49%

Below you see another example of why it's important to paper trade. I messed up SL and TP on the EURUSD.  One pip is .0001, so instead of an SL of 11 pips, I placed it at 2. There is slippage in prices that you have to be aware of when placing these orders. I generally check the location, do the math, and place the order within a minute or so. If you take too long to execute, volatility can work against you, especially if you get your pips wrong like I did. 

So I said hey, let me get back in there. Ha, I placed the ordered right, and ended up wrong twice; and the EURO just kept dropping.   The next day, I decided to jump back in because I was confident I wouldn't make the same mistake again.  No big news fundamentally btw, on MT5 anyway. We're still in the mist of madness with COVID-19.  Anyway, JPY (.01 per pip!) went well, and again, not wanting to settle for a negative week just yet, I jumped in yet AGAIN the next day.  That was way too much risk, and I felt it. The risk was present because I became emotionally involved, which is the wrong way to play.  Overall, good week though.

I started my last book First Course in Corporate Finance, and it's deep.  Present Value starts it off and it exhausts that subject. There are a lot of formulas initially, but going slowly through the table of contents, there are some interesting subjects coming up that I have actually not read much about so far.  Nothing else to report. Deep breaths.  Stay aware.

Completion of book 43, 45% gains to date

-->

I finished Trading Systems and Methods (2013) by Perry Kaufman today.  What a mammoth.  Some interesting topics for me included regression analysis, RSI, and my running favorite, seasonality.  This book really covers it all when it comes to both fundamental and technical analysis. Later in this post, I rewrite one of the quotes just for reinforcement and repetition, although I have mentioned these topics in previous posts.  By the end of this book, I felt like I'd finally reached a point where there are much fewer 'new' concepts.  That is to say, I can distinguish what is "traditional" regarding trading.  When something new appears, I can at least compare it to some other idea, indicator, process, analysis, or term I’ve seen previously.  

I woke up in Chapter 14: Behavioral Techniques, when it said: “Short-term systems are more likely to target investor behavior than economic factors because, over a few hours of one day, the influence of macroeconomic policy and long-term trends is very small." I believe that the combination of investor behavior in lieu of fundamental announcements is quite powerful. The news items that affect prices the most are stated as:

•       Release of economic statistics (PPI and CPI for inflation, retail sales, balance of trade, employment and initial claims, consumer confidence, housing and refinancing).
•       Action by the Federal Reserve or other central banks to change rates or change their bias (the way they express future policy).
•       Changes in the money supply that indicate easing or tightening.
•       Government reports on commodities production and inventories.
•       Unexpected news or price shocks, such as an assassination or terrorist attack
•       Trade negotiations, agreements, legislation, and occasionally rulings by the U.S. Supreme Court that affect business.
•       Weather and natural disasters, such as the Japanese earthquake, or a hurricane that affects the sugar crop or causes large payouts by insurance companies (or COVID!)
•       In-depth studies by the Wall Street Journal.
•       Front-page news articles and dominant television coverage of high prices, strikes, etc., and their potential effects on business.
•       Market letters, research reports, and comments from accepted authorities, major brokerage houses, and influential organizations.

"[T]he CFTC releases its Commitments of Traders (COT) report each week. It tells the distribution of holdings among large and small speculators and hedgers as a percent of total open interest."

Throughout the book, there is an emphasis on labels like “contrarian,” among others that distract from learning what tools can be employed to make a profit.  Quite simply, the book is filled with tips and information useful only to the individuals seeking positions at well-established institutions.  Often, I read thinking, “that would impress somebody if you pop that out in conversation,” or “I would think that perspective could potentially make me money,” even if I’m not exactly sure how.  

And OMG, I’ve heard enough talk about the golden spiral/ratio for one lifetime.  I’m a lover of all beauty in mathematics, and this is still just ridiculous to me, but so is astrology as a serious subject in trading. The takeaway is the power of people to self-fulfill their prophecies.  This is also in Ch. 14 on behavior. It was good stuff.  I had no idea there was “Financial Astrology Software.”  What a world. The question going forward is how prevalent it is and what's the trend on ignorance in the trading population.

In Chapter 23: Risk Control - “Long-Term Capital Management, a home for some of the smartest

financial minds, believed they could engineer the risk out of each trade by explaining

away all of the previous price shocks, then failed to survive the next price shock. Without

including these larger, infrequent losses in the performance profile, trading accounts are

likely to be undercapitalized.”  There were a few nuggets like this that I just ate up.  Overall, I give the book a B.  Although it was a huge book, and impossible to absorb all the topics on the same level, it is a great reference, something to go back to again and again.  The amount of stats, geometry, algebra, and even differential equations speaks to the depth of knowledge presented.  

So, let's see, that's... 43 books. The last and final book, A First Course in Corporate Finance by Ivo Welch (2006).  This is also a huge one. We'll see what I can get outta this one.  Laterz.

***********************************************

Here's last week's profits, bringing my balance to $145,044.  Note, I had two trades back to back because I had entered the TP wrong the 1st time, and I saw that it was a huge rally, so I jumped right back in correcting my error, and took a 5% win overall.

I’m going up to 4% risk from here on out because my time to go live is coming soon, and I need try a few more things, sooner than later.  Quick calculation, if I take 10 trades, risking 2% for SL, 4% for TP, let's say I'm successful 50% of the time.

5(.04x) - 5(.02x) = 5(.02)x = .1x.  That means I'd gain 10% on my capital (x).  So odds are in my favor if I'm correct only half the time!  I just had to point that out.  Now, what if I increase the risk to SP of 4%, TP of 8%:

5(.08x) - 5(.04x) = 5(.04x) = .2x = 20% gain.  The risk makes it important to be more accurate because I can bleed my account sooner. Oh my goodness.  

4 more trades, 38% total

11 weeks into 2020, and my balance is at $137,700.  This is encouraging to say the least. 38/11 = 3.5% a week. The strategy is staying the same. The last couple of weeks have been rough, so this week was refreshing.  I placed both trades one after the other. When the sell of GBPUSD ended up positive, I started to look at the USDZAR trade more closely.  Coming from a rough week, I wanted to end on a positive note. Once I had gone beyond 4% profit, I jumped out.  In retrospect, it was a good decision because the ZAR switched direction within the next hour, far from hitting my TP, but instead went all the way up to my SL.  I had placed the trade incorrectly again. The ZAR moves hella pips, and I had a lot size that would have destroyed my account if the trade went south (north?).  That being said, it pays to watch when you have time as a swing trader.  I was in and out within 4 hours.

Onto fundamentals.  European Central Bank (ECB) put out a lot of important indicators today including: Deposit Facility Rate Decision, Interest Rate Decision, and Marginal Lending Facility. These 3 are released monthly.  Personally, the corona virus's impact is more interesting to me considering the effects on airlines, trade with China and Europe, lay offs, and the media storm.  I'm looking for big volatility across the board.  That will be next week for me though as I've done my 2 trades for this week.

The current book I'm reading is Trading Systems and Methods by Perry Kaufman (5th ed.) 2013.  It's deep into technical analysis, so I'm familiar with everything so far, about 1/5 of the way into it.  I can definitely feel the difference in applying strategies, and actually creating a plan of action.  Book #42 is almost through.