds the largest liquidity. Relevant? Yes, but it is far from standardized, enough liquidity is elsewhere in American and Asian, and that makes it less concrete. Obviously, this throws off the 12 hour, 6 hour, 4 hour, etc. And then there is the hourly. Everyone in the world can relate to the hourly. It literally is the only timeframe that makes sense. The sub-hour timeframes are just not. It may be because they are just speculation subsets of the hourly, or because they’re not rounded, but the reasons don’t matter.

Thoughts: I’m surprised at how long it took me to just write that, and I figured that out a few months ago so it’s not helping me really, so I’m going to try to stop them for the most part. I’ve just noticed since I don’t really screw around on forums as much and recently writing less that I just get more stuff done and make more progress.

Had more interruptions in my day than I thought I would, but my schedule looks pretty clear for trading Thursday.

Attachment: more insightful than tradable (unless you are creative :) - there are ways), but interesting and the only time I'll ever need to make that image.
 

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There’s a big basketball game here tomorrow tonight, so I’m catching back-edge American and Asian today (began looking for trades 3:45 pm).
Note for myself: still finding it a bit hard to ignore the active bar as a signal, so add a trading rule or something (so I’m subconsciously trying to interpret the daily bar when it has 9 hours left to form, for example).

4:13 – buy stop hit on USD/CHF. Risk: 16.1 pips (these are around 0.5% of my account right now).

I think I forced myself into this one a little bit, and I should have waited for the signal that is in the process of developing rather than the reaction I was playing. I still have a positive outlook though.

4:33 – stopped out, paid for my mistake.
5:18 – short USD/CHF. Risk: 15 pips.
5:30 – stopped out. I took the break of 15 min horns on the bar close, but it went straight against me.

New rule: three straight losing trades in a day and I’m out. Even if my trades are only right 60% of the time, this should really only be happening 6.4% of my trading days.

5:46 – short EUR/USD. Risk: 11.1 pips.
5:50 – stop moved to -3.1 pips.
5:59 – stop moved to +2.
6:10 – stopped out.

Review: Although my patience is far more advanced than it was, I think I still have a subtle edginess. Basically once I saw a 15 min signal, I pounced on it in the hope that it would roll over into a new trend with energy (as they ran wild earlier). Anyway, they really all failed, and I lost sight of the hourly.

Patience: on the positive side, I am waiting for concrete, confident signals for my entries; each was well planned out, and very easily could have resulted in the turning points if my analysis had been better. On the negative side, I still can’t stay off the smaller timeframes. When I was on the 1 minute I would go daily, 3 hour, hourly, 30 min, 15 min, 5 min, and pretty much took the 1 min as my dominant setup timeframe. The same thing is happening with the 15 min. The real moves I did see (and I expect to continue) is short the EUR/USD but especially short the EUR/JPY. I saw the EUR/JPY move from my trendlines and LOBFs long before it happened, but unfortunately not only did I not have the patience to hold out for the hourly move, I actually let my mood go sour and left to go see a movie an hour and a half before it happened! Although I would only be dealing with a 14 pip profit right now (4 hours waiting for a setup and 2.5 hours open-trade and only 14 pips? – that’s what I’m afraid of). Secondly, my trades on the USD/CHF especially were not patient enough. I had a nice trendline in place I was looking for a bounce off of, but my trade entries were “area” bounces and failures when I should have been looking for precise bounces – two came soon after I finished trading, and both are hanging around 20 pips in the green.

Lessons: I really need to finally learn that large impulses don’t necessarily mean the market still has a lot of energy. I have no idea why I fall into that one again and again and again. Step up the patience a few more levels. Focus on the hourly unless extremely precise signals are given.

Also, keeping close analysis on four pairs every 15 minutes is still a lot of information. Yes I increase my time exposure and such, and there are really many good arguments for it, but in the end I process information slowly, and I really only retain small bits of information at a time – so I really can’t keep up with four detailed analyses at a time, especially when I can’t always understand them completely. As a result, I’m cutting down to my favorite pairs – the EUR/USD and EUR/JPY. I will try also to focus on the hourly (with assistance from the 30 min, 15 min) over the course of a trading day, rather than catching every 15 min bar over 3-5 hours or something (which is probably why I’m focusing on it anyway).

Likewise, I have cut out the 3 hour account (don’t know if I said that yet, but I decided that a while ago). Trying to cut my bad habits before they develop strongly (like the 1 min). 
Rest of week: I have had ten hours so far this week, so maybe a few charts and screensaver time if anything.

