Before I bid farewell to the year that was, I decided to take a short walk down memory lane to give you a review of my trading performance and the lessons I learned throughout 2011. First, here’s the monthly breakdown of my trades in 2011:
Yipes, a 6.92% drawdown for the year! Not a very attractive picture, is it? Looking at the chart above, we can see that though I have never had more than 2% drawdown each month, those little losses tend to add up. I also found out that my losses are more than double my winning trades, and that I tend to short the comdoll pairs more than I buy them.
Another funny thing about my trades is that the sizes of my winning trades are about the same as my losing trades, both in pips and in percentage of account. Does this mean that I’m not maximizing my wins enough, or should I exert more effort in containing losses?
Well, I guess I can take comfort in the fact that my little drawdowns didn’t go to waste. Through the help of your advice and support, I learned A LOT in these trades. Here are my favorite trading lessons:
1. Always remember to protect your profits.
Do you know the feeling of holding on to something precious only to have it slip away? No, I’m not reminiscing about my love life (or lack thereof). I’m talking about those moments when I watched my paper profits vanish to thin air just because I ignored technical or fundamental signals to close early.
During those times when I’m feeling extra greedy, I have to make an extra effort to remind myself that it’s okay to walk away with a small profit than risk having it erased completely. As they say, a bird in the hand is worth more than two in the bush. Besides, no one ever got hurt by taking profits early, especially when the market situation calls for it, right?
2. Don’t forget to move stops when necessary.
In line with the first lesson I mentioned is the need to keep adjusting stop losses in case I decide to keep a position open much longer.
At the start of the year, I experimented with using trailing stops but I just couldn’t seem to find the right fit for each comdoll. I found it more effective to adjust my stops manually, mostly depending on the technical outlook, but I often forgot to adjust them before the weekend or before a major news release. Good thing I moved my stop to breakeven in this short NZD/USD trade though as it gapped up over the weekend!
3. Reviewing past price action helps a lot!
If you tune in to my blog regularly, you’d know that I made a habit of coming up with Comdoll Weekly Replays which reviewed fundamental events and price action for the past week. I mentioned that this was part of my deliberate practice, in hopes of being able to spot repeating patterns and improve my overall trading performance.
Towards the latter part of the year, this deliberate practice started paying off as my trade for the week actually turned out to be the best setup for the week. Well, almost. I was able to have the correct fundamental bias and catch good entries just like I did with this AUD/USD short trade, but I really do need to improve on my exits and risk management.
4. Always, always BE FLEXIBLE.
As my trading stats this year have taught me, I do tend to cut off my wins and let my losses run. A newbie mistake, I know, but one that I found hard to break. Because I take swing trades a lot, sometimes I forget to really take a look at the markets and make the necessary changes when a news event invalidates my original trade idea. As Dr. Pipslow once said, just because I’m taking swing trades it doesn’t mean that I don’t have to constantly be updated on what’s happening in the markets.
Next year I’ll try to be more flexible by considering adjusting my trade details more often, and deviating from my original trading plan if some news reports suddenly invalidate my trades.
There you have it, ladies and gentlemen! Now it’s time to say goodbye to 2011 and look forward to more pips in 2012! Who’s with me? Hit me up!
Happy new year!