Good morning Journal.
Alright… we got some things to talk about.
Like, some changes.
For as much as this pains me, I have to do it.
It’s my strategy. Need a new one.
The reason why I’m so bothered by this, is because I really, and I mean really, wanted to proceed through this year without having to make any changes to a strategy. Journal, I’ve told you this time and time again. You know what I’m talking about. It’s just the point of continually seeing something play out, and working. You know, for some data collecting and proof being documented. I’ve been so badly wanting that to happen, but it can’t.
Well, I guess you got to be right, or at least close, for that to happen. And I’m not right, on this strategy that I’ve been using. I have to tell you though, the things that I’ve been working on has been for a good reason. You’ll see (if you’ve been paying attention). These last 2 months have shown me something. And, I believe it’s been showing me that I need to move on. Change.
Don’t worry Journal. I’ve been on it for a little while now. I’m simply just catching you up on things now, that’s all. I got something. And I’m looking forward to this.
Well, before I move on, I was thinking that I probably should explain why my strategy wasn’t working. Trust me, I have reasons. But, I really don’t want to go through all that now. But, the bottom line was that the results have not been good. I did make it through 2 full months. I hung in there. Am ashamed and disappointed of this time that has transpired this year so far, without satisfactory results.
I guess that all comes because of the high expectations I have of myself. But…it’s ok. I’ve accepted it. And am moving on. What can I do, right? When I really think about it all, there has to be a reason. A good reason for why I thought I was onto something good, but then to be shown differently. Much differently.
Time wasted?
Maybe.
Maybe not.
“Oh…I got it this time.”
Results show…“no you don’t.”
At least I will always be able to chalk it up to experience. It’s just another one of those things that I got to go through. At least I have learned something, though.
- Complete currency trading is quite inefficient. Will only work in a volatile market environment. It has it’s place. Just not in a relatively calm market.
Don’t get me wrong, this is a tool in my tool shed. It just doesn’t produce during these times. I got proof that it does work during volatile times, like last year. Man, I got all kind of proof, documentation, evidence that it works like a charm. But you know what? I got to hang that tool up. Now. Cause I lose more than I can gain.
Specifically, I’m talking about my complete currency trading strategy. The idea of trading the 7 currency pairs, of the one common currency, as one. There’s way too much slippage. It’s inefficient. Meaning, the losses out weigh the profits. It’s too diversified. There’s not enough going in one direction for a profit. See. When it’s very volatile, the market wants, and likes to, compound itself. The currencies each have more of a distinct direction they want to travel. It gets concentrated, meaning, all 7 AUD pairs will be traveling in one direction. Or all 7 JPY pairs. Know what I mean? And plus, during this volatile time, they will travel (the pip count) much farther. Producing some good results for the whole (currency).
Well, they say that your strategy should match what the current market environment is. Right? And now, for me, it’s time to change.
Alright.
Now that I got that out of the way.
Let’s change.
I like change.
This is what I got going on Journal. Trust me, this has been coming down the pike. Like this entire month. So. I guess I should start out with my mind map on it.
Let’s see. Some of the highlights of this strategy will comprise of :
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Mastergunners portfolio methodology. The Forex Portfolio - How to Gain Consistent Profits by Staying in the Market 24/7
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Chart reading. My trend determination will come down to how well I can follow a chart.
Journal, you know me. All of these things, and then some, have always comprised of who I am, when it comes to my style of trading. There’s no secrets here. Nothing new. I’m just putting these things together in a slightly different way, that’s all.
I want to talk about these specific, important aspects of the strategy.
—Basket trading—
It’s always grabbed me, ever since I discovered it back around '13 or so (I can’t remember exactly, but we’ll say sometime between '13 - '15. But, I’m in that thread. And I do have to say, if there ever was a thread that changed my life (I mean, my trading) it’ll be that one. I’ve been apart of many, many threads in here. But that particular one has, and probably will always, stuck with me. Probably because that’s exactly who I am. I can’t deny myself. Simple as that.
I just might have taken that to extremes, though. It’s like stretching out a rubber band. I went all the way with basket trading in the sense of, what I call complete currency trading. As you know. But. I’m gonna have to ease up on that some. I want to get back to some of the original concept of that methodology. You’ll see when I completely spell this all out.
—Charting—
I’m getting back into the chart reading again. For the longest time I’ve been dealing strictly with numbers. Remember…excel stuff. Just my own plotting of numbers. It’s a particular dynamic. And it is quite different than viewing a chart. I, like everyone else, started out that way. Looking at the charts. And then to take away from that the information that makes you trade in a certain way.
