I've been trading strictly automated systems on Spot FX for a little under 18 months now. I've never really done any discretionary trading, or really been interested in it, up until recently. But over the last month, I've been feeling a little burnt out with my auto-trading whilst at the same time becoming more curious about discretionary trading after seeing the market's reaction to some particular events that are difficult to target via automation, but seem ripe for profit using discretion (for e.g. the BOJ announcing its massive QE plan).
I'm quite sure as of this moment I'm probably a very, very average discretionary trader, mainly due to lack of experience. That said, since becoming a member of futures.io (formerly BMT) over 12 months ago, I've read A LOT about the psychology of trading, trading price action and the common mistakes new traders make. So in that regard, hopefully I have a leg up in getting off to a good start.
Since my automated trading is very indicator driven, I feel sort of compelled to take the opposite approach with my discretionary trading, so I'll be using a PASR approach. My chart will be naked except for some hand drawn support and resistance lines. I'll generally be looking for opportunities where the PASR technicals are in confluence with fundamentals to try and maximize the probability of a successful trade.
I will be looking to make only 4 or 5 trades a week that are well researched. I'll be generally looking at the 1 hour timeframe and look to hold positions for 1-3 days. Risk reward on every trade must be at least 1:2 and I'll be risking no more than $100 per trade.
I'll be applying a loss limit of $200 in any given week. If that is breached, I will ban myself from trading for the rest of the week.
I'll be placing my trade ideas and actual trades in this journal. My aim for this journal is to help with discipline and accountability. I would welcome any feedback from anyone in the futures.io (formerly BMT) community about any aspect of my plan or any given trade/idea.
Instrument: USDJPY
Direction: Long
Technicals: Higher highs for last 1.5 days on hourly, potential break through 98.1 resistance
Fundamentals: JPY Consumer Confidence released @ 1500 GMT+10
Market Conditions: Still fairly volatile post BOJ news a couple of weeks ago
Entry: ~ 98.15
Stop: 97.91
Target: 98.85
R:R: > 1:2
Summary: Take trade if market is disappointed with JPY consumer confidence results which causes breach of 98.1 resistance.
Price has already breached my entry and is hovering, so I'll be looking for continued movement in that direction, post news announcement at 1500 GMT+10
Consumer confidence came it at 44.8 versus 46 as expected. Should be bullish for USDJPY, so I entered the trade. Didn't get the 98.15 price I'd hoped for as the price rose leading up to the announcement (ended up getting in at ~98.35). I may think about adjusting my stop and target based on this entry price but for now I will sit back and see what happens.
Instrument: AUDJPY
Direction: Long
Technicals: Lost a lot of ground this week, but has begun to make higher lows on hourly chart
Fundamentals: Ground lost due to poor figures out of China over prior week and also consolidation after massive JPY moves of last couple of weeks.
Market Conditions: No big news events beyond 11:30am GMT+10
Entry: Market price post 11:30am GMT+10
Stop: 99.85
Target: 101.85
R:R: ~1:1.5
Summary: Take trade after 11:30am GMT+10 if news is favourable. Expecting a recovery in this pair after it has lost a fair bit of ground despite pretty good AUD fundamentals and pretty poor JPY fundamentals.
One thing I missed when entering this trade is a constricting wedge pattern developing for this pair. To hit my target, it would require breaking out of this wedge. I'm now considering taking profit now as it kisses the top of the wedge formation, then potentially getting in again if it breaks out of the wedge.
Lessons: It could be argued that exiting early may be a case of 'not letting my winners run'. I more so feel it is a case of missing an important technical pattern when analysing the trade opportunity. Even if it is the latter, I need to pay more attention to this. I still think there's a good chance that the pair will break out of this pattern though (which could be my next trade).
Instrument: USDJPY
Direction: Long
Technicals: Higher highs for entire week in constricting flag pattern
Fundamentals: BOJ QE gives JPY bearish outlook
Market Conditions: Abe giving press conference which has acted as catalyst for breakout of flag pattern. There is a G20 statement due at some point before the weekend which does add risk to this trade.
Entry: ~98.83
Stop: 98.354
Target: 99.31
R:R: 1:2
Summary: Now that flag pattern has broken to the upside, only obvious target is the magical 100 mark, so have set target just below that.
The following user says Thank You to HitTheCity for this post:
Happy to finish the first week of my journal in the black. No lapses in discipline, each trade carefully researched - I'm aiming to do the same this week!
Event risk: The news docket is fairly light early in the week with no major announcements due until Wednesday (GMT+10). I will therefore be looking to make predominantly technical based trades early in the week, looking for opportunities to fade the top and bottom of ranges or channels. Later in the week there are some big news events that have a scope to really move the market. I'll be looking to watch those closely and take some positions based on likely outcomes of those events.
Critical levels:
USDJPY pushing to break 100
EURUSD hovering just above 1.3
Instrument: USDJPY
Direction: Short
Technicals: Large resistance price barrier at 100 that will take some effort to breach.
Fundamentals: BOJ QE gives JPY bearish outlook
Market Conditions: USDJPY gapped up over the weekend. I feel it's likely that the gap is likely to be filled and price will slowly retrace towards 99.5 early this week.
