Back from my summer break and from an impromptu “staycation” last weekend in the Annapolis Valley home to the Nova Scotia wineries, another month has ended, which, also coincides with the end of Q3 2021.
Some of you are aware that over the past 4-6 weeks or so, I have been looking at updating, changing, or amending communications. This month’s blog format starts those changes that I decided upon with some discussions with my trading groups. Most of the changes that I will be making will be implemented during Q4 and will be ready for 2022.
This blog is a month end version, which means that initially I will review the previous months performance of THE WEEKLY FX PREMIUM before touching on what will now become the usual monthly running format.
Despite recent market activity that has tested oodles of my patience and a firm grip on trade convictions and persistence, the WEEKLY FX PREMIUM continues to add pips. Although not every trading style has had a straightforward approach and I have been caught on a few occasions and taken losses. Such is life and so goes trading FX, losses are something to live with and accept regardless of the annoyance at the time.
Nevertheless, September and the Year-to-Date numbers are as follows: -
Total net pips = +1,581 pips
YEAR TO DATE 2021:
Total net pips = +14,003 pips
(90.46% of my 2021 objective)
I am delighted to be on what I call the final straight with regards to pips generated, however, behind these numbers I am not satisfied with my overall performance as there are areas that require improvement. The issue is that with only 3 months of 2021 left the chances of completing a perfect year of trading in all target areas looks difficult.
1: THE WEEKLY FX PREMIUM – SEPTEMBER 2021 PERFORMANCE
1.1: MONTHLY TRADE STYLE PERFORAMNCE:
Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Mini lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.
Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.
Therefore, on the spreadsheet using the highlighted reference points: -:
A: - This represents at USD$1.00 (Mini Lots) per trade a USD$ income of $1,581.00 which, correlates to my reporting of net pips for the month of +1,581 pips.
B: - Costs trade reflects the fact that 44 Mini lot trades in total were undertaken at a cost of 44 x USD1.00 = USD$44.00.
C: - When subtracting B from A this gives a net income total based on single Mini lot trades of USD$1,537.00.
As you can see from the above monthly total, the bottom-line numbers were great and obviously pleasing on the eye, but, above the bottom line there are areas to look at a little closer.
I was caught with a fast-changing sentiment market that I thought at the time would fall into a “BUY THE DIP” situation, which it did not do.
I took losses on trades within my FLASH and RADAR trade styles. Both trade styles, FLASH in particular, is intended to be very short-term at most a day trade. On the other hand, with RADAR trades, whilst I will let these move around, my stop loss is mostly aimed at the weekly average true range at most, although I will make exceptions. I decided in September NOT to make exceptions and take my pain of losses.
Look, I am not going to whinge and bitch about these losses. A total of 155 pips in losses, in the grand scheme of things a drop in the ocean. For 2022, I do have decisions to make vis-à-vis my trading style. I am a huge believer in playing to one’s core strengths and I am of the opinion as we enter Q4 that trade style changes will be in place for next year.
1.2: MONTHLY TRADE BY TRADE REVIEW:
It is obvious looking at the trade-by-trade breakdown that my approach to my long term (CORE) POSITION trades are a strength and my multi-trade bit by bit strategy of taking profits along the way works. Its NOT for everyone BUT it works for me and is hugely successful from both a pip and income perspective.
2: THE WEEKLY FX PREMIUM – YEAR TO DATE 2021 PERFORMANCE
2.1: YEAR TO DATE TRADE STYLE PERFORMANCE
(including the net WEEKLY FX PREMIUM returns):
Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Micro lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.
Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.
Referring to the year-to-date spreadsheet above and using the highlighted reference points: -
D: - The gross year to date income from all three trade styles is USD$14,003. This is based upon single Mini lot trades valued at USD$1.00 which, correlates with my reporting of net pips year to date of +14,003 pips.
E: - Costs trade reflects the fact that 372 Mini lot trades in total have completed so far this year at a cost of 372 x USD1.00 = USD$372.00.
F: - When subtracting B from A this gives a net income total based on single Mini lot trades of USD$13,631.00.
G: - An annual WEEKLY FX PREMIUM subscription costs CAD$1,500.00, which is approximately USD$1,200.00.
H: - After the annual subscription cost is deducted, the net income after all costs is USD$12,431.00 based off single Mini lot trades.
If this performance was annualized, it would generate around USD$15,000 net income per year based on single Mini lot trades. Obviously, this return is dependant upon my trading performance being consistent throughout the year and that you were able to trade my suggestions and exits when posted.
There is a huge amount of additional monthly and year to date trading information and reports available on my website https://www.weeklyfxdrivethru.com This can be found on my home / landing page under the tab at the top of the page titled HISTORY / PERFORMANCE, scroll down to “This year’s Performance”.
