Diversified Trend Trading Approach

Hi B

The beginning of the week was not an enjoyable experience. Good to know it wasn't just me. I was listening to some joy on other threads from the scalpers amongst us and was quite envious.

You sound as though you have an excellent balanced portfolio and that you are riding the trends v. well. Nice management of the EU rally by the way.

I will keep fingers crossed for next week. All the best.

C

Please note that following the weekend analysis, I have amended predictive entries for next week and these are contained in the analysis below.

There is considerable discretion placed on predictive entry levels and the information below hopefully sheds further light on why I have placed them at the levels detailed below.

All the best for trading next week.

Regards

C

PS..... Please note that while the predictives are used as a gauge for looking for entry signals, the final decision is made when I switch to the H1 timeframe and look for the consistency of the trend on the H1 timeframe using the SDC. I have been known to cancel entries following my assessment immediately prior to entry based on H1 trend consistency information gleaned from past price action in the SDC channel.

I'm still long the USD and didn't get any signs of weakness yet, trading the long term (e.g. the D1 W1) have a lot of advantages and also some weaknesses ( bigger stop loss), had the EU kept retracing higher i would have exited my shorts with minimum profits and of course the yen trades also, the AU i'm confident and according to PA (Price action patterns) that it will continue lower @ least until the 82300 'sh, the 6770 is on my radar also of course not without some retracements higher and some scares, after that god only knows.

Sunday morning, sitting in Starbucks drinking my mocha with the family and relaxing a little bit.

Best,
B.R.

Now that's what I call a nice way to end the week.

I was looking at your thread over the last few days and my eyes have been bulging at your fantastic charts. There is a lot to them. I might have to start at the beginning and take it slow to gain an appreciation for your style of trend trading.

Have a great week B. :-)

The Week of Hell!

Sometimes you just can't pick a winner and this week's trades bear testimony to this fact of a traders life. The first half of the week was a week of records....namely a string of consecutive losses that dependent on your trading approach may have represented a deep drawdown sufficient enough to make you question whether trading is just a zero sum game......or make you wonder whether you are just the worst trader in the entire world.....neigh, the universe.......

Despite the pain of enduring defeats, lessons provided by these defeats are essential in determining whether or not your trading strategy is sufficiently robust in managing risk. Despite the pain of a string of consecutive losing trades that with previous approaches would have sent me scrambling, I am sufficiently confident now to state that this current approach is a saviour with regards to mitigating adverse risk events.

This month is not yet over so it is too soon to say that this may represent the first unprofitable trading month in almost 2 years for this strategy....however what gives me hope is that the damage done this month is insignificant with respect to trading capital and allows for a quick rebound if market conditions resume with some trends taking shape. I have been a trader for most of my life and this is the first time that I feel confident enough to weather this storm thanks to the merciless risk management approach adopted by this strategy.

.......so aside from the fact that I simply could not pick a winner, there is some comfort to this story of this week's trading.

I would be interested to hear how other trend traders fared this week as across most markets, there was considerable uncertainty and many trend reversals going on. This is not necessarily a December phenomenon and to be faithful to the strategy I am not in a position to apply tea-leaf reading and forgo trading during this period based on a subjective hunch that these periods should be avoided. If this strategy has what it takes to be included in a very small selective set of trading strategies (if indeed they do exist at all) that are sufficiently robust to deal with altering market conditions, then I need to trade it at all times. This week has actually been a good test for risk management aspects of this approach.

My next post will commence with a recap of the trade activities undertaken this week. Prepare for a good laugh....after all, it's not often you can tell the tale of 10 consecutive losses in a row!!!!

Enjoy.....at my expense :-(

C

Closed Trades for the Week

CADJPY
Look how confident I was at the beginning of the week in that I had defined my 2.5R levels on the chart for a change to the SDC......this confidence was shattered however as seen in the chart. (-11.5 pips). Ok this is just a small loss....still feeling confident....Copernicus mutters 'there will be better trades just around the corner'....(or will there?)


DJI
Now this just hurt. Note how I entered just prior to the trend reversal (-130 pips). (Suck it in I said to myself...it's got to get better from here.......(WRONG!!!!)


