Fernan's Trading Blog

Reversed momentum (21st Nov 22:00 UTC)

At 10PM yesterday I entered a sell trade to ride a momentum… a couple of bars after the signal.

I missed the signal because I was dancing salsa out in the city… The momentum died down the moment I jumped in and started reversing.

I’ve not been stopped out yet, but I’m thinking I should close this position to cut losses. I’m thinking now of setting up alerts to notify me when momentum dies down, activating the alert once I’ve entered a position

Result: LOSS

I cut my loss here because I understand the reason why I didn’t cut earlier - missed the momentum loss on the trend

Just missed take profit zone! 21st Nov 19:30 UTC

A squeeze alert on EURUSD triggered last night, so I entered and I forgot about it. Momentum faded and another buy alert triggered this morning. The position is still open but I’m getting really antsy to close it while my open profit is still positive.

Should I move my stop loss? Shall I close?

EDIT:

So I took @Drekieyja’s advice and tried to draw a fib extension on the nearest swing highs / lows when I would have taken my trade, not sure how accurately I drew it (or if I’m using it correctly) but I can see some reaction on levels like 1 and 0.618. Maybe I will use these levels as my retracement tolerance on my trades.

By the way my long position has completely gone against my favour, at the moment it doesn’t phase me but I reckon with real money, I will be more frustrated than I am now.

Result: WIN

This trade retraced beyond my entry, but then it skyrocketed back up, triggering my take profit. This win may be more down to luck.

Missing profit zone part 2! What is going on! midnight 22 Nov UTC

I shorted USDCHF at midnight and this morning it just missed my take profit zone again! now it seems to be reversing…

I am putting my zones on s / r zones bang on, perhaps I should adjust my take profit zones nearer to the price action, but not on top of the s /r lines? Maybe this is psychology thing

Result: WIN

It seems the uptrend is just a minor retracement, it was within my risk management plan so instead of cutting the profits I let the trade play out, and soon after it hit my target at 11:30!

You should have a clear idea of what the movement is going to look like before you enter the trade. Once it becomes clear that you were wrong about the way the price action would play out, you should get out of the trade.

It’s not that price can’t still hit your profit target. It’s that you are no longer trading, you are gambling. If your profit target is hit it will be luck rather than foresight.

When in doubt, get out. Capital preservation is king. Or at least it is for me.

Hi,

Thanks for the insight,

Just to understand, you mean foresight on how the price action is going to play out?

I think an issue I have with the current system right now is that I focus too much on getting the right entry points that I neglect on setting alerts for exits and rely too much on take profit levels.

Because my indicators rely on riding a trends, I noticed that my past couple of trades I did not exit straight away once the momentum seem to be losing momentum.

I think I will need to refine this strategy either today, or end of the week during my retrospective.

Contradicting indicators - hesitating to jump in

At 10:30 UTC today LTCUSD triggered a squeeze alert, normally I would just enter but I noticed it’s having a hard time breaking a key resistance point.

Also one of the other indicators I have on the system Wavetrend, is showing overbought conditions.

I will observe this closely in the next hour or so to look for any clearer signs to jump in.

Pretty much. We know that price does not move in straight lines, but you should have a reasonable idea of how it is likely to behave. If you don’t you probably shouldn’t be in the trade.

As an example, let’s say I’m a trend trader with an open bullish position. I should have a pretty clear idea from my past experience and my trading plan how much of a pull-back I am willing to wait out before getting out of the trade. If I wait too long, and that pull-back becomes a true reversal, then I will have lost a great deal of profit, or even taken a loss.

Don’t let greed keep you in a trade when things are not going your way. ‘Hope’ is not a strategy. Protect your capital.

OK makes sense, so perhaps a good improvement I need to incorporate is to draw out retracement zones using something like Fibonacci or via past s / r lines to validate the trend.

Squeeze Quick Win! 22nd Nov 14:30 UTC

Squeeze alert triggered on USDJPY, so I shorted. This time, instead of just firing a market order straight away, I tried to draw a fib extension and draw out a plan:

  • Stop loss at 0.236 level
  • Size take profit 1:1
  • If price action retraces to 0.382 level, invalidate the trade and look into exiting

It turns out the price action did not retrace at all and it hit my tp after 2 bars!

