Looks like my luck ran out in Q4 as I got out of sync with the volatility and behavioral shift in the forex markets . Here’s my Q4 performance review!
Basic Forex Trading Stats
Total Number of Trades Ideas: 11
Breakeven/No Trade: 1
Win % (winning trades / triggered trades): 27.27%
Average Winning Trade in %: +0.44%
Average Losing Trade in %: -0.73%
Largest Drawdown: -3.07%
Q4 Total Realized Profit / Loss in %: -3.51%
For me, the fourth quarter was a big disappointment, especially after I did so well in the second quarter and third quarter with nine wins and only two losses. It was almost the complete opposite record, and the laundry list of mistakes are pretty long.
First, the market’s behavior did shift as we did get higher levels of volatility, but the trends we saw through the first three quarters of 2014 seem to disappear with most of the currency-crosses.
Of course, there was the exception of the huge rally in Japanese yen pairs, which shot higher after the big surprise monetary policy easing by the Bank of Japan in October. Within that move came two of my biggest mistakes when I attempted to short EUR/JPY not once, but twice!
During the first EUR/JPY trade, I was caught off guard by the BOJ easing, and the second time, I thought that it may be a good time to play the potential for monetary policy easing by the ECB against what I thought may be overdone moves–I was wrong. I did learn my lesson however and shorted the yen on a text book triangle break in GBP/JPY, giving me my some reprieve with my performance on the yen.
As for my other trades, the biggest mistake I see is not cutting my losers quicker. In all of my trades, I only played ideas where the fundamentals and technicals lined up, but when they were invalidated, they should have been closed much sooner. While that practice may not have made me positive for the quarter, if I had limited those losses to a range of about 0.25% – 0.50%, I probably could have closed positive for the year.
The only other mistake I think I need to own up to for Q4 is probably too much of a short euro bias. While it does make sense fundamentally to be short euros because of the QE potentially from the ECB next year, the sell off in commodity currencies was a much stronger move that caught me off guard in trades like my EUR/AUD short and EUR/CAD short.
At the end of the day, the fourth quarter was filled with quite a few opportunities, but I didn’t adjust to the shift in market drivers and behavior, and I didn’t cut losers as quickly as I should when the story quickly changes. That bad quarter took my blog performance down to a -2.35% loss for the year, under performing my benchmarks: the Barclay Hedge Currency Traders Index (+2.14% YTD thru the end of November) and the Barclay Hedge Discretionary Traders Index (+0.76% YTD thru November). It’s really not much of a loss for the year, but again, after positive gains in Q2 and Q3, this is definitely a disappointing way to close out 2014.
Overall, I think I made progress this year in terms of taking risk and figuring out what risk management framework works best for me. And I always try to remember that this is a long journey towards forex trading competency and mastery, and as with any journey, there will be obstacles and forks in the road that can sometimes set you back. I’ll do some resting and reflection for the next week, and hopefully be ready to keep moving forward to in 2015.
That’s all I got for now forex friends…How did you do in Q4 2014? Please share your thoughts in the comment box below. Thanks for stopping by and good luck in 2015!