ForexSpirit

July saw the welcome reappearance of a positive monthly return.

I only closed out four full trades for the whole month, all of which were in the black. My returns for the month also included a partial stop loss for my Q3 entry on July 25; this partial stop loss is part of my updated trading plan, where I will close out at least a half of any open position if it goes 100 pips from its original entry price. When price goes back in the direction of what I consider to be the long term trend I re-enter the trade at the stop loss price. This is exactly what I did on July 31st, when I entered a trade at 1.3697, thereby cancelling out my stop loss.

My return for July 2007 was 3.59%.

I’m slowly internalizing and becoming more comfortable with the changes to my trading plan that I have made this month.

There was a great quotation in yesterday’s Currency Currents newsletter. I have never heard of F. J. Chu before, but I’m certainly interested in reading more of his work now.

I feel it’s worth posting the quote here as it is full of useful insight:

Those who wish to render the market rational and susceptible to mathematical quantification misunderstand its true nature. The application of probability, statistical regression, and diversification only gives the sense and appearance of control. Yet in their search for certitude, they reflect a pessimistic confusion about the economic future and its limits. We cannot drive absolute certitude about the market because it has its roots within ourselves. The market is not illogical per se, but its mathematical exactitude is a trap. The market is governed by laws of the mind. Insight, imagination, and faith—and not just economics and rationality—are the sentiment that mobilize the investor to risk his capital. After all the research is done, the wisdom of his actions will not be apparent until well after the investor commits himself to it. An investor must trust his intuition enough to pursue his vision and act upon it. And in doing so, he carries the insecurity that comes from standing alone and not with others. In most cases, a reasoned calculation of gain or loss would impel an individual to the sidelines in search of security. Investors who never act until all the market statistics are available or wait until all speculation becomes fact are doomed to mediocrity by their dependence on an illusory rationality.

If you’re a regular reader of my blog then you are sure to see some of the trading mantras that I seem to cover quite regularly touched upon in Chu’s writing. That’s probably why this piece resonated with me when I first read it.

Once again I’m reminded that you have to take on risk as a trader. You have to place that trade even when you don’t know everything; when you have absolutely no idea what is going to happen next. That’s what makes you a trader.

Another piece of useful information I came across this week is that the Daily FX calendar has been given an overhaul. It certainly seems to be pretty good now. It’s always important to source your economic data from multiple places so as to allow for redundancy when a website might be down and to verify that the expected consensus data numbers are correct.