Amazing! Interesting how my balance is now 5+ USD up from 1000 USD deposit, even though I felt like I took so many trades that ended up losers.

Maybe it’s the trades that I took which I cut straight away before hitting my SL, I will check this on my end of week retrospective.

Wave trend against Squeeze 22nd Nov 17:00 UTC

Wavetrend alert triggered an oversold crossover yesterday so I went long on USDCHF. As of now (the following day) the price action has been ranging below my entry, so I have been negative.

My mistake here is that although the wavetrend is oversold, I didnt pay attention to the squeeze momentum, which was at the time of the entry, still showing signs of a strong bearish trend.

Since I can see the squeeze momentum reversing, I will wait and see how this trade plays out.

EDIT:

I paid the price of this mistake. This trade has been open for two whole days, hovered below my entry price and finally hit my stop loss this afternoon.

Fibonacci levels not breaking 23rd Nov 08:30 UTC

My squeeze alert triggered at 08:30 and before I entered the price action is firmly holding on the 0.786 fib line, maybe I will short not now, but set a sell stop order just below the fib line to confirm the downtrend.

EDIT:

Interesting result, my stop order got hit, and my prediction was half right as the price action went my way, tested the next fib level 0.618 but started reversing, this time I sized my take profit to go 1:1 against my SL which I think in hindsight, I should have placed the TP on the fib line.

The reason I didn’t was because I thought the level is too tight, and it wouldn’t have been a 1:1 risk reward for me.

Anyway I will monitor and see where this trade goes

EDIT 2:

Although this trade looked originally good, the entry setup was good, and the price hovered just below the entry level (its a short, so this is positive equity for me), 2 days later the price spiked up and hit my stop loss.

I love pending orders. They are virtually the only kind of order I use any more. They allow you to play an if/then confirmation game with your trades.

If I am right, and price is going to do XYZ, then price will move through this zone, triggering my order.

Being wrong (ie, price does not punch through the resistance level but instead bounces off of it) typically costs you nothing. It’s fantastic risk management.

Definitely going to start using them more often after the result that I got!

I think one psychological hurdle I need to get over it is getting panicked when an alert triggers, thinking I should get into the action as soon as possible or I will miss the price.

Remember that profit is a function of price movement and position size. With correct position sizing you don’t actually need a large price movement to produce decent profits. In fact, the closer your profit target, the more likely you are to actually score a win.

As I develop more confidence in my system I have been pulling in my profit targets (and my stops, to maintain my R:R) to trade progressively smaller movements. Positions that I used to sit in all day are now typically finished within a few hours.

Setting limit orders, for the first time! 23 Nov 12:00 UTC

Squeeze alert triggered here, the following bar seems to heading down, so I decided to drew a fib and look for my long entry point.

I put my limit buy at .786 level and sized my TP to 1:1

EDIT: Encountered my first world class buy limit dodge from the price action! Haha

It turns out I was right about the bullish signal, and the price action did retrace but a couple of pips shy of my limit order…

So the trend left without me! Damn it!!! Cancelling this limit order and reviewing my psychology on this, it’s a fairly new concept to me, and I reckon it will be more frustrating when I’m trading for real.

Hahahahaha. A moral victory, at least.

The point is, you had a coherent vision of what the price would do, and the price went and did (almost) exactly that. Well done. Just remember, in future, that trying to call the exact top or exact bottom can leave you with nothing. Don’t let ‘perfect’ become the enemy of ‘good enough’.

Edit: Also remember that this cost you nothing. That’s the best kind of ‘mistake’ to make.

Lost my final winning trade 24 Nov 17:00 UTC

At around 5PM an alert triggered for USDJPY while I was in the office so I decided to take this trade with my usual plan: Draw fib, decide on SL and size position, all that jazz.

I went for work drinks, came back home and noticed my position has increased slightly. I won the trade! However I lost the screen of my SL and TP levels because I was in such a hurry to get out to the pub and grab a pint.

and for some reason, TradingView’s paper trading doesn’t actually keep track of the orders, or they clear it. Luckily they have a journal that although doesn’t show everything, it definitely gives me a history of the win.

Retrospective Sunday, 26 Nov

I’ve decided to write some sort of weekly summary to discuss aspects of my trading I want to highlight and improve, as well as performance and prep on the following week.

