ForexSpirit

Trading can be a total roller coaster at times. The unrelenting risk-on that has unfolded all of October being a case in point. Try as I might, I just couldn’t put my head into full-on Euro bull mode. In the end that has cost me.

In EUR/USD it meant I missed out on the opportunity of having any long legs active. For the first 10 days of October I did actually place a few cautious long entries, all of which got stopped out at BE. After the trend channel breakout on October 10 I just couldn’t get my head around going long yet. Nothing was sorted out as far as a comprehensive solution to Greece or the European banks. According to ForexLive the majority of the whole move up is just short covering. Everyone was short up the hilt and even the possibility of a big step towards a solution was enough for everyone to pull the plug on their shorts, thus causing a cascading effect where the market just rampaged north.

In other currency pairs, ones that I don’t have as much of an intimate knowledge of, I paid too much for the chance of participating.

Even though I didn’t profit from the big run-up in EUR/USD I was conservative enough to only have a drawdown of 227 pips (150 of which come from 3 failed short top picking attempts Wednesday and Thursday; see, still only looking for shorts!). On the other hand, I’m not at all happy about my performance in other currencies, where I left dud trades on too long and had to cut my losses.

As much as September showed how much potential the millepede method has when you get to ride a trend, this month showcased that when I miss the reversal of a trend I’m not able to switch my conviction definitively and that spreading my trades over too many pairs is haemorrhaging too much money too fast.

Earlier this week I thought of three keys words that I want to keep my mind focused on when I’m contemplating a trade: participation, patience and picky. These are my three little Ps and the market is the big bad wolf.

Participation: you can only make money if you actually place trades. You have to be in it to win it. This means being willing and capable of placing trades. I have no restrictions as to when I can place a trade. I will prefer to place a trade during the day so that I can more easily monitor it and move the SL to BE when I think it has moved into enough profit. I’m not adverse to placing trades on Friday, during the Asian session, or other ‘slow’ periods that other traders often avoid.

Patience: The market’s not going to move 100 or 200 pips every day, so it can often make sense to not trade. A big part of the millipede method is a waiting game. Even when you have profitable legs active you generally have to wait weeks before you can reap the profit of what you’ve sown. Having patience is often counter to wanting to participate.

Picky: the pivot that tips the balance towards either participating or being patient and holding off is being picky in the entry setups that I’m willing to place a trade on.

I’ve also made two other decisions relating to how I trade day to day. Starting next week I am going to only look at trading EUR/USD. I have been consistently profitable trading EUR/USD with the millipede method. It is the currency I have the most experience with (by a long shot). Every other currency I am either okay with (AUD/USD, EUR/CHF) or terrible (the rest), as evidenced by my trade results. Instead of placing potentially three or four trades across multiple currencies on a given day I will instead be solely focused on EUR/USD, where I’ll stick to pulling the plug if I experience two losses in a day. I don’t really expect to place more than two trades in any given day anyway, but I’m going to keep that rule for those days when I get a rush of blood to the head and want to make back whatever strife has befallen me.

Up to now I’ve been very loose with my initial SL levels on newly opened trades (i.e. there haven’t been any, thus the USD/CHF pain mentioned in a previous post on the SNB intervention). I’m been slowly reigning that back in and I’ve settled on having a 50 pip SL level right from the get-go. When I have a trade underwater it ties my hands mentally about knowing what the best course of action is. The open trade acts as an anchor that blinds me to the best course of action and I’m unable to determine what direction I want to be trading in. The sunk cost fallacy grabs hold of me and won’t let go. Since I’m narrowing down my focus to a single currency pair once again I don’t want that sort of albatross around my neck for days on end. So the 50 pip SL is there to clear away the baggage when my entry has been average or poor.

These changes are simply trying to focus on what seems to work for me and cut away the things that aren’t. Maybe I went too far thinking I could trade eight currencies simultaneously. I’m tussled with this aspect of the millipede method before. If you only focus on one currency, how well can you do during ranging periods? What if there are no big trend moves? The multiple currencies are a way to mitigate these problems. Unfortunately they seem to cause more problems for me than they solve. Thus, instead of chucking in the millipede method (and in process probably trading for good), I’m hunkering down on what I’ve been good at in the past and trying to leverage the currency pair that I know the best: the good, old Euro (if it manages to live through this crisis).