NIK
The good old Nikkei. Now this won't let me down. This stalwart just keeps giving pips......(sobs.... -124 pips). Another frickin trend reversal or major retracement.....but it just keeps getting better......*groans*


USDJPY
This is where I kicked the cat!!!!!. (-39.4 pips) What is wrong with the markets.......I hate Santa Claus!!! In previous days I would have started getting aggressive at this point trying to recover lost pips with excessive overtrading.......and would have paid a severe price....more pain and sufferring follows. In reality this is the price of trading correlated pairs such as the Nikkei and USDJPY but I didn't say this at this moment in time as I was not being entirely reasonable at this stage thinking that my great stats for the last two years was taking a bath.


EURJPY
Intense self-loathing started taking shape with this trade. (-134 pips) The words 'you are the biggest loser was heard from my mouth and I spent at least 30 minutes looking for the cat to kick again...(it just vanished in thin air for some strange reason).


DAX
Finally a profitable trade......but this was bitter sweet as this position was a trade which was held for a considerable period and like everything in the world at this point in time .......finally bit the dust with only a very modest profit. (166.8 pips). At least it took some of the pain away and made me soldier on........'I can beat this frickin market'... I said at this point in time....and patted the nervous cat.


NZDUSD
Ok..now this was just plain rude. Almost a perfect storm with an entry taken just before a significant reversal. Such a nasty major spike that was directly aimed at me. At this point I was becoming suspect that the entire world trading community had seen my posts from last Sunday regarding my predictive entries and they all mutually decided to wipe me off the face of this planet. (-169 pips)


AUDCAD
Fate was starting to set in. Bruised and batterred, the pain was beginning to ebb in favour of just general numbness. (-27.8 pips) The anger subsided and was replaced by deep depression....why doesn't the world like me!!!!!!!!


CADJPY
At this point I started yelling at my maker taunting him in front of my trading screens yelling....'is this the best you can do?'....'come on show me what you've got.....this is just a flesh wound you big sissy'. This was the second shot in the week for CADJPY being a sucker for punishment. (-11.5 pips).



The result of these gruelling trades is that I have endured (including last week) a string of 10 adverse trades......a record....yippeeeee.....NOT!!!!.

Now getting more serious, the important note to highlight is the following. Despite the wicked string of adverse events, the low risk per trade of 0.5% trade capital combined with the use of the SDC as an exit mechanism has resulted in the following very favourable result. Despite 10 unfavourable trades in a row, total losses incurred represented only a drawdown of 2.8% of trade capital. This validates the significant potential of this approach in managing capital risk. Such exceptionally low drawdowns is certainly a different beast to that I have experienced with alternate approaches where drawdowns of between 20-30% have been fairly commonplace.

Despite the gruelling conditions for trend traders this week, I am actually very happy with this result...hard to believe I know...but in my opinion it is the way a strategy handles risk that is the most important factor to consider when considering 'trading for a living'.

My next post will highlight a better story concerning current open trades.

C

Current Open Trades

USDSGD (Currently 288.3 pips)
This long term trade gave away considerable profit during the week but it is still alive to tell the tale.


AUDUSD (Currently 222.1 pips)
Hopefully this trade will reach the 2.5R level where I can then reduce the width of the SDC to 0.5 to lock in some profit.


AUDJPY (Currently 43.4 pips)
Given the thrashing I have received this week, this was a nervous entry. Hopefully this plays out Ok.


EURAUD (Currently 57.6 pips)
Hopefully this trend continues.


USDCAD (Currently 61 pips)


DJI (Currently 229.5 pips) - Looking weak.


FTSE (Currently 146 pips) - Down she goes.


EURCAD (Currently 63.2 pips)


CADJPY (Currently -44.3 pips) - This is testing the nerves.


DAX (Currently 121.5 pips)


....now I am hoping I get a bit of joy from these next week and that I do not get the stuffing kicked out of me again...but you just never never know. :-)

C

Excellent recap, very honest, this is how it should be, tough like any other week, a lot of trend reversal this week taking in consideration that this was a mild risk events news week.