Attachment: my trading day on the EUR/JPY (hourly). Looks pretty dumb, only just over 2.5 bars from looking for the short until I went somewhere else.
 

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Just finishing my end-of-month tasks - editing all my documents and trading rules, and writing my monthly reflection:

1/31/09 on the Month of January

In Review: This month was characterized by far less trading than I would have liked. I had a lot of free time the first two weeks of the month, but I had to spend most of it working on my resume and job search, and then working out problems with my computer. However, I was able to come back for some decent watching, screensaver, and chart-making time later in the month, as well as two days of trading, which resulted in one small profit day and one medium loss day.

Strengths: My patience, money management, and market wisdom, is far beyond what it was last month. I am also very pleased to see that the charts I made even two weeks ago are far inferior to the principles I’m working on now. I know that consistent profitable is just another step away. It constantly seems as though it is farther away than always presume, but I am taking very large steps and getting closer and closer. I am also quite encouraged by my increasing degree of market innovation and analysis. In the past month, I have developed two new signals that I have never seen in a book or online in addition to many other innovations I have made, and I am discovering a new edge as a result.

Weaknesses: My patience seems to need some work. Although I have come a good ways, I certainly have an edginess when it comes to analyzing pairs with complete composure on several different timeframes, certain entry signals, and also with my overall ability to sit through and remain composed through long trading sessions.
Things on my to do list: Just watching and trading.

Goals: Over the next four trading sessions, I would like to have at least two of them be profitable with an overall net profit.

Ideas for improvement: I think experience and a little bit of experimentation is all I need. My mistakes are costly, but they are rather small. I believe another month of added experience will further improve my patience and composure, innovation, vision, and management. I am also discovering that I am just a tad slow when it comes to realizing my mistakes, especially in vision (such as a wrong trendline), and I expect both experience and the resulting confidence / less focus on other aspects will assist me greatly.
 
Just wanted to give a brief update. I completely changed the way I take notes in classes. It sounds irrelevant, but I will be taking notes on my computer for my lone Tuesday-Thursday class from 2:00 – 3:15. I will be able to trade this time at least on Thursdays, so I will likely only be missing the 1:45 and 3:15 15 min closes rather than everything between 1:45 and 3:15.

I completely changed my account drawdown policy. Now, my max drawdown before stopping trading is six times my per trade maximum risk rather than the 12% I had before. If you run the numbers of 50% success at 1:1 on six trades, which I expect to surpass anyway, it makes perfect sense. This also means that, with my current per trade risk at 0.5%, that my total account risk is set in stone at 3%. As I get better, I will step risk to 2% and 12% and such. I haven’t completely taken my previous drawdown rules off, but this just seems so much better.

Screensaver and maintenance stuff, no charts. Good trading this week.
 
Watching the market today. I believe I am pretty close to being able to trade and “watch” at the same time. I am trying to cram the ideology of only taking precise signals into my head and not focusing (as much) on direction, which to clouds my mind. I will have to focus on this over the next few trading sessions.

I’m wrapping up a solid watching session of about four hours. Unfortunately, I really don’t have a clue about what’s going on in either the EUR/USD. There was a decent long on the EUR/JPY I may have caught, however. As far as I can see, the EUR/USD is trying to throw a perfect bull flag head-first into a solid longer term TL. I also think the trend is on the hourly and 3 hour, so I don’t think a bull/bear signal will be developed for quite some time. However, in my last few minutes I did throw up a USD/CHF, and I’m seeing a long on the hourly. I should be able to trade a large part of the day tomorrow.
 
10:10am – began looking for trades

10:52 – Long USD/CHF. Risk 36 pips (0.5% approx).

11:10 – stopped out. My loss was actually a bit more than 0.5%. When I was looking at Oanda’s risk controls they were for market orders, so I had to try my best with the market tool (and a calculator) to limit risk while trying to enter my order. I have no idea why they show risk on market orders with stops (of course it’s constantly moving too) and not limits with stops, but I won’t enter any new trades until I make an excel spreadsheet that calculates my size from my risk.

12:13pm – if I were entering trades, I would be short the EUR/USD at 1.30 or long the USD/CHF at 1.1425 (both are really beautiful signals). I see another short possibly developing (but not ready to be taken) on the EUR/JPY as well. If I had to pick one, I would be going with long the USD/CHF again.