Look. This is stuff that traders probably don’t even realize. It’s like the obvious. I mean, what else is there? What a trader does is look at a chart, then makes determination on what they see. Well, I got away from that. I went to the numbers. It mattered to what the numbers meant more than what I was seeing. There’s a difference. And I realized that. Cause I wasn’t having a lot of success, back in the day when all I did was look at the charts. I do think it’s a bit primitive. And probably deceiving also, in a way. You know what they say…“trade what you see, not what you think”. So. If you understand what that is all about, therein lies the deception.
The disconnect between what we see in a chart, as opposed to what is really happening in the chart. But, the thing that’s getting me lately, about charting, is in it’s hindsight. You know what I think about hindsight, right Journal? It’s evil! Meaning, I think there’s so much deception when you think, after the fact (in hindsight), that you should have known better, all before it actually happens. But, the truth of the matter is, when it’s currently happening, you end up thinking something completely different. Basically, it’s very, very difficult to be thinking the correct thing when it is at the present time.
I just call it evil, when in hindsight, you think you should have known better. That’s all. But, on the other hand, every time I look at a chart, and pull up all of the different time frame perspectives, the biggest thing I get out of it, is this:
- Trends are legitimate. Can be very long. And over time, if followed correctly, can be very profitable.
So. What I’m saying is. Hindsight shows me what’s possible. But, in order for that to happen, there’s things I got to learn. And that’s the road I want to travel on now.
Now. Trends are one thing. But I believe that a more correct trend will make more of a difference. Let me explain what I mean.
One currency pair still means nothing to me. I will always, forever, believe that. It’s a currency’s aggregate that means everything, to me. So therefore, that’s what I’m after. And this is what I will follow. A currency’s aggregate running pip count.
Let me be clear. This is what I’m hanging my hat on. And follow.
— A complete currency aggregate running pip count —
This is the chart that I will be following. Diagnosing. Depending on.
Oh, I just remember another very important point. About me and my trading (I’m trying to catch you up on what’s been going on with me Journal). It’s the difference between mechanical trading and discretionary trading. For quite some time now I’ve been trying to be as mechanical as possible. That’ll probably be why I was biased with numbers as opposed to the charts.
Discretionary trading — synonymous with following chart reading.
Mechanical trading — synonymous with following pure numbers.
So, for me, a bit of revelation, lately, has been that I need to be a bit more discretionary with my trading. It’s so very difficult to come up with a plan that you can count on. Believe in. And prove profitable no matter what the market ends up doing. But I’m starting to believe that some degree of discretion is what’s needed, for making the difference in what’s profitable than not. I think that chart reading encompasses that certain amount of discretion that is necessary.
I hope you can understand what I’m saying Journal.
Back to my point of what a more correct trend I should be following. And I believe this will make a big difference in my trades. Let’s see it with the charts.
The AUD.
Their aggregate, complete currency, running pip count chart.
Now. There’s a reason why I picked this time frame (all you have to do is read my last so many posts on all of the different time frame perspectives I explored). In my mind, it’s the most correct, accurate tell tale of what the AUD has been up to lately.
In any case, 3/18/20 is the starting point for all my charts. It’s gospel. Cause I believe that’s when the slate got cleaned. The whole entire market started out, with a consensus, on this date.
No one can argue, or even show me differently, what the (correct) trend has been.
AUD trending high
It did trade a bit sideways, there in the middle. Even slipped some. But then resumed it’s bullish bias they had since the beginning.
Now. This should be interesting. I haven’t done this, so maybe I will learn something here. Let’s look at those AUD pairs separately.
These are all the AUD pairs, since 3/18/20. Daily t.f.
All of those daily compounded pips, on each pair, all added up will result in my chart above (except AUD/CNY, bottom right). Now. You could ask me, "Mike, wouldn’t it be easier to summarize the AUD by just looking at these 7 pairs this way?
And I would say…“Absolutely not.” Each pair is showing something different. Showing their own particular story. So, let’s do this then.
- The AUD/USD (top L) and the AUD/JPY (bottom L) look almost exact. Tracks identical. Nice long high trend, then short retrace, then back up.
- The AUD/CAD (bottom, third one over) also compares to those 2.
- The EUR/AUD (top second over) and the AUD/CHF (top right) are exact. Just inverted to each other. They ranged most of that time period, in the middle.
- The GBP/AUD (top, third one over) ranged in the middle. But is quite volatile than the others.
- The AUD/NZD (bottom, second one over) shows a lot of retracement in the middle. You could even say they were trending low (not high) here.
Or…as I am preferring, we could just look at their aggregate running pip count, above, and get the accurate story from. In the middle of that chart, they falter. Yes. But it was supported. And never technically broke any kind of major support level, to be considered trending low. Chart reading, by the book, that is.
And this is where I feel that I will have my edge. In tracking a currency’s correct trend this way. It’s my starting point. It tells me whether :
- It’s technically trending.
