Art Vendelay's journal

I'm making a journal, mainly for personal uses. I'll test my ideas here and document my journey. Once a week I'll post about new insights, could be anything related to trading. If you find it interesting, good, if not, like I said, the journal is mainly for personal uses. This journal is not financial advice, If you trade off of what you found in this thread, you are alone in bearing that risk.

My style is pretty basic, I like simple. I attempt to pair the strongest vs the weakest currency, then I use basic structure and support/and resistance to time my entries. I like to keep abreast of the fundamental front, it gives me context and I like to be aware of the environment I'm trading it. Nothing too complex, just keeping tab of monetary policy and how it is likely to evolve.

I'm starting with a little less then 500$ as this is a test, the plan is that when I get to 1k I'll match that with a 1k deposit, when I double that to 4k i'll match that with another 4k deposit, after that we'll see how it goes. That way when I deposit new money i'll have a margin of error. Also I dont expect to be doubling my money anytime soon so it will give me time to fine tune my trading, for now the aim is to consistently not loose money on a monthly basis.

Feel free to chime in and criticise my trading but try to be constructive.

Green pips to y'all
Art Vendelay

Watching NZD/USD, USD seems to be losing steam and NZD looks like is picking up the pace. The pair looks like is reacting to a support zone around the .654/655 level, I'm entering a limit order at .6556, stop below the local low on the 1hr, leaving TP open. In a ideal world we will get filled and in the green before NFP this Friday. on a unrelated note GBP/JPY is on an absolute tear right now, Brexit related, will keep an eye on that.

Update: order canceled, price got away, I was expecting a retrace sooner, will revaluate if a retracement occurs.

NZD/USD reversal is dead for now, the most likely scenario is that it will resume its down trend.

Week review,

Not much to speak of, I need to better manage my time so I can get at least an overview of the market everyday, I did not spend enough time going through possible setups this week, it is a slow start, not particularly happy about it. I need to be in trades in order to test/improve my trading.

The objective for next week is to allocate at least 30 min every morning to scan the market and formulate possible plans of action. To help me with that I need to fix my sleep routine, its pretty messed up right now.

Weekly trading insight,

Every week I'll write a post about my views/insights on trading. Putting my thoughts on paper will compel me to structure my conception of trading in a coherent fashion and force me to face cognitive dissonance where it exists. Also, it will be interesting to see how my thinking evolves with time. maybe I'll look at my early posts and think:" Was I on crack when I wrote this?". In any cases, here is the first installment:

Why even bother?

As a newcomer in the retail trading world one question is coming to mind, why even bother? The answer can answered by two main points. First is interest. Since I was a little kid I was always fascinated by money and at the same time I did not understand it, where does it come from? How can a bunch of paper be worth the same thing as a big mansion? Those where the question I was asking my parents when I was 6 years old.. for real. So one part of why I bother with FX trading is that the currency markets has always been an interest of mine.

The second part of why I bother with this endeavour, and the reason why most of you forum dwellers are on this website, is that I truly believe that outsized returns are possible to attain for the lowly retail trader. I worked for about 5 years in the sell side of the business and I noticed something peculiar about how the different trading desks were making money: it seldom had anything to do with guessing market direction or volatility. In fact, having market exposure was mostly frowned upon as, in this post great recession era, liquidity requirements were often too great to justify the profit of proprietary trading i.e. it would eat up too much of the balance sheet only to get a very volatile reward. Instead, they focused on financing trading activities for buy side/corporate clients while at the same profiting from the lack of CAPACITY from those same clients. I put capacity in red because it is important, its pretty much the name of the game for multi billion dollar funds. I'll give you an example:

let say a huge pension fund wants to buy an illiquid equity ETF that has relatively liquid underlying stocks (happens a lot more then you would think). The fund has 2 options:

1. say eff it, buy the ETF itself and assume the market impact as a cost (not smart)
2. say eff that, enter in a total return swap agreement with a bank, pay a fixed interest cost and let them deal with the market impact (smarter)

In the 2nd scenario, the bank is paid from the fixed interest payement received in the TRS agreement, however, because it is short the TRS, they will lose money if the ETF goes up, the bank will look to hedge that risk. The bank has an edge over the pension fund in this case. For the fund to long or short the ETF they need to trade it directly in the market which will most likely bring significant execution costs if they want to trade a significant notional size. However, if the bank is an ETF market maker (authorized participant), it can go directly to the ETF provider and say:" yo, if I get you all the underlying stock of the ETF can you get me the ETF for free". This way the bank has only to buy small positions in all the underlying stock instead of one humongous position in the ETF, the result is much lower execution costs. Also, since they are long the ETF and short the TRS, which is essentially a linear derivative of the ETF, they have no market exposure, which means no balance sheet being eaten up.

