Somehow, I got lucky once again with my forex trading in the third quarter, but as we always say, we can always do better. Here’s my Q3 performance review!
Basic Forex Trading Stats
Total Number of Trades Ideas: 10
Breakeven/No Trade: 3
Win % (winning trades / triggered trades): 71.43%
Average Winning Trade in %: +0.40%
Average Losing Trade in %: -0.22%
Largest Drawdown: -0.46%
Q3 Total Realized Profit / Loss in %: +0.79%
Looking back, the third quarter was a tale of many markets: a low volatility, choppy summer transitioning into an explosion of volatility as the pros came from summer holiday. And it was also about euro selling on the sentiment that the ECB would eventually cut rates and start purchasing assets to battle eurozone weakness and a deflation scenario.
Commodities and the comdolls also fell out of bed, partly on weakness creeping up in China, but mainly on the insane +8% U.S. dollar rally that started at the beginning of July pushing all non-U.S. assets lower (it’s too bad I stayed away from dollar pairs). Needless to say, forex volatility picked up big time compared to the doldrums of summer.
Because volatility was so low for the crosses in July and August, pulling profits was tough. Most cross pairs traded sideways until mid-to-end of August, and for me, it was tough to find a solid currency cross trade I could hang on to because most combinations looked tough as long-term trade options: e.g., couldn’t buy the euro, and couldn’t sell it either against weakening comdolls or a strong (but weakening U.K. economy), and I couldn’t buy comdolls, euro, or the pound against a weakening yen because of the possibility their weakness could draw in short-term sellers, or that geopolitical risk would come back to boost the yen.
Fortunately, I was able to scrape together a few small winning trades during that time, and when the big volatility came, I was able to grab a couple of solid wins with my EUR/GBP short and AUD/CAD short. The EUR/GBP short was a high probability on the idea that the ECB would take action to ease, and the AUD/CAD short was an extremely simple parity break and retest setup, playing Aussie weakness against a comdoll that would be relatively strong given its proximity to the U.S.–the Loonie.
My only two losses were both on GBP/JPY, and looking back, I think it was a mistake to play the British pound during the uncertainty of whether or not we’d see Scotland leave the U.K., which would have potentially big negative effects on the U.K. economy. There were short term opportunities through that time, but playing the shorter-term is something I try to avoid now.
Overall, I think the best decision I made was to stick with my methods of watching the fundamentals to determine my directional bias and creating longer-term setups. Ever since I decided to do that back in Q2, my win percentage has been high (9 wins:2 losses since Q1). My biggest weakness was probably not being assertive enough to play the solid opportunities like maximizing the EUR/GBP downtrend after the Scottish vote and taking the AUD/CAD short earlier after a major support break at 1.01.
At the end of the day, the third quarter was filled with quite a few opportunities, especially in September, but there’s still a lot of work to be done with my trade management and aggressiveness. But to stay positive, that 0.71% gain puts me up by +1.20% for the year and mixed against my benchmarks: the Barclay Hedge Currency Traders Index (-0.20% YTD thru the end of September) and the Barclay Hedge Discretionary Traders Index (+3.86% YTD thru September). It looks like the rise in volatility helped many trader’s performance in September, so I hope it stays to give me a chance to work further on my weaknesses, and end the year with three quarters of performance gains in my forex blog!
That’s all I got for now forex friends…How did you do in Q3 2014? Please share your thoughts in the comment box below. Thanks for stopping by and good luck in Q4!