12:38 – both theoretical trades looking very strong. Short on Eur/Jpy would also be triggered.

1:31 – was away for a while. EUR/USD would have hit my stop for a profit of around 40 pips. USD/CHF looking strong still with a gain of about 60 pips.

2:00 pm – I would be out USD/CHF with a profit of about 60 pips

6:30 – EUR/JPY short signal

7:45 – I would have been stopped around breakeven with the tweezers. Ended up going back up and going straight back in my direction after hitting the trendline again.

I’ve been watching the market a lot though, including Asian yesterday, so I’m done. I called another trade that I didn’t record, but it went against me.
I’ve been watching the market a lot though, including Asian yesterday, so I’m done. I called another trade that I didn’t record, but it went against me.

Final result would have be two full stops lost (-.5% each), three full stops gained (+1.5%), and one around breakeven.

Attachment: blue triangle is long, red circle is stop (ignore squares). Green check is the trade I called long, the red check the stop I called. The red X was a bad long call.
 
I’m working under the premise that I am now capable of learning while paper trading, so I will be trading today. This has come from my increasing ability to keep my hands off when I am unsure in the past few sessions, the watching I have done throughout the week while I have been doing other things, and also that I have been able to develop new trading principles when I have been wrong that shows I am patient and composed enough to learn in the meantime. I will be busier and will watch instead on Thursday to see if I’m right, though.

9:45 – started trading

11:10 – pissed off. I’ve been waiting for a short setup on the EUR/JPY mainly (possible but weaker one on the EUR/USD) for over an hour and a half, and the trade is as clear as day – I mean really, there are so many short signals here it’s insane. However, apparently it was too obvious and now I’m dealing with a 15 minute bar with a 190 pip range, which screws up everything and I will likely have to wait at least an hour before anything even thinks about developing. Time to take a break.

11:45 – back just to check on things. The range of the EUR/JPY in the last 45 minutes is now 280 pips. Ridiculous. Now that I think about it, the behavior of the 15 min wicks and accompanying volatility before the move (what I interpreted as nearly a sure reversal) could have really been an indication that the move was high-energy and could have been interpreted on the timeframes below the 15 min. Although I wasn’t part of the fun, I firmly believe that this patience is exactly why I believe I am now mature enough to watch and trade at the same time. It’s better to learn something than to blindly place a market order into this insanity.
At this point I would normally be looking toward the USD/CHF, but I made a temporary rule that I wouldn’t trade it today so I can test how well I’m seeing my other pairs.

1:13 – I was offered a decent entry to jump on the EUR/USD short so I did. It was a borderline play according to my rules (wide range bars), but it pulled back enough to offer a pretty good entry into the formation. Risk: 0.5%, 40 pips.

1:26 – standing profit of 40+ pips. By rule, my stop is moved to positive: +8, even though I’m now thinking about changing this rule to allow maybe +1-4.

2:00 – stop moved to +19

2:32 – stop moved to +47

2:50 – stopped out at +47

6:30 – back looking for a trade for the first time since I closed the last one, but I am excited to see that there is still nice trend in the EUR/JPY. It is either a double top and/or head and shoulders, or it’s a failed double top / head and shoulders. Either way, looks like fun.

7:25 – I’m rather annoyed at this one. I lost 28 pips on the EUR/JPY while I was gone. My buy stop was above a bar, and it only reached one pip short – yet I was entered in the trade. After asking customer service, it was because the limit was triggered off the ask, not the charted price. I exited within about two minutes of realizing what happened. Loss of 0.25% and 28 pips.

7:38 – short EUR/USD. One of those if-I’m-not-short-here-I-haven’t-learned-anything kind of trades. Risk: 23 pips, 0.5%.

7:44 – up 25 pips, stop moved to +2. The funny part is that I used to be lagging and entering around now so I am definitely many times better. However, I don’t like that profits are coming so quickly; I’d feel more worthy of it if there was more work/time involved.

8:15 – stop moved to +17 on light of a new bearish signal (of my own innovated variety!). I have signals confirming signals. Trading is awesome.

8:29 – stop moved to +28.

8:41 – stopped out at +28.
Session trades: +47, -28, +28 = +47. Total P/L of about +0.8%. About eight hours of trading maybe. I’m pretty happy with the session.

Attachment: my shorts on the EUR/USD. Triangles entries, circles stops, squares just order adjustments.
 

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