Paper trade: Long USD/CHF @ 1.03498, Stop 1.03240

USD/CHF is chalking a wide V pattern now. The up-leg has played out nicely for 2/3 of the way. According to T-theory, USD/CHF should reach 1.045 on Monday. Furthermore, USD/CHF is testing support at the top fin of the Fibonacci fan line as seen in Figure 1. 1.034 is also a short term support by an up-trending line, see Figures 1 and 2. Lastly, the current trend is up as shown by my 2-MA lines in Figure 1. In summary, both short and intermediate trends are aligned and we’re at support now, thus, I bought when the reward/risk is favourable.

Entry: 1.03498

Stop: 1.03240

Target: 1.0450

Reward / Risk = 100.2 pips / 25.8 pips = 3.9

I initially placed my stop at 1.0295 but realized the reward/risk was horrible. So I moved my stop up to make this a shorter timeframe play (i.e. a quick reflex bounce).

On another note, the order types at Oanda (my forex broker) is severely handicapped. It only has the basics. For example, I would have liked an order-cancel-order type so that I can place a contingent exit at the profit target and the stop.

USD/CHF 4-hour

USD/CHF 30-min

Paper trade: USD/CAD long 1.07426, stopped out 1.06999 (-42.7 pips)

I went long USD/CAD this morning with 1/3 position when we bounced back up to 1.0800 and then retraced to 1.075. It was stopped out about an hour and a half later. In hindsight, this was not a good trade for one major reason. I should not have gone against the short-term trend on a weak support level even if the intermediate trend is on my back. I should have at least waited for stronger support around 1.0650.

Figure 1 is a chart of the 15-min USD/CAD with my orders marked. When USD/CAD failed to break 1.0800, a major resistance, it was a sign that the short term trend remains bearish.
At least I entered a stop and didn’t let the loss accumulate. Below are the statistics for this trade.

On another note, my stink bid placed at 1.0666 this morning seems likely to be triggered (USD/CAD is trading at 1.0679 as of this moment of writing). My stop for that is 1.0600. This is a better entry because there’s a multi-day resistance at 1.0600 and crude is testing a significant $70 resistance too. Although if I’m more conservative, I should be more patient and wait for 1.0600 instead… So I’m only entering 1/3 position for this instead of the 2/3 as in my strategy (revised since my last paper trade in USD/CAD). See Figure 2 for the support/resistance.

Update: I retracted my bid at 1.0666 because crude oil broke above $70 and USD/CAD hang on to 1.0672 or so for a few hours. If we do break it, it would only create another short-term sell-off. So there’s no point in me having an entry just 6 pips below at 1.0666. It will just get washed down when the support breaks.

Entry: 1.07426, 3000 units

Stopped out: 1.06999, 3000 units

Net: -$12.81

Time held: 1:28:00

Max. Drawdown %: -0.41%

% from Max. Gain: 0.47%

USD/CAD 15-min

USD/CAD 15-min

Paper trade: USD/CAD all out @ 1.0872 (+196.6 pips) and 1.0821 (+145.6 pips)

USD/CAD made a quick run to 1.10 and retraced back down to 1.08. Since my entry at 1.06754 almost two weeks ago, there’s been both run-down and run-up as I have noted. Although this trade turned out well with an average paper gain of 171.1 pips (see stats below), one thing that I’d definitely need to work on is not giving back the profit.

For the first half of my position, USD/CAD topped at 1.0948 and I existed at 1.0872, which is 0.71% of unrealized profit left on the table. For the second half, USD/CAD topped at 1.0992 and I exited at 1.0821, which is a dismal 1.6% left on the table. I could have doubled my gain if I can take my chips off the table at a better time.

Obviously, I still need a lot of work to do in sharpening my stops. For that, I started to keep track of my trades using a detailed spreadsheet that have custom macros to calculate my performance statistics. Some of these numbers are displayed below. I will now focus on the quality of a trade rather than just on the net outcome of a trade while I’m working on improving my trading. I’ll cover this topic another time once the spreadsheet is done. I am still tweaking the formulas and format as I record more trades in it.

Entry: 1.06754, 5000 units

Exit 1: 1.0872, 2500 units

Exit 2: 1.0821, 2500 units

Net: +196.6 pips and +145.6 pips

Time held: 159:27:00 and 256:14:00

Max. Drawdown %: 0.12% (a very good number)

% from Max. Gain: 0.71% and 1.60% (not so good numbers)

Sold -1 BC 100 OCT 09 12.5 PUT @1.45, mark 11.27

Brunswick Corp. (BC) stayed above $11.00 as we began the week. I placed a stop at Friday’s high before the open today to be executed at 10:30am. When I got back at lunch, I found that my stop was triggered as soon as it was sent. Luckily, it was also at the time when BC retraced the open’s gain slightly. So it was a good price to be out since BC has closed above $12 today (Figure 1).

This trade was entered last Friday before noon at 1.95, when BC was trading at 10.81. This represents a loss of $65. For this particular trade, I adhered to my exit strategy (even though it was a loss), so that’s good. For the entry, I could have waited later on in the day on Friday to see how the market performs as we approached the end of the week. If I had done that, the reward/risk would have been better. But I think I would have entered short anyway since the sign were pointing downward when BC hung back to around $11 at the close after breaking above $11.20 intraday on good volume. And the fact hat the market was consolidating too.

Looking at the long term, BC has retraced all its loss since the dive last year. For the market, S&P500 has etched higher today too but is still about 10 points below last week’s all-year high. The volume for the overall market is noticeably lighter too. So this uptrend can possibly continue up as not many is riding this move. We shall see how this goes.

As can be seen from Figure 2, BC at $12 has some resistance above to $13. For the lower end of the range, we have $9.60. A break below $9.60 would signal a stop of this recent bull train’s momentum.

Brunswick Corp

Brunswick Corp. 2-year chart

Passing Japan’s hardest test: If there is a certifying exam for trading, this would be like it

I started watching this video (attached below) merely out of curiosity. Just to see what test in Japan is harder than becoming a lawyer or a surgeon. But as I was watching it, the parallel of their recurring theme on the goal of Kendo, which is to defeat yourself, rather than your opponent, is strikingly similar to what I’ve been trying to accomplish in trading.

The video follows two 8th dan Kendo test candidates, Ishida Kenichi, a National Kendo Champion 15 years ago (whom have failed this test 4 times since), and Kai Miyamoto, a 78-year-old that has tried this test for 24 times in 24 consecutive years and failing every time.

Watch the hour long video and take from it what you can yourself. Here are a couple of quotes as teasers.

“Mr. Ishida trains to teach his body not accidental swings, but only perfectly calculated and timed movements.” (flip through any trading psychology book and I’m sure you’ll find similar words)

Toward the end of the video, Ishida had to write an essay on the topic of “The Sword is Soul”. The translator summarized Ishida’s essay as follows.

“The most important aspect of Kendo is to have a humble enough mind to admit that you are weak and train to improve yourself.”

Replace the word “Kendo” with “trading” and there you have it. A seemingly trite statement, but only when you are able to appreciate the simplicity and truth of such words by a former Japanese National Kendo Champion can you begin to truly learn, rather be it Kendo or trading.