The dollar has been strengthening against the pound since I took a pound short on the 24th. Last night things got a bit choppy and we saw a bit of a retrace as the MACD crossed over. I exited my short pound position at around 9:00 p.m. last night at 1.9623 for +132 pips.
The Russell has also been choppy this morning with little directional conviction. First and only trade of the morning was at 6:38 short at 796.8 for +1.5.
Net on the morning: +1.5
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The Psychology of Handling Large Drawdowns
6 days ago
9 comments:
Good morning Ted,
Care to elaborate a little
more on reasoning behind
6:38 short at 796.8 for +1.5 ?
I enjoyed reading your blog
about the quest for the holy grail.
That being said, I do have plan..
hard to stick with it, though.
In fact I have several plans.. and
can't really decide on one.
How long did it take you to arrive at your current "plan" ? Do you always go with a 1:1 risk reward ratio ?
Best Regards,
Jesse
Jesse,
Well the market gapped up slightly on the YM and Russell. Based on the price action it looked like buying was weak. This gave me a short term bias to sell.
When price bounced off of resistance strongly and RSX started to return from being overbought I pulled the trigger.
However, I also knew that we are in an uptrend (but one that is weakening). This helped me determine that a short-term profit target of around 1.5-1.8 ticks where the next level of support sat would be a good target.
As far as plans are concerned, I try to pick markets and time frames that interest me. It took me several months of intensely researching the Russell to determine a) that I enjoy the price activity that scares off many, b) that I could find a way to exploit that activity, c) that this method would suit my personality.
No I do not always choose 1:1 risk to reward ratio. However, because this is primarily a scalping methodology many of my trades have a risk to reward ratio of about 1:1.
However, as you can see last week I took several trades that were closer to 2:1 - but that was because the market activity and trend dictated that I should. Now the market is more choppy (at least today and yesterday) and so 1:1 is better.
Tedders
Ted,
Everything makes good sense
except the RSX indicator.
Can you show a screen shot of
where it went from overbought to oversold?
Do you use mental or actual stops?
I know you emphasize sticking with a plan..
but how much of your plan is subjective..
"looked like buying was weak"
and how much is mechanical?: "rsx cross + red line support"
Thanks again.
Jesse
RSX never became oversold before I sold it. RSX was overbought and was beginning to return from being overbought. You'll notice, however, if I had waited for an actual RSX cross I would have entered 2 candles later. This would have worked out but you'd have been sweating the stop a lot more.
This photo should make it clearer. I entered on the close of the candle with the down arrow.
http://i147.photobucket.com/albums/r303/LordTedders/ER2_1-30-07.jpg
I use hard stops always. For my system methodology - it relies on 2 things. One is the technical indicators which tell me that there is a possible trade entry, the second is market price action itself.
I listen primarily to my S/R and RSX indicators (I cannot enter if they do not agree), but if price tells me (as I watch time and sales) that the market will or won't follow through, I use this information to adjust my targets accordingly. I don't see price as being subjective - to me it is another indicator but not one that TradeStation can display (and hence why I do not automate this methodology like I have for some of my Forex strategies).
This might be confusing or seem subjective but really its simple and quantitative. I watch price over time and it tells me - are the bulls rampaging the market in seconds (they did at about 5 minutes after the opening bell yesterday), or are they lackluster and half hearted - as they were for the first 2 hours today (although price did go up)?
I hope this makes this clear.
Tedders
Well done Ted! Congrats on 132 pips gain.
btw, do you trade forex with Tradestation? or just for charting?
Gav,
Thanks. I use TradeStation for charting. Although I just got NeoTicker so when I figure it out (could take awhile) I may chart full time with NT. I use MBTrading for my Futures broker and EFX for my forex trading. EFX is owned by MBT. I really recommend them, they've got it together and charge a fair price (commissions).
A short pound position (vs the USD) is the only currency position I have faith in over the medium term. A few years ago, this trade would have bled over 4% pa in carry, but now the carry is close to neutral.
Short Pound is definately looking like a strong play at the moment. We'll have to see
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