Bone-Headed Move of the Year So Far

I haven't been blogging lately because I'm been embarrassed by my behavior on this particular trade. This trade occurred on Wednesday, April 8th.

The Prediction

With a 42 pip candle, the 3am GBP Grid predicted that the currency would ultimately reverse direction after passing the BUY or SELL with a 58% probability. This would be a gain of 71 pips.

This isn't a particularly high probability, so I was going have to play things carefully.

The Set-up

The GBP seemed to be moving up nicely, so it didn't seem wise to put a limit-entry at 1.4703. Sure enough, by 8am it had rocketed up to 1.4746, a few pips below where the grid would've declared this a dead trade, 1.4752.

I decided though, once it definitively passed the BUY threshold, to put a stop-entry at 1.4703 in case it missed its target and flew down.

Sure enough, it tripped the entry at 9:17am. Then it promptly flies up 30 pips, stopping me out! I'd meant to have my stop at 40 pips, but for some reason had set it at 27 pips??????

Don't Trade Angry

GRRRR, I was furious with myself. I put ANOTHER stop-entry at 1.4703. IT tripped at 11:57am. It FLEW down 65 pips! Double what I'd lost. YEA!! I'm up. And to top this off, the GBP looked ready to challenge the day's support level. The indicators all had looked oversold, so they seemed poised to break through.

The currency BOUNCED off support and started the Bataan Death March up back to where I had gotten in. I hadn't moved up my stops to at least cover my loss because I reasoned the market owed me the breakthrough.

At this point, you must realize how stupid I was thinking. It only occurred

to me after I went back to ZERO pips.

Conclusion

God. I did so many things wrong, it's taken me a couple of weeks to gather my thoughts. I committed several sins here. First, I was careless. When money's at stake, you need to be careful. Double check your work. Double check your trade settings.

Second, the market doesn't owe you anything. It does what it does. I was up 65 pips for a good five minutes, with plenty of time to close the trade. I figured this was the breakthrough of the month. It wasn't, and I paid dearly for it.

Third, close up those trailing stops. I should've had my stops to cover my losses from the morning. I was blinded by anger and greed.

Gee, I wonder why people hate me sometimes.

External Factors Intrude

Being an adult is never easy. You appreciate consequences so you become more risk adverse. It's a good attribute to have when you are trading.

The Prediction

By traveling 45 pips, the opening candle suggested that the currency would travel another 55 pips with a 76% probability.

The Beautiful Setup

I was never in the red, as it zoomed through the SELL at 1.4690 at 4:50am. Every indicator showed this was going to be a long run, perhaps way further than the predicted 55 pips. The 60 minute RSI was cresting overbought, trending purposely south. The 240 minute charts showed oversold conditions, but with room to run further. The 15 minute RSI had just crossed the 75% marker and the MACD was seconds from triggering south.

One concern was 1.4635, the prior day's low. The currency was likely to at least pause there, maybe even retrace. The 3am Grid's target was precisely 1.4635, so it was going to be in play regardless.

The Fly in the Ointment

Man o man, it flies down to 1.4620, lingers for a second and quickly finds resistance at 1.4645. That's when it happens. My charting software froze. Solid. Now I'm blind. My trading platform is working just fine, with my gain hovering around the predicted 55 pips. What to do?

I GOT OUT. Hey, 55 pips is a decent day's work. Once I rebooted, the software restarted, and I saw that the currency had dropped another 50 pips or so. BUMMER!!!

Bottom Line

I made a mature, rational decision. So many things can go wrong when you have eyes on the instruments. The risk goes up exponentially when you can't even read your instruments.

It sucks being a grownup.

Nothing You Can Do

The week started shittily with a trade that had two distinctions. It came and reversed quickly, and reversed again for a several hundred point drop. It was a frustrating result.

The Prediction

The 3am Grid predicted that the GBP candle would travel another 53 pips with a 75% probability.

The Results

At 5:25am, the SELL was tripped. It quickly reversed, so by 5:35am I was stopped out of the trade. As it happened, the currency retraced all the way back to the BUY before reversing again and dropping 288 pips! Truly frustrating.

Bottom Line

This was the kind of trade that makes you pull your hair out. No lessons learned except to note that the markets jig and jag violently sometimes before reaching their goal for the day.

Push the Ball

Thursday, April 2nd, the 3am Grid advised me that I had another trade. It gave me a target, the probability of success and time to implement the trade. Could I have made more money? Absolutely.

The Prediction

The 3am Grid predicted with a 58 pips opening candle, that the GBP would go another 37 pips with 78% probability. Great odds!

The Action

The GBP tripped the SELL at 4:52am. One minute and one hour later it hit the target. As it was zooming up I was asking myself whether I was going to move the LIMIT given the 60 minute RSI and MACD were edging overbought. The 15 minute was giving me conflicting signals to the 60 minute so I elected to make my money and leave. Thirty-seven pips is not a bad day's work. Considering the prior day's drama, I was fairly satisfied.