- When I should be in the trade.
- When I should not be in the trade.
I should note also. That when there’s a trend going on, I want to be in it. Of course. But when it stops trending, then I don’t want to be in it. Not going in the other way. Cause I feel that patience will pay off. Between the ranging that currencies like to do after a trend, and also the break & retest they like to do, in case of a strong move in the opposite way. But I feel, that patience should reveal those traps that come. Know what I mean?
Let me finish my analysis on the AUD.
-Their trending high.
-They are on my list, of currencies to trade.
-This is where they are considered not trending anymore.
I have 2 more other currencies that I deem are trending high. And want to be in them.
The NZD.
-It’s important to see the correlation of both the AUD, and the NZD together. And in this case, I believe the AUD kept the NZD supported, and the reason it went higher.
-I also think it’s important to know when the New Year began. And what their trend is in relation to that time frame reference. That context, I think, is very important.
-So far this year, the pip count was rejected from going lower. But, if it breaks lower than that ‘out’ point, then I believe it’s not trending high anymore.
The only other currency I believe is trending high is this one.
The GBP.
-Their trending high status has been of late. Starting the very end of last year, and continued into this year so far. Strongly.
-It’s almost straight up since the year started. I could pick (technically speaking) the beginning of the year for a breaking point for the trend. Instead, I picked a point half way in between. I’m playing it conservative and safe. I’ll jump if it hits this point.
Now.
I have these 3 currencies that are trending low.
The USD.
-There’s no doubt the USD has been on a bear trend, since this start.
-But since this years start, it’s been supported from going any lower (lower swing lows).
-Look in the middle of that chart. The same thing was happening. It traded sideways for a good amount of time. And then what happened? Right back on down (back to trending low again).
-But I’m not going to chance any higher of an ‘out’ point that what I got there. It’s the highest point of this year so far. I can be patient and see where this wants to go.
The JPY.
-The same thing goes here. Can’t really separate the USD, & the JPY. They track very similar. Over time they seem to converge. And it’s been the JPY lately coming back on down where the USD has been.
-They are almost straight down since the year started. So, I picked a landing point close to when the year started.
-You have to give them some space to run, cause it can come all the way back up to the beginning of the year and then U-turn and still be considered trending low.
You got to be true to charting rules. Straight down…steep declines warrant that much in the reverse. That’s why swing lows/highs are important. When there are none, then drastic measures surely can show up.
That’s nice.
One more trending low currency.
The CHF.
-Another late stage, recently started, trend development.
-This year has shown nothing but swing low’s.
I need to show the correlation of the CHF with the EUR. I think this is interesting.
EUR is yellow. And their not trending at all. So forget them.
But these 2 currencies are tied together. Have always been. But lately, boy, they sure have diverged from each other. They did diverge way back last year, as shown. The EUR diverged from the CHF by going much lower. And the CHF was supported much more. But then, the EUR comes roaring back up to them. And we have a marriage once again. For at time. We’ll call it sometime shortly after the year started (the second week of the year it came apart).
Alright. That’s nice.
Moving on with more details of my strategy.
On the left is the corresponding OUT points that I need documented. You have seen all those points on their respective charts.
And now, this is where I have diverged from what I’ve been doing. No more complete currency trades. I can’t go in with every possible 7 pairs anymore. I’m gonna rationalize it in this fashion…
In order to minimize the inefficiency of that system, I’ll just pair up what I know to be true. Whatever currency is trending high will be paired against whatever currency is trending low. Makes sense, doesn’t it? You can say that I’m shaving off the fat.
This is my basket of trades, and how they have come into being.
Believe it or not, this is what I’ve been wanting, ever since I was exposed to MasterGunner’s methodology. If you read through his system, it was all about picking the trending currency pairs. Riding them out till they are not trending anymore. It’s a simple concept. And when you give it the time it needs for trending, you could end up with some real profits. Well, this is my way of deriving which exact currency pairs are best to trade.
We should look at these currency pairs individually.
Trust me…I’m not such a fan of any particular currency pairs, just yet. I prefer macro over micro. (Complete Currency over a pair.)
Give me some time to get warmed up to this (nonsense).
But, I do understand that it’s about making a profit. At least it seems like what I am doing is using my Complete Currency diagnosis for an educated determination of who exactly should I trade. Right?
Don’t get me wrong. When the day comes (and surely it will, again, someday), I will be jumping on the complete currency band wagon again. In the meantime, it’ll be hanging up in my tool shed. I didn’t do all that work for nothing.
Well, I really don’t feel like going over these pairs, just yet. Let me cut this post. I’ll come back tomorrow morning and divulge more of my new trading strategy.
A new month, and new start.
I like it.
Thanks for listening, Journal!
Mike
