What's Your Excuse?

Lately, I've been thinking more about my forex trading money management strategy. I have yet to implement my new money management strategy below, but was my old one a double edged sword? Is my new one better? Am I contradicting myself to my detriment?

I'm always getting out of the market with at best + 10 pips. This happens on the majority of my trades. I know the more serious traders out there probably think this is really bimbo and maybe it is. However, I've done much worse in the past. Before, I was one step forward, five steps back. Now, I'm one step forward, two steps back. Is that ideal? No, but it's an improvement - so one gold star for me, although I'll hold off on the couch-jumping until I actually start making serious profits.

My best win YTD was +249.08 pips. My worst loss YTD was -74.33 pips.

I haven't had a really good trade since January.

Technically, I'm losing 74.77 pips this year. Don't forget I also blew up my trading account about two years back and am still not breakeven.

There's no turning back now. I've got my work cut out for me. If I keep trading little black dress (bearish divergence) and little red dress (bullish divergence) and finetune my money management strategy, my strategy is going to be sustainable. I have stopped the downwards trajectory and that's a small victory.

I know I have to keep at it - it's boring and I'm going at the pace of a turtle, but turtles are known for their longevity.

I honestly asked myself, am I still making excuses for myself for not being a better trader and for not going faster?

Well, I've now got:

1. a better strategy than coin flipping
2. a much more level-headed perspective on the market


What have I got to improve?

1. continue to keep my discipline
2. do the analysis and trade my plan - don't get into any more impulse trades (what really killed me was trading FOMC and the stop & reverse & reverse thing I did back in May when I was experiencing total emotional volatility)
3. my money management - particularly where trailing stops is concerned (i.e. what is the best way to trail your stop whilst staying in the trade?)
4. figure out exactly when my strategies will work best - under what market conditions should I use little black dress (bearish divergence) vs. little red dress (bullish divergence)?
5. stop making excuses for myself. If I'm just scared of getting into a trade, I need to confront those fears. And if I'm going to condemn myself for not getting into the trade in the first place, at least I should make it a real learning opportunity.


This week, I'll be travelling, so I won't be trading or blogging all that much. Perhaps the extra time to reflect on my trading is just what's required at the moment.

Boris Schlossberg: Anatomy of A Scalp

Interesting video from Boris Schlossberg on how people run stops - seems quite an alpha male strategy to me though... I think the politically correct term is aggressive strategy.

Some Thoughts From the E*Trade Webinar

So I attended my first E*Trade webinar.

Aside from the technical difficulties, some interesting trade ideas were bounced around, so it wasn't a complete waste of time.

Overall, the stock market rally is not overextended according to our friends at E*Trade.

Preferred stocks might be an interesting arena to look into in addition to undervalued international equities. TIPS might be another asset class to explore.

They seem to favour opportunities in large caps as well.

Chris Keith also poignantly mentioned: "Don't fight the Fed." So does this mean that my AIG is not the hopeless and lost cause I thought it was?

I believe in Divine Intervention, but not where my trading is concerned.

Leap of faith?

GBP/JPY Meltdown Party Started Without Me...

Why don't I ever take my own advice??

I have no excuse this time other than I'm attending the E*Trade webinar.

But that is a very lame excuse indeed. This webinar is kind of funny because they're having some technical issues. Not only are the PowerPoint slides not working, the presenter had to run to another room to finish the presentation. Oops... ok, now they've corrected the issues.

Wow, this is one of the fastest descents in GBP/JPY I have seen in a while. -50 pips in basically a few minutes. This has now moved too far beyond my ideal entry point, so I'm just going to let it run on without me. With the crazy way that DJIA rallied today, I'm not sure how good my original short GBP/JPY idea was anyway. Reading mixed signals... not my forte.

Maybe there's another GBP/JPY flight tomorrow?

We've Got A Real Budget Issue Here...

Looks like I'm not the only shopaholic... financial troubles echo across the US...

This is why I'm semi-Republican. Notice most of the traditionally Democratic states are all the ones in major financial fiasco territory?

Arbitrage & E*Trade Offering CME e-Micro Currency Futures

You know how you could be looking for something all around the world and it turns out it's right in your backyard? Me neither.

But I just realised my lovely broker E*Trade is offering CME e-Micro currency futures. If they take delivery on the actual currency, then I could be doing some arbitrage with this.

Why doesn't anyone talk about arbitrage strategies in forex?

Is it actually a viable strategy?

It'll be a lot more boring, but a lot more profitable I'd imagine.

Fun One: Do You Have A Winning Investor Personality?

I wonder how true this is...

I Am So Tempted to Short GBP/JPY...

But it seems like the bulls are in control today. I'm going to have to wait and see. I know this is probably not a good time for me to be all contrarian. If it stays above 157, I might contradict myself and go long.

It's like there was a surprise party that I wasn't invited to and I'm even all dressed up!

I'm glad I added to my NYX position yesterday. I'm +3.87% on that part of the position so far and am really looking forward to a full recovery of that position plus a good four figure profit.

All my other positions are basically status quo though. So one tree doesn't make a forest.

Bimbo In Bimbo Out: Risk to Reward Ratios

Since no one reads my blog, I have to be answering my own question here.

Our contingency plan has to be better than our original plan, right?

Why did I even make AIG my Plan B? Was I mesmerised by the glamour and glitz of a 1:23 risk:reward ratio? In trading, if you start out mesmerised, you will be tantalised by profits that seem to always elude you.

Risk:reward is only one component of trading. If we fail to get the analysis right, we are trading on emotion as much as if we were trading based on coin flipping.

Analysis trumps risk:reward in my diva opinion.

My AIG analysis was frankly bimbo. I had even failed to do my due diligence very well here. The reverse split had obviously been a public announcement. Yet, I was mesmerised and chasing the risk:reward.

1. Start with sound analysis. Bimbo In = Bimbo Out
2. Then, look at risk:reward.
3. Remember to trail your stops. Slippage is evil.

Now, if you'll excuse me, I have to get back to the drawing board. I've got some trading wounds that need to be nursed. No more excuses. No more bandaids on broken ankles!

Plan C: A Contingency Plan for the Contingency Plan

I mentioned a while back that I had recently set up a portfolio targeting worksheet in Excel comprising of a scenario analysis that outlines my profit objectives at key market levels (52 week high, 50% of 52 week high, all-time high, etc). To alleviate my fears, I also calculated potential losses at the 52 week lows as a way of showing me that the worst is possibly over.

The more I think about it, the more I feel it is an over-simplified view of equity trading. With so many factors beyond our control, we really should be thinking of a contingency plan for the contingency plan.

I laugh about it now, but AIG was part of my portfolio recovery plan. I added a 300 share position in AIG right prior to its recent reverse split fiasco. From a position worth three figures, I was hoping to grow to a profit objective approaching five figures.

So was this realistic? At the time, it truly was. I could see AIG going to $32.25 from my $1.41 entry level. Now, after its reverse split, who would ever buy AIG at $621.80?

I'm definitely not an expert and you'll notice that with my bimbo posts here. But if we look at risk:reward from this perspective, shouldn't we be asking ourselves one critical question: if we set ourselves a risk:reward ratio of 1:10 or 1:5 or even 1:3, are we realistically going to achieve our target limit?

So how do we factor that into the equation? And if there are no guarantees in trading, how do we create a Plan B or a Plan C?

Because after all is said and done, our well-thought out plans could still end up being up in the air.

This AIG position is so small that I shouldn't lose any sleep over it. But then I would rather have placed this money in my Hermes Kelly/Birkin/Lindy Fund.