Financial market volatility exploded in the first quarter of 2020, sparked by the savage spread of the coronavirus pandemic across the globe. Here’s a quick review of the trades I took in this environment and some lessons learned from the process.
Basic Forex Trading Stats
|DATE||TRADE IDEA||P/L in pips||P/L R:R|
|1/24||USD/CAD Fib Short Play||-64||-0.42|
|2/5||Short-term Downtrend in AUD/CHF?||+66||+0.41|
|2/18||AUD/NZD Downside Break?||-82||-0.38|
|2/27||EUR/NZD Fib Short Play||-244||-0.80|
|3/2||USD/CHF Fib Short Play||+105||+0.86|
|3/24||USD/CHF Uptrend Play||+195||+0.86|
Total Number of Trades in Q1: 6
Average Gain R:R: 0.85
Average Loss R:R: -0.53
Largest Drawdown: -0.78%
Win % (winning trades / triggered trades): 50.0%
Average % risk per trade: 0.67%
Total Q1 Blog Profit / Loss in %: +0.06% on 4.00% total risk taken
At the end of 2019, it looked like 2020 would be a risk-on environment as it looked like central banks would likely keep monetary policy moving in the same direction (i.e., easy money conditions to support their economies). Volatility in this scenario was likely to continue to decline, but there were negative geopolitical news on the rise; mainly the never ending trade spat between the U.S. and China (remember when that was a big thing?) So, I looked to play very short-term and very long-term with that outlook ahead.
Well, a huge black swan hit the markets in February as panic ensued over the fast spreading coronavirus pandemic, prompting a mass market liquidation of risk-on trades through February, and eventually some selling of even safe havens in March. What a time to be a trader, right!
As for me, I had eight ideas, with six being triggered and closed during this time period. And after a quick look, I’d have to give myself a so-so rating on my performance. On one hand, volatility was immense, which is the perfect time to try to catch pips usually, but on the other hand, given this was an unprecedented situation (a global loss of lives and economic shutdown) I was hesitant to take risk.
On the trades I did take, I’d say I did okay as well as my average positive R:R was much higher than my loss R:R, but my losses were on bigger position sizes given my scaling in strategy in most cases. Also, in terms of directional biases, I was 50/50 correct when considering the trades taken, but when also account for the trades that didn’t trigger (GBP/JPY Short Play & USD/CAD Rising Lows Retest?), I was more right than wrong and should have done much, much better given the moves in both of those pairs.
Overall, while I did eke out a tiny, insignificant gain on the account, being that this was one of the best times ever to be an active trader, I think I failed miserably. I should have been focused on the panic and played that through a swing/”scaling into winners” strategy, rather than taking short-term trades for quick pips. Of course in hindsight, that was was the right move, but in real-time, I probably did okay by being cautious given that we saw big weekend gaps and a somewhat break down of markets during the panic.
Going forward, I think the big risk-off move might have passed, but with the upcoming data (both economic and coronavirus related) likely to be very, very bad, I think odds are decent of another round of risk-off flows. I will work on one big trade around that core idea (probably my AUD/JPY short open at the moment) and do a lot of short-term trades around it in other pairs. It’s going to be uncertain times for a while, so I think this strategy fits for now, but I’ll be ready to adjust if by some miracle the world can recover quickly from this terrible situation. Stay tuned!
What do you think of my review and how did you do in Q1 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.