19/6 – K7 Strategy adjustments – 300 trades in…..

LONG ROAD

The emotional bit….

I have now done 312 trades using the K7 strategy.  Recall I already commented on the batch of the first 100 trades.  I believe that taking 300+ trades in less than 3 months has really pushed me and challenged me.  I am behaving like the Japanese automanufacturers who push the production lines until they break down – so they can make the machinery better and become much stronger in the long run.  Putting on so many trades has been hard physically and emotionally.  Some days have seen me wanting to jump off a bridge.  It has been hard work.  but because I have pushed so hard, I have become better.  I am figuring out what works, and what doesn’t work. I am understanding the markets better, from session to session, from week to week, from month to month.  It is really hard work! I am making myself fail.  I am pushing and challenging myself.  I have put aside everything – I don’t have any other income.  I have thrown all my professionalism into this and slowly it is starting to show signs that it is working.  I have been knocked down so many times, but I continue to get up and fight.  I am very careful in protecting my trading capital by trading small – this is why I can work at this for so long and persevere.

The numbers….

Overall, 201 trades were taken from the London trading office (+2.49R), 59 from the United States during a 2 week trip there (-14.53R) and 52 were taken from Germany over another 2-week period (-0.57R).  This implies that the trading in the US was completely bonkers – was this a coincidence and pure randomness in results, or did it have to do with the setup of my trading environment there and/or me trading only the New York (due to the time difference?) or was I being put off my staying under the same roof with my girl-friend? Interesting questions.

My transaction costs over the 312 trades have averaged 6.01% per trade (i.e. 0.0601R/trade).  Total transaction costs to this point are 18.59R – meaning that if results were completely random then I should be down 18.59R after 312 trades.  I am down “only” 12.61R so I am slighly better than random.

Without knowing for sure the reason, I have excluded the 59 US-based trades from the additional analysis below:

84 winners, 128 losers, 41 scratches; Avg Win +0.941R Avg Loss -0.600R Avg Scratch -0.009R; RR 1.57:1; Win Rate 39.6%

  • DAX, 89 trades, -1.14R
  • Cable, 63 trades, +2.4R
  • EURUSD, 40 trades, +2.5R
  • EURJPY, 22 trades, -0.53R
  • USDJPY, 22 trades, +2.19R
  • AUDUSD, 8 trades, +0.27R
  • “All Other” instruments, 9 trades, -3.77R

The adjustments….

Based on all this, here’s what I will be working on and refining as I continue trading this strategy:

1. Always enter close to the EMA’s where possible – exceptions – where there is a good chance that price won’t come back to the EMA – e.g. because of significant fundamental reasons.  On the whole, entering close to the EMA’s will allow for better and less stressful position management, for better RR ratios and overall higher profits.  It will mean that in some cases I will miss out on getting into a trade – and I can live with that.  What is the true cost of requiring myself to enter at the EMA level? The cost of missing those trades that never come back to the EMA.  Every trade that does come back and eventually win, will return more profits than if entered at a higher level.  Every trade that does come back and eventually lose – the loss will be equal to 1R in any case.  Continue on with this reasoning – it should lead to some great insights…..

2. Always enter on the correct side of the EMA’s – no exceptions.  This also applies to reversal trades.

3. EMA alignment needs to be in place on the 5M timeframe.  Exception is where a good technical pattern has taken place with a level of some sort in support.  However in such a case it must look as if the EMA are about to complete a XO, and such a XO must in fact take place within several candles.

4. For continuation trades, it is more profitable to wait for clear direction and entering on a continuation pattern, instead of trying to trade out of consolidation zone, i.e. anticipating the breakout.  This is particularly when trying to trade out of the Asian range at the start of the London session.  This does not apply to reversal trades.  Overall approaching the trading like this will result in fewer trades but the hit rate/profitability should increase as a result.

5. Position management – need to put a lot of work into this – review my trades.  Review missed trades.  Consider what approaches would work best.  Ideas: Fib retracements, over-extensions

6.  Instruments selected for trading – It’s very surprising that the profitability for the “other” instruments is so bad.  I had not realised that.  The 9 trades comprised 8 losers and 1 scratch trades and zero (!) winners. Though this would make sense – if trading unfamiliar instruments, one should expect to do worse rather than better on those.  So a point to take away would be to focus and always trade the same instruments, rather than trying to trade a whole raft of stuff.  However on certain days certain things are likely to give rise to opportunities.  But the figures paint a rather clear picture, don’t they?  I guess a mix of still trying to fine-tune the strategy combined with trying to trade unfamiliar instruments will result in total destruction of one’s trading account?  For now I will keep things simple and not trade “other instruments”.  I will first focus on fine-tuning the strategy for my key instruments and then look to expand it to other markets.

NON-STRATEGY ASPECTS:

7. Decreased transaction costs – recently I negotiated with my broker and he agreed to reduce the commission costs by one-third to one-quarter on all my fx instruments.  In exchange I deposited more funds into the account.  This saving will go directly to the bottom line.  Examples: EURUSD down from 1.1 to 0.8, Cable from 1.5 to 1.1, EURJPY 1.8 to 1.5, USDJPY 1.4 to 1.1.

8. Trading Psychology – I am continuing to study and work on the psychology element of my trading operation.  This is also helping to improve my effectiveness.

 

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3 Responses to 19/6 – K7 Strategy adjustments – 300 trades in…..

  1. FXTraderPaul says:

    Jeez George, you really have been putting in the effort (not that I ever thought you wouldn’t). I commend you on doing this kind of exercise. I did it myself about 9 years ago. It was heartbreaking at times, truly got-wrenching, and yet it finally broke my attachment to my ego’s need to be right. I no longer cared about the outcome of the trade, I just followed the system: planned my trade, traded my plan and managed my risk. I proved to myself that i could follow the plan ruthlessly regardless of what was going on. A few years later a big hot-shot multi-millionaire traders wife told me that he commented to her that I was the most disciplined trader he’d ever seen. He was astounded that I could follow a plan so religiously trade after trade. I put a lot of that down to following the kind of exercise you’re doing now. The fruits from your labours may not be readily apparent but this exercise will pay dividends down the line. Of that I guarantee you. Keep up the great work.

    Liked by 1 person

  2. Pingback: 22/6: Trading Results Graph & a word on transaction costs | George's FX trading blog

  3. Pingback: 3/8: Review of K7-specific blog posts | George's FX trading blog

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