As everyone knows by now, the currency shot up another 100 pips that day. Had I stayed in I never even would've been in negative pips. My motto is to always go for singles and doubles. Home runs sometimes come easy, sometimes hard. Swinging for the fences is a good way to have a shitty win/loss record.

Bottom Line

I play tennis. Virtually everyone I know who plays tennis likes to hit the ball hard, with pace and direction. There's a particular kind of tennis player that is universally disliked. They are pushers. They make contact with the ball. They keep it in play, always. They don't go for winners, they just keep hitting the ball with underspin. The ball barely makes it over the net and never bounces high, forcing the opponent to reach for the return. It's said they kill you with paper cuts. John MacEnroe likes to say though, "Show me a pusher and I'll show you a room full of trophies."

You want a room full of trophies, be a pusher.

Keeping Your Cool

It was satisfying to make money in March, but it's still gratifying to start the new month with winning trade. This was harder and easier than it looked.

The Prediction

With a 75% probability, the 3am GBP Grid predicted the currency would travel another 45 pips on Wednesday, April 1st.


Dammit!

I see that the computer is telling me this is a good high probability trade. I'm very excited to start the month off with a strong probability trade. I see that the currency is surging nicely, likely to trip the sell within minutes of closing at 4am. This could be one of those in and out situations that we all love.

I noticed though that my charting software has frozen. I turn my attention back to my brokerage software, and it too has frozen. I'm screaming at the screen.

Back in Business

After a few moments of aggravation, I decide to reboot the machine. Reboot it again. Reboot it again. This time it catches and I'm back in business. Only now, the currency is 20 pips above my entry. I learned a long time ago, do not leave your wing man. Oops, wrong movie. Do not chase the currency.

My patience was rewarded when it retreated back to the SELL flirting with it for several minutes. I was able to get in at 5:32am. Yippie!

Knowing When to Leave the Party

Up down, up down. The GBP is clearly using the SELL as support all morning. My suspicion is that market might be waiting for the 8:15am ADP numbers. If they come in worse than expected, this currency could fly north. I'm resigning myself to waiting for the results of the announcement, when I notice the currency creeping up to my exit. A bird in hand is always better than two in the bush is an expression currency traders need to take to heart.

With 41 pips out of an expected 45 in hand, I dump the trade at 7:48, minutes before the opening of the American market. Gone good-bye.

Survey Says?

As you can see from the chart below, the GBP nosedives at the opening of the American trading hours.

A few minutes after that, the ADP numbers get announced. Instead of the predicted 650 thousand drop in employment rolls, ADP announces a staggering -750 thousand! Weirdly, the GBP dives in relation to the dollar. Now I'm thinking that I'm brilliant for getting out when I did, since I would've been clearly stopped out.

Bottom Line

I got lucky on Wednesday. If I'd left my trading desk in disgust after the computer glitches, I wouldn't have been around when it came back to the SELL. If I'd chased the currency north I would've only been up a few pips, forced to risk a big announcement to make or break me. If I hadn't been satisfied with 90% of the expected gain, I would've endured a loss on the day as it swooned seconds later.

Sometimes, you make your own luck.

March Results

When I started this blog, I started keeping track of stuff I hadn't before, like percentage of trades captured. This has me at 40%, which admittedly stinks. I clearly can do better.



I don't only do the GBPUSD. I also do a 3am USDJPY trading system, so overall my pips captured are roughly twice what I've reported here. I left money on the table with the GBP.



I've noticed an interesting phenomenon. I feel like my decisions are better formulated and turning points are better defined. It's like you the reader is in my mind and I have to justify my decisions.



I'm liking this.

Lost Opportunities

I've discussed reverse trades in prior posts (Types of Trades). After Monday's experience I need a new approach.

The Prediction

With 68 pips the 3am GBP LC Grid predicted that the currency would break in one direction, but would ultimately reverse with a 80% probability.

Quick Start / Quick Ending

Two hours later, the GBP trips the SELL and quickly jumps back up forming a hammer. By the end of the morning, the GBP completed the reverse, end of story.

Analysis

I didn't jump on this in time and missed the opportunity to make 93 pips. It got me thinking about how to do these. I went back 6 months to review all reverse trades. I was surprised to see a couple of things. In general, these are winning trades 78% of the time over the last 6 months. Regular 3am Grid trades have very little drawdown before reversing. So it makes sense on those trades to put LIMIT-STOPS immediately upon the closing of the 3am candle.

So called Long Candle reverse trades on the other hand routinely drawdown 70, 80, 100 pips before reversing. To me that's way too much risk. Clearly, I'll need to develop a strategy to capture these.

I can't beat myself up too much. Monday's set-up was unique in the sense that it tripped and immediately reversed. Over the past few months, the drawdown would've tripped my stop every time. I did good.

Bottom Line

Analysis gives you the context to make better and more comfortable decisions. Gee, pretty obvious I guess.