Lets start with the mother of all currencies the Mighty dollar which took a dive this week and show signs of topping, all the yen pairs follow through downward although didn't break the lower primary DC (Donchian Channel) yet but its close, EU made my week with a precise take profit and long entry after the break of my down channel up and the retest which allow me to take a precise to the pip long entry which i hope it will last.

Took profit on the AN (AUDNZD my favorite pair) Support after a long drive down and waiting for PA Signal to decide the next step, still short AU but sign of bottoming is taking shape with 2 outside day and 2 inside bars.

The UCAD behaved differently because of the correlation with oil and took off breaking resistance, CADCHF broke down my W1 channel after a long period of consolidation waiting for a retest to have a better short entry if it comes.

My best play so far is CL (Crude Oil ) which keep diving and is oversold, i expect next week to have some retracement before the downtrend continues, i'm still long gold after that nasty whipsaw we saw on the first of the month but tightening my stop for i don't expect this bull move to continue.

All charts are on my thread.
MRM ( Money and risk management ) is crucial, don't change your strategy because the Market changed you will be rewarded for your patience and discipline i'm sure of it.
If i may suggest to hold off a least 50% of your work ( At this point I was becoming suspect that the entire world trading community had seen my posts from last Sunday regarding my predictive entries and they all mutually decided to wipe me off the face of this planet ) because YES there are stop haunters from different financial firms how prey on honest people like you and me because its just a part of their bread and butter to make these profit targets placed for them by their firms to get their bonuses @ the end of the year and we are almost there, so be attentive.

All your hard work is much appreciated, i'm sure that its a matter of time before you will be the next Millionaire trading the markets.

Best,
B.R.

Hi B

I like your trading recap. I will closely look at it tomorrow when I post the outlook for next week. I spent a good portion of this morning going over the original ETMA thread from Alfredo before I launch into yours which I am greatly looking forward to. The principles behind the mean reversion of your strategy seem very powerful and is not to dissimilar to this approach using the SDC. In the past I spent some considerable time on a COG strategy derivative that held a lot of promise and hence my interest in your technique. Inevitably however I will need to invest some considerable time looking at your approach to closely look at the nuances.

My long term aim is to obtain a suite of different approaches that suit my style to further diversify income streams and reduce my risk exposure to any single market condition.

I must admit that I am considering taking your advice about not supplying predictive entries as I am just asking for trouble by telegraphing my future actions. I will however provide these entries by PM if anyone would like to keep track of them. So for the outlook for tomorrow I will simply post what I see as the general market moves for the week for each of the pairs and keep it fairly generic. On a monthly basis I will provide my analytics spreadsheet if anyone needs to backtest using trade entry details that will be included in the spreadsheet. It's better to be safe than sorry and I must admit I do have a fairly conspiratorial nature that doesn't help.

...anyway, thanks for the kind words of support B. I feel like I am now ready to face next week with a skip in my step.

Regards

C

Weekly Analysis

Portfolio Status
10 active trades with 14 instruments sitting in watch and wait mode.




This week's analysis will take a more visual and interpretive format than previous weeks attempts as a graph speaks a thousand words. I will also only be focussing the analysis on those instruments in watch and wait status as current active trades have been featured in previous posts.

Regards

C

GBPUSD




ASX



EURJPY



.....more to come.

C

EURUSD



NIKKEI



USDCHF




.....more to come.

........after a nice steak lunch.

USDJPY



AUDCAD



XAUUSD (Spot Gold)



....more to come.

NZDUSD



XAGUSD (Spot Silver)



NZDJPY




Final post for the week to come.

NZDCAD



GBPSGD





That's it for the weekly update. Let's hope this week plays out better than the last week.

All the best for the week ahead.

Regards

C

C

As usual, very nice charts. Thanks for doing this.

No problems Pak :-)

I think this graphical interpretation on the 3 timeframes helps me keep clear of the noise of a single chart. I will in future weekly assessments improve on the chart annotation to assist interested thread participants in understanding my rationale for predictive entry placements.

C

Yep, I am liking it a lot - very clear and succinct MTF analysis. Cheers

Simply brilliant, brilliantly simple, excellent work, keep it up.

Best,
B.R.

Many thanks B. :-)