Entry: ~99.8
Stop: 100.03
Target: 99.47
R:R: > 1:2
Summary: Despite being counter trend, I feel this is a high probability trade with limited downside.
I cut this one short of the initial target after it was clear the little thrust down was losing steam. Still, starting the week with a small win, so that's nice.
Well, this should be a lesson to me - price eventually fell to hit my original target. I have to learn not to let trades play out, even if that means taking a loss after being in the black on a trade every now and again. Not doing so will eventually destroy my R:R.
Instrument: EURUSD
Direction: Short
Technicals: Big support at 1.3 that is just waiting for a fundamental catalyst to bust through
Fundamentals: Eurozone PMI figures coming in weaker than expected.
Market Conditions: Been a slow day thus far but expecting a big spike of volatility when the announcements come through
Entry: 1.30257
Stop: 1.30717
Target: Wait and see... if price goes through 1.3 it could be a big move which I might trail.
R:R: Undefined as I've not yet set an exact target, but I'm hoping for at least a 100 pip move.
Summary: If these news results can cause a break of the 1.3, a big move might result.
In opposite fashion to my last trade, I held this one too long. Profit peaked at over 50 pips, but I decided to put a 20 pip trail stop on it to give it a chance to run overnight while I slept. Still, it's a solid win, so I won't beat myself up over it too much.
Instrument: AUDUSD
Direction: Either
Technicals: Hourly bars currently testing top of descending wedge.
Fundamentals: AUD CPI figures to be released at 11:30am GMT+10
Entry: TBD
Stop: TBD
Target: TDB
R:R: TBD
Summary: If the CPI figures are a miss, I'll go short with a target near the bottom of the descending wedge channel. If CPI figures hit or exceed, I expect a breakout of the channel and will go long.
Well, I'm in short as the CPI figures were disappointing. Got a horror fill so I'm behind the 8-ball a bit, but still feel confident this news should thrust the AUDUSD back towards the bottom side of its channel.
Instrument: AUDUSD
Direction: Short
Technicals: Hourly bars currently testing top of descending wedge.
Fundamentals: AUD CPI figures to be released at 11:30am GMT+10
Entry: 1.02352
Stop: 1.02676
Target: 1.02073
R:R: < 1:1 (not a great R:R due to bad fill)
Summary: CPI figures were a miss, so shorted AUD.
Both the technicals and fundamentals seemed to align to make this look like a winning trade. However, the market is about probabilities, not certainties and you can never be correct all the time. I still feel like it was a 'good' trade even though it wasn't a winning trade.
Instrument: USDJPY
Direction: Short
Technicals: Price bound below big scary 100 figure
Fundamentals: USD Durable goods data due
Entry: 99.382
Stop: 99.491
Target: 99.15
R:R: > 1:2 (not a great R:R due to bad fill)
Summary: Short USDJPY if Durable goods data is a miss
This is a retrospective journal entry. I made this trade after the Durable goods figures were a miss. Price went briefly in my direction but ended up bouncing back, hitting my stop and continuing further. From a rational perspective, I'm not sure why the market reacted in this way, but I'm glad I had a tight stop in place.
Instrument: USDJPY
Direction: Long
Technicals: Price has been bound below big scary 100 figure
Fundamentals: BOJ meeting today should be a catalyst to at least retest 100 mark and possibly break through. Especially if USD GDP figures are on target later today.
Entry: 99.188
Stop: 98.978
Target: 100.845
R:R: > 1:2
Summary: I'm banking on the BOJ news to be bearish for JPY. I think I got a pretty good entry price. I have my initial target set a fair way off, I may bring that back in depending on how quickly price moves and where it is at before the USD GDP figures are released.
I'm really not understanding how the USDJPY is moving right now. I need to take 5 and think before getting in again with this pair, even though I still feel like it should test 100 again today.
Instrument: USDJPY
Direction: Long
Technicals: Price has been bound below big scary 100 figure
Fundamentals: BOJ meeting today should be a catalyst to at least retest 100 mark and possibly break through. Especially if USD GDP figures are on target later today.
Entry: 99.815
Stop: 98.495
Target: 100.845
R:R: > 1:10
Summary: I'm going again with the USDJPY long. This could make me look really silly after already losing over 30 pips going long on it today, but I feel like this trade is still good with huge upside, I just didn't foresee the price dropping back below 99 before shooting for 100, which caught me out earlier. I'll see how this one plays out then review whether I should have had a wider stop on the first trade or if it's better to have tighter stops that get hit more often before catching a runner.
Well, the market has humbled me and made me look and feel like a bit of a muppet. I was so sure the BoJ news would be bearish for the JPY and perhaps in the longer term it will prove to be the case, but the market reacted in a bullish way when the BoJ didn't double down on their previous QE initiative.
There is a lesson here and I'm pretty sure I know what it is, but I'll wait until the end of the trading week to formulate my thoughts and let myself cool off a little bit.
Entry: 98.860
Stop: 98.785 (moved my stop up. That looks like a bad decision. Think I'm going to instigate some harder rules on doing so for next week). P&L: -7.5 pips