Let’s start with performance

So looking at my posts from last week.

  • I took 12 trades
  • 6 wins
  • 6 losses
  • 50% win probability

I started a fake balance of 1000 USD and I came out slightly positive +5 USD but this is because two of my losing trades I cut early because I understood my issue, instead of letting the trade hit the stop loss.

Any significant news that had any impacts

For this I am using a combination of the economic calendar on BP and the analysis post from Pip Diddy.

Observing the major FX pairs, I noticed that USD had a really massive impact on Wednesday 22nd 13:00 UTC.

There were three US reports at this time and the only report that stood out to me was the Durable Good Order which was reported worse than expected and this the dollar really took a hit. The sentiment seemed to be positive for the greenback a couple of hours before the report came out, and it caused a bullish trend until the evening.

What is this “Durable Good Order”? why did it have such a big impact?

Key learning points, psychology and schedule

  • Recapped on hedging risks. Check currency correlation with any open positions before entering
  • Use ADR to find the nearest average tp or sl. Use fib lines to confirm levels, as well as sr levels
  • Be stricter with conditions. If I am using a combination of Squeeze Momentum and Wavetrend Oscillator, only enter when they are both pointing to the same direction. DO NOT ENTER if they are pointing different directions. This happened on the three losses I incurred, so if only I had cut these, I would’ve not entered these trades.
  • For squeeze momentum, setup alerts for momentum loss. Activate when you have an open trade.
  • Place limit orders instead of market order to find the perfect entry point and validate strategy.
  • Risk / reward ratio does not have to be 1:1, place on levels instead.
  • Recapped on STOP orders and LIMIT orders. STOP orders are for trend continuation orders, LIMIT orders are for trend reversal orders.

Although all orders were fake, I tried to imagine they were all real trades. Heck, even my initial balance and order sizes were as if I am investing real money. There are a couple of factors I want to highlight:

  • Jitters on entry. I am so excited when an alert triggers, I feel like I need to move fast and place a market order straight away. I am aware that my brain is doing this, I plan to just slow down for now and place a pending order instead to control emotions here.

  • Trend leaving me behind. There was a specific trade with LTC where I place a LIMIT order and my prediction was correct, but my order was shy a couple of pips, so the price action missed my entry and left without me. I felt so frustrated, but I think I need to instead focus on the fact that it’s a mistake that didn’t cost me anything. Afterall, you don’t lose what you didn’t have in the first place (ha, so philosophical)

I also want to assess my trading diligence. Trading takes so much of my time! (Duh!) It’s crazy, between gym, salsa, drinking, full time work and a relationship (as well as other ventures), journalling twelve trades felt like so much!

I like the format but perhaps a good solution would be to make the journal entries into smaller versions. My current idea is a screenshot of the chart, order placement screen, and a short description of why we are entering this trade. Update with result as well as any notes for restrospective later.

Adjustments and next week preparation

  • Adjust alerts for only when the indicators are pointing one way, and the other isn’t pointing another way.
  • For Squeeze Momentum, create an additional alert for when the momentum is lost, and start it when a position is opened
  • Draw sr lines, fib lines and use ADR to determine entry, exits, stop losses. NEVER place market orders.
  • Watch out for EUR from Wednesday onwards, according to the economic calendar, there are multiple economic data reports coming out that are high impact until Friday.

The Big Assumption - TradingView bot

I’m venting on this blog to my own mistake… You cannot make a trading bot on TradingView!

As I got quite skilled on writing indicators and strategies on Pinescript, I decided it’s time for me start automating some of my processes using some kind of bot.

So I looked at TradingView. pinescript has “entry” and “exit” functions. Sure let’s use that.

Wrote a simple exit strategy, implement a simple scaling out strategy to my trades.

It turns out, strategy is using broker emulation! All trades are fictional and even if you connect to other brokers using a live account, the pinescript does not get affected.

So now I’m changing my strategy slightly to instead connect to the brokers directly via their APIs, and automate the bot through there.

Well see how that goes.

First limit order this week

Squeeze momentum showing buy momentum, wave oscillator not overbought, so I drew a fib line and placed a limit order with tp and sl on the nearest levels.

EDIT: missed my LIMIT entry, and trend left without me, nice. Nothing won nothing lost I guess.