Hey folks. In this journal I'll be sharing my trades on a daily basis including the indicators I'm using, my rationale for each trade, and my psychology surrounding each trade. I'm going to lay it all out there for your comments. My methodology is a work-in-progress and will most likely change as time goes by. Currently I'm using this TA setup: Chart 1 Timeframe: 1 hour TA tools: 9 EMA for broad trend indicator, pivot points for broad S/R levels Chart 2 Timeframe: 5 minutes TA tools: 18 SMA for narrower S/R, 24, 12, 6 MACD for narrower trend, as well as over/under bought/sold Chart 3 (trading chart) Timeframe: 1 minute TA tools: 9, 2 Bollinger Bands for pin-pointing entry/exit That probably sounds like a mess and overkill, but I like it, it makes a strange kind of sense to me I will be using hard stops only if I have to step away from the computer or a trade runs over my scheduled time. The rest of the time I will manually exit a trade when the indicators show that the market has changed directions. Targets will be handled in much the same way. If I have to step away I'll leave a trailing stop in place. Otherwise I will manually exit when the indicators show a reverse. I'll be trading one pair at a time. My schedule is to trade EUR/USD between 8am and 11am EST. If I'm unable to trade that time due to prior engagements then I'll trade USD/JPY between 8pm and 11pm EST. If I have nothing better to do then I might trade both periods.
April 8, 2008 8:52pm Short USD/JPY @102.55 10pm Close @102.49 Rationale: The 1 hour chart was pretty much a wash. The 5 min showed a possible overbought situation and hints at convergence. The 1 min had a solid 2 bar break through the middle and lower BB bands. I'll rate myself at 9/10 for following my rules. The only reason I'm not giving myself a 10 is because there was no confirmation from the 1 hour chart. Psychology: I felt good about this trade even though it went against me initially. I was ready to pull out or reverse but the indicators didn't show that to be necessary. I felt slightly anxious with the initial move against my position, but certainly not enough to take any rash action. So I'll rate myself at 8/10 for this because while my psychology wasn't perfect, it didn't interfere with the trade. Final Note: Since I had a small profit I decided to close the trade instead of leaving a trailing stop because I had something else to do and couldn't finish out the next hour of trading.
April 9, 2008 10:17am Long EUR/USD @1.5762 10:39am Close @1.5769 Rationale: Rating 9/10 1 hour chart showed strong uptrend and 20 pip distance to resistance 5 min chart showed consistent trading above the MA since 8am 1 min chart broke through middle BB for entry point I decided to exit when middle BB was broken again to the downside especially considering the market had just traded to within a few pips of the resistance line. Psychology: Rating 3/10 How could I NOT feel good about a trade with all those positive indications that basically went straight up from entry? Since this trade didn't challenge my emotions nothing was learned on that front. So I'm giving myself a neutral 5/10 rating. I'm also deducting 2 points for lack of disipline because I started trading an hour late.
April 10, 2008 9:11am Short EUR/USD @1.5854 9:24am Close @1.5844 Rationale: 9/10 1 hour chart MA was flat and price was right between PP and resistance 5 min chart bounced off MA to the downside 1 min chart broke through middle BB Closed when 1 min closed above middle BB. Psychology: 6/10 Again this trade went in my favor from entry so I didn't learn much emotionally. I did feel totally calm through the trade so I'll give myself an extra point for that. 9:38am Short EUR/USD @1.5849 9:49am Closed @1.5837 Rationale: 10/10 1 hour chart beginning to develop downtrend on the MA 5 min chart bounced off MA again just like previous trade 1 min chart broke through middle BB Trade closed when middle BB was broken to the upside Psychology: 4/10 I deducted 1 point because I could feel myself starting to get over-confident on this trade. As a result I'm quiting for the day before I make a stupid mistake.
April 11, 2008 3:25am Long EUR/USD @1.5824 3:46am Closed @1.5840 Rationale: 10/10 1 hour showed good uptrend with plenty of room 5 min more upward confirmation from MA and MACD showed a decline in overbought situation offering an entry point 1 minute closed above the middle BB Psychology: 10/10 This was an interesting trade! I felt like an outside observer watching the bulls and bears fighting each other for dominance, while I stayed ready to respond when necessary with no concern over the outcome. I'm glad I couldn't sleep and decided to look at the market. 10:17am Long EUR/USD @1.5836 10:22am Closed @1.5824 Rationale: 6/10 1 hour chart had been flat for a couple of hours but still showed uptrend from earlier gains and plenty of room to resistance 5 min chart had been somewhat directionless since about 8:30am but appeared to be getting started on an uptrend 1 min closed above middle BB I closed the trade at a loss when the lower BB was broken. I knew the market was struggling to find direction and I took a chance at what looked like a possible move, didn't work out is all. Psychology: 10/10 I felt fine during the trade and had no problem with it being a loss. I'm calling it a week since as I write this my normal trade window will close in less than 30 minutes and the market still has no direction.
April 14, 2008 9:21am Short EUR/USD @1.5838 9:51am Closed @1.5844 Rationale 9/10 1 hour chart bounced off resistance 5 min chart had been trading below MA for 45 minutes 1 min chart bounced off middle BB Closed when loss exceeded 5 pips Psychology 3/10 I waited too long hoping this trade would turn profitable again, I should have gotten out when the market stayed flat for more than 15 minutes. 9:53am Short EUR/USD @1.5835 9:59am Closed @1.5838 Rationale 9/10 1 hour chart same as previous trade 5 min chart bounced off MA 1 min chart broke middle BB Closed when middle BB was broken again. Psychology 2/10 I entered this trade partly because the indicators looked good, but also partly because I wanted to be "right" about my previous entry and make my loss back. Fortunately I came to my senses and exited the moment it turned against my indicators. 10:21am Short USD/JPY @100.69 10:34am Closed @100.73 Rationale 9/10 1 hour chart MA flat and price between PP lines 5 min chart trading below MA 1 min chart closed below middle BB Closed trade when loss exceeded 5 pips Psychology 1/10 With each trade I'm getting more and more frustrated that the market keeps going flat when I enter and then against my position. Definitely quiting early today.
Time stops are equally important as pip stops - if it doesn't go your way within a certain time (2 or 3 candles, etc) it is good to get out. It is a frustrating feeling, as you found, to get stuck waiting for something to happen in a sideways move - just exit and move on to a better setup because our purpose is to react not predict. Good job.
Keep your head up, shit does happen (trust me). You know what the next step is - scale down or stop until those trades no longer bother you and you understand why things fell apart so quickly.