The point of this example is to illustrate that capacity is such a pain that buy side firms are essentially ready to pay banks to get rid of it, they are ready to pay ALOT. It is so profitable for banks that they are inventing products to address the issue. As a retail trader this is our edge, we dont have to deal with any of it. by the time you will reach capacity issues you will be loaded. People often say that we are competing with banks and hedge funds and all that but in reality not really, our orders are of no consequence, we can sneak in where the big guys can't. The same is true for FX, even if it is the most liquid market in the world, big institutions need to work their orders.

This is also a reason why most mutual/hedge fund are having average returns. Having huge returns, and running huge sums of money is often in contradiction with one another. In this context, maximizing returns is not the same as maximizing profits. This is why comparing hedge fund/mutual fund performance to a retail trader's performance is wrong, plenty of funds have average performance but makes loads of profit. Just by the fact that they have a lot of money to invest, they are forced to diversify their assets which in turn lower their expected performance. It may sounds stupid but most funds do not have an absolute return objective because with their capacity issues it might just be easier for them to market a low/well diversified fund and follow closely a benchmark, it will reassure their clients which are more often then not risk averse. What they will forego in performance fee they will gain in AUM if their marketing and sales team is good enough.

TL;DR, I bother because I love the markets and I think that even as a one man operation it is possible for the rewards to exceed the risks and the efforts. I may be wrong, only time will tell.

Art

Little scalp sesh this morning. When I scalp I try to use the shorter time frames to set my stops and I try to ride my trades until it hits a sup/res or breaks out on the 1hr. The most likely outcome long term should be multiple small losses vs few bigger winners.

EUR/GBP has been on a downtrend lately so this was my intial bias for the day, short E/G. on the 1hr we could see a sharp rejection at 4am est of price trying and failing to breach the nearest resistance which happens to also be last week's low. With the recent momentum for GBP the odds were for the move to resume through the NYC open after the rejection during London.

https://www.tradingview.com/x/aBtaOuyt/

I then zoomed in on the 1 min to fine tune the entry, shorted twice, was wrong both times and decided to reverse course as per the below:

https://www.tradingview.com/x/9wLrCD8P/

Swing trade on Cable,

recent news of Brexit negotiation have lifted GBP/USD to around 1.30 witch also correspond to daily resistance. Those reports of Brexit going well may have been overstated as per EU officials. I'm betting that the recent rally may be short lived and that the longer term trend will resume. I shorted GBP/USD based on technical at around 1.30 but EUR/GBP or perhaps GBP/CHF might have been the sounder choice as per the fundamentals since it's a euro region play, will have to wait and see, this is why I keep a journal.

risking 2%, if everything stay as is the target is at the base of the recent cable rally, 50 pips stop. coming off a daily resistance and the 1.3 handle I expect a swift move, if price is stalling my analysis may no longer be valid and I'll have to revaluate.

Daily snapshot:

https://www.tradingview.com/x/2wHIcs0B/

1h snapshot:

https://www.tradingview.com/x/noxKFSPP/

Did some scalping on CAD/JPY,It seemed there was an opportunity to ride a longer term move while keeping risk minimal. Entered at a resistance in the hope that it would hold, execution was less then optimal I ended shorting some pips below the level, lack of patience. If the resistance would not hold I was expecting the level to become support and the shorter term upward momentum to continue which is what ended up happening, small loss on the first trade then TP was hit on the reversal of the trade.

1hr snapshot

https://www.tradingview.com/x/lThLkLse/

1m zoom:

https://www.tradingview.com/x/g0Lf1fng/

I also went for a jog and missed a re-entry, I need to watch out for that.

GBPUSD swing trade is not looking good, my stop seems a little tight... I am afraid I'm might get spiked, oh well, for now, I'll keep watching.