I didn’t have the same kind of luck in Q2 as I did in Q1, getting off to a rough start as volatility fell and how I played the market sentiment shift after the initial pandemic shock.
Basic Forex Trading Stats
|DATE||TRADE IDEA||P/L in pips||P/L R:R|
|4/20||NZD/CAD Returns to the Downtrend?||-88||-1.00|
|4/28||AUD/CAD Resistance Reversal?||-219||-0.74|
|4/28||GBP/CHF Fib Short Play||-101||-1.00|
|6/17||EUR/AUD Downtrend Play||+163||+0.58|
|6/25||EUR/NZD Straddle Play||+41||+0.24|
Total Number of Trades in Q2: 5
Average Gain R:R: 0.53
Average Loss R:R: -0.91
Largest Drawdown: -1.37%
Win % (winning trades / triggered trades): 75.0%
Average % risk per trade: 0.55%
Total Q2 Blog Profit / Loss in %: -0.67% on 2.00% total risk taken or -0.33 R:R
In my Q1 review, I questioned whether or not we’d continue to see extreme volatility and one-way moves, and that I’d stay cautious given the likely economic damage the pandemic has caused. Going into Q2, I definitely leaned more towards risk-averse in both wanting to put on risk and my directional bias as I thought more pain would come.
Well, we did see a lot of pain, both on from a human standpoint (13.3 million cases; 579K deaths around the globe) and economic standpoint (Global economy to shrink 6% in 2020 on coronavirus pandemic: OECD), and it’s not close to ending, but that didn’t stop traders from leaning risk-on, betting on a market recovery from the extremely negative levels seen back in March.
And that’s where I made my mistake. I favored the “less risky” major currencies over the “riskier” currencies in my first few trades, assuming a higher probability of more de-risking as economic data worsened. I traded my first three trades (short NZD/CAD, AUD/CAD & GBP/CHF) of the quarter in this manner, and took losses on all of them as the “re-opening trade” began to take more focus.
Eventually, I did switch my bias, playing along with the re-opening theme, but unfortunately, I was only able to get in with two trades and I wasn’t able to close them out with big wins to make up for the earlier losses. Concerns of a second wave by the end of June (U.S. hits highest single day of new coronavirus cases with more than 45,500, breaking April record) started to take the steam out of the market’s broad risk-on bias. And volatility was also on the decline as well, so it was a lot tougher to make pips.
Overall, I probably should have switched my fundamental bias sooner, but that was a tough call given my expectations of economic carnage. And while we have seen a bounce back in the economic numbers (China’s economy recovering but hard battle ahead, US industrial production surges 5.4% in June), they’re nowhere near pre-COVID pandemic levels.
For Q3, it’s likely we’ll continue with this pattern of sentiment shifting back and forth on COVID therapy/vaccine headlines, improving data, geopolitical tensions, and second-wave fears. I’m going to stick with short-term trades in that environment, but if this new wave of cases/deaths continues to accelerate to a point where we see massive lockdowns once again, then I’ll lean into a risk-off fundamental bias.
What do you think of my review and how did you do in Q2 2020? Please share your thoughts in the comment box below. Thanks for checking out my blog…good luck and good trading!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.