Week 2 FX trading results

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Returned 7.9% this week. My worst trade took place on Monday, when I allowed one of my demons to take over; the result being that I traded in greater size than was justified by both the trade set-up and my own very lax risk parameters. I closed the trade at break-even but on hindsight it could have been very detrimental. A lucky escape.

I continue to take excessive risk relative to the standard model, but my trading road map serves me well as my mentor. I give a scoring of 7/10 for how well I have heeded the advice of the road map. My greatest flaw was that I allowed the the discretionary component of my approach to get the better of me, but the results of these trades was far less destructive due to a massive reduction in the size of these trades. There is a lot more work to be done.

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6 responses to “Week 2 FX trading results

  1. Hey that’s excellent! I had a loss of 2% this week.

  2. Caravaggio, sounds like the beginning of a virtuous circle.

    Lucky escapes are exactly that, and next time you push your risk parameters, Lady Luck will be at somebody else’s turret, serendading them instead of you. If the risk-pushing demon appears, walk out of your bedroom and take a walk or clean the bathroom, whatever. You do not have to trade if that demon is hanging around.

    BTW, I left a comment under your roadmap post.

  3. “I continue to take excessive risk relative to the standard model… ”
    Focus only on taking mathematically logical risks, and this problem will fade away.
    We all make mistakes, and the only time we really “lose” is if we don’t focus on solutions and let these mistake repeat over and over again.

  4. Hey Rocko, at least your losses have been contained. I’m lucky to have had these positive results but I also accept the view that in the short-run, absolute positive returns are not always better than absolute negative returns. Once risk is accounted for, I think it can be better to post a contained loss in any given week, month or year, than it is to post a gain that has involved putting one’s very survival at risk. However, and here’s the kicker, I am actively taking excessive risk relative to the standard model for the time being, because I have decided that it is necessary if I am to have any chance of climbing out of this hole of my own making. The trade-off of course, is that while this strategy might reduce the number of months it may take to get my equity back to a reasonable level, the approach also reduces my odds of survival over the same horizon. This is something that I am just going to have to live with for the time being. If the gods of fortune smile on me in the months ahead and I do manage to crawl out of this hole, I will revert to a more sensible approach to risk management.

    Michelle, I think I am slowly getting better at pushing this demon out of my head (that is, the demon that has me placing unjustified trades in big size). Last week involved that one nasty trade, when things could have really spiralled out of control, but now I have the road map to help me on my journey. I am taking your advice to take small breaks, especially when the shadow of the demon hovers over me. When this happens, I either close down the trading platform and divert my energies to other web-sites or I physically remove myself. I find that going to the gym really helps to rebalance my internal compasses. Win or lose next week, I would really like to score 9 or 10 out of 10 for managing my demons.

    PS – Rocko, I really agree with your very last comment re learning from risk. I think if someone allows mistakes to repeat over and over again, they are are ‘losing’ at a very personal level.

  5. though intellectually I grasp your taking high risk at the moment in order to compensate for the April deadline on which you decided, part of me has alarm bells going off. If you have unlimited trades, then why can’t you focus on taking trades with low-moderate risk? Just plod consistently along? I do not trade futures, so I am probably out of my element here. Or just pepper the plodding routine with a high risk trade once a week?

  6. There is an alarm bell going off at my end as well Michelle, and rightly so. Unfortunately my trading approach does not have unlimited trades. In recent months I did trade heavily but most of these trades were discretionary, destructive trades.

    If I am true to my original approach I will only execute a handful of trades in a given month, which is why I have had to ramp up the risk if I am to get anywhere. I hope to one day be in a position to be able to plod along with measured risk, but that is a previleged position from my perspective.

    If I ever get close to break-even I will adopt more sensible risk-management.

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