Hey, forex friends!
As in the previous years, the end of another trading year means we get to look back on the trades that we took and hopefully apply the lessons that we’ve learned to our trades in the coming year.
Unfortunately, I took too few trades this year to show you basic trade journaling stats. I don’t know if you’ve noticed, but I’ve mostly shared trade “watch lists” instead of active trades for most of this year.
That doesn’t mean that I didn’t learn from those trades that I took though!
Here’s a list of what I’ve learned from this year’s setups:
1. It’s okay to adjust your entries and exits.
Don’t get me wrong, it’s IMPORTANT to have a trading plan and to stick to it. The habit promotes more decisive execution and consistent results in the long run.
But prices don’t always go where we think they would. A currency pair, for example, could miss a technical level by a few pips before it reverses, or a pattern “breakout” could turn out to be a “fakeout.”
Back in September, I shorted USD/CHF when the pair hit its SMA and channel resistance area on the daily time frame. I believe the Fed was also facing pressure from the POTUS to cut interest further at the time.
The trade went well…until progress on the U.S.-China trade negotiations boosted USD/CHF to new monthly highs. Because I closed my short at the first signs of an upside breakout, I was able to cut my losses to only half of what I would’ve lost if price had hit my initial stop loss (it did after I got out).
As I said in my 2018 trade review, as long as you’re not risking more than you initially planned for and you’re maximizing trade opportunities, making trade adjustments shouldn’t be a problem.
2. Be more aggressive in seeking profits
For the longest time I’ve focused my “risk management” mojo on limiting losses. I realize now that I should pay more attention into locking in profits.
Earlier this year I was able to enter USD/JPY’s uptrend right at a support level and was confident that the trend would be my friend all the way to my profit target.
My “friend” ended up taking its sweet time! I held on to the long position for WEEKS before my trade was taken out at its adjusted stop loss after a particularly dovish FOMC statement.
If I had noticed how it was getting more difficult for USD/JPY to make new highs and locked in profits I had instead of just adjusting my stops, then I could’ve gained more pips and used my time on seeking other profitable setups.
3. Learn to trade other time frames.
I don’t know if you’ve noticed, but volatile headlines on Brexit, the U.S.-China trade negotiations, and even Euro Zone PMIs have made it tricky for major dollar pairs to sustain long-term trends this year.
Those same catalysts provided legit intraweek trade opportunities, however. If I had been more comfortable trading shorter time frames and pushed myself to trade setups other than visible trends, then I probably could’ve made more profitable trades.
With these lessons in mind, I’m lining up my priorities for the year ahead:
Be more active in “risk management.”
This means both limiting losses AND maximizing profits. I gotta be more comfortable locking in pips without feeling guilty over not following my initial trading plan!
Explore other time frames and trading strategies
While I have more experience trading trends, I should also practice trading range and breakout trades so as not to limit the setups that could yield me pips. Looking at shorter time frames would also help especially since it would encourage more chart time for me.
Forget that perfect trade
Instead of waiting for setups that would look good on my trading journal, I should look for ways to simply get more pips. If the technical and fundamental drivers are valid, and the reward-to-risk ratio is still attractive, then I shouldn’t hesitate to take valid setups.
That’s it for my review this year! I’m pretty excited about taking more trades to share with you guys.
How about you? What hard lessons have you learned from your trades and what are your top goals for the year ahead?
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.