Post-FOMC session review

Another typical day in the life of an aspiring currency trader.  Lots of things packed into this one. Alcohol and lack of sleep.  FOMC rate meeting.  Long/short calls from other traders.  Greed. FOMO.  Over-aggression.  Self-awareness. Risk Management.  It certainly never gets boring.

  • Consumed more alcohol than usual on Wednesday evening.  Slept just over 6 hours. Arrived at office shortly before 7am.
  • As expected, the FOMC interest rate decision triggered some decent volatility across the board.  The immediate reaction was dollar weakness on more dovish interest rate expectations for the remainder of 2017 and beyond.  Equities rallied in response and commodities rallied on lower US dollar.
  • Ironically the dollar pulled back from around 7.30am London time – so good thing I didn’t sell the dollar in the morning.

Instead I traded the DAX, as it had broken out of its fairly tight price range that it had held over the past two weeks (see 1-hour insert on second chart below).  My mind went back to the DAX session from the start of the month, in which it rallied all day following the overnight speech by Trump – the 5-minute DAX chart that day ended up looking like this:

DAX Mar1

This influenced my expectations for today, and I more or less assumed that today’s price action would take a similar path, so I would need to look for long setups.  My trade ended up looking like this (5-minute chart):

518 blog version

The details of the trade were as follows:

  • 7.30am – Long 132 [12,132]  with stop at 97 [12,097], 35 point stop, risking 0.75R
  • 7.59am – Price peaked at 179 just prior to the opening of the cash market – giving maximum favorable excursion (MFE) of 47 points [1R].
  • 8.03am – Price pulls back.  Added to position at 149, moving stop on both legs to 116 – keeping overall risk at 0.75R.
  • 8.34am – Price hits 116 – Full loss of 0.75R on the trade – a far cry from the 1R of unrealized profit prior to the cash market open

Review of my trading actions

  • Initial Entry on 1M XTF was aggressive. Technically sound, but aggressive.
  • As mentioned, I had a bias that the session would fold out the same way as the recent post-Trump speech session where price rallied for the whole day. Both of my entries were based on the assumption that the session would be the same.  There were certainty some technical and fundamental similarities between these two scenarios, so it wasn’t an overly bad assumption to use as the basis for my speculation.
  • However, adding to long position at 8.03am was poor trading and was too aggressive.  I had no evidence that the pullback had stopped. FOMO, greed?
  • Not closing trade prior to cash open –  – I assumed that price would go much further. Also driven by FOMO and/or greed?
  • I recall trade on DAX – closed prior to cash open – though that was reversal setup rather than Cont setup.  That had turned out to be a good decision.

DAX Dec5

8.30/8.45am – opinions from other traders

A further thing that didn’t help that day was the interactions with one of the colleagues in the office who is sitting in the same large room as I.  He has extensive trading experience under his belt (a lot of it on the DAX), and tough he is not trading at present, does keep an active eye on the markets.  We have trading discussions from time to time and it’s been helpful!  Though I have noticed that when he calls out his opinion on whether he would go long here or pick a low or whatever – that distracts me in my own trading.  Yesterday was another situation like that.  This is my own fault – it’s my responsibility to handle/digest comments that I hear from other traders.  In any case, we had a quick and amicable chat about it – regardless, it did break my concentration – and it is something I am going to have to learn to deal with in the future.

9.05am

Took another long trade in the DAX, at a lower level of risk (risking 0.5R instead of 0.75R), in line with my money/risk management rules, given that I had a full loser on the first trade.  This was a valid setup, an acceptable entry and I managed it in line with rules.  It also turned out to be a losing trade.  That’s fine.

What did I do well/evidence that I am progressing as a trader

  • Immediately after the trade finished, I pulled back and took my foot of the gas pedal.  I know that in the past having situations where a trade had gone well into my favor prior to my ultimate trading result being scratch or even a loser (as in this case), regularly led to subsequent further poor trading in the session.  This could be the case regardless whether I was consciously annoyed about what had happened or even when I felt totally fine at the time.  I tried to reset my mind set and took extra focus.  Good!
  • Soon after I having a conversation with the colleague in my office regarding the sharing of his opinions on the DAX, I knew that I had to very careful in taking further trades, because the issue did unsettle me – and i was no longer in as good as a mindset as I could/should be when trading.  I realized this because I am becoming more self-aware during my trading session.  Good!
  • It seems I kept my composure and mindset and traded competently for the second trade, not letting the previous instances cloud my judgement or analysis.  Earlier in my trading journey I was less able to do that.
  • Finally at the start of the US session, I noticed that the previous night’s drinking and slight lack of sleep started to take its toll – I didn’t feel fresh. I didn’t feel sharp.  It would be better for me to refrain from trading the rest of the day. Good and responsible decision!

 

This entry was posted in Psychology, Trend-Following Strategy. Bookmark the permalink.

One Response to Post-FOMC session review

  1. Pingback: Trade Reviews: Lessons learned & Pre-Session Biases | Trick or Trade

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