3: THE SOAPBOX
INFLATION WORRIES ARE NOW FRONT & CENTRE
Central Banks as you know are like “Brontosaurs from the Jurassic Period”, very slow in movement and very slow to change direction. If you prefer a modern-day analogy; Central Banks are like modern-day Ultra Large Crude Oil tankers that can carry about USD$100 million of oil when at full capacity, and they are about 400 metres (1,300 feet) long. For these ships to stop and turn 180 degrees takes miles and miles of ocean.
OK... what’s my point?
Very simple; Central Banks are very slow to change direction and when Monetary Policy is changed as an FX trader irrespective of whether you believe the reasons, you must take note, failure to do so you do so is at your peril.
Let me just list a few headlines that I have seen this past week through my inbox: -
- EUROZONE unemployment declines further, opening door to higher wage growth.
- GERMAN inflation highest since 1992.
- EUROZONE inflation at 3.4% puts more heat on the ECB.
We also saw the FX market move with huge volatility earlier last week on the back of U.S. concerns over the FED insistence that inflation risks are TRANSITORY despite wage inflation concerns identified by the markets. We saw the US10YR spike above 1.50% to 1.56% and then drop back sub 1.50% at the end of last week.
Without doubt the technical picture over-hanging the FX market needs to find an equilibrium soon, and I believe the uncertainties that are in play right now need to come down on one side or another supporting BULLS or BEARS so that we can get away from the chop and hopefully have a clear sentiment direction. Unfortunately, we have U.S. Non -Farm payrolls on the way this coming Friday so there will always be a reason for market hesitation prior to that data being released.
Mindset is everything in life irrespective of what you do. I make no apologies for stating once again that we are in the midst of a global “health” pandemic. Policymakers and Central Bankers worldwide initially reacted to the health problem as if it were an economic crisis, and to a large extent this mindset still persists.
The Covid-19 pandemic brought to the planet all at the same time, SOCIAL, TECHNOLOGICAL and ECONOMIC tsunamis. The pandemic forced a shift to an on-line DIGITAL TRANSFORMATION, which many would argue was going to happen, but it was brought forward with gusto. The likes of Amazon, Google, Facebook, and Apple benefitted with sooooo many zeros added to their net worth it is quite staggering. We have a new world economic situation. These aggregators create ease for consumer access but have destroyed huge chunks of their competition along the way during the pandemic. I suppose at this point I could add at least Apple manufacture, so they are not the worst.
The supply and demand curve in economics remains as relevant today as it was 30-40 years ago. It is a place to look vis-à-vis inflationary pressures.
All the signs are there that demand is not an issue but supply as sure as eggs are eggs is a problem and Policy Makers and Central Bankers need to wake up and smell the coffee, alter their thinking, this is not 2008?
Regretfully, lessons from 2008 have not been learned. Leverage, Securitization of products only serve to increase speculator involvement in markets, and this is most noticeable in G7 housing markets. The UK, Australia, New Zealand, and Canada stand out regarding “hot housing” prices. The belief that short-term, targeted, and temporary policies would restore normality just a pipedream.
Are we f*cked?
Labour has become a major issue following the pandemic which most in power missed. Workers are more sensitive to health risks and now have more appealing lifestyle choices such as working from home. We have record job vacancies in many G7 countries as a result. Wages have gone up. Wage inflation is NOT TRANSITORY.
Add to this supply disruption and we are with regards to inflation f*cked.
The longer this policy mindset takes to adjust, the chances are increasing that policymakers just repeat the mistakes of 2008. When I listen to press conferences from Central Bankers and sound-bytes from policymakers, they are all petrified at upsetting markets. Huge swings in equities would in my opinion have them running for Prozac. As we all know stock markets are NOT the economy, but since TRUMP there is this belief that still circulates like a vulture over roadkill. At some point in the not-too-distant future, the Quantitative Easing fueled printing presses need to stop, and we need to deal with the present-day reality.
- It seems so simple no supply to meet demand – prices go up = inflation
- It seems so simple no employees to fill vacancies – wages offered are increased = job vacancies filled but we have wage inflation...
Even the “Dollar Store” in the U.S. has fallen short and now has prices at $1.25 / $1.50 / $2.00 and beyond because it cannot get supplied anymore at discounted prices. Below is a news piece I caught on social media earlier this week, when I knew what my SOAPBOX topic was going to be. This is inflationary.
Looking directly at the FX market, I am still a believer in the fact Central Bank Divergence will be the trade for the remainder of 2021 and into H1 2022 maybe even longer with some Central Banks like the ECB!
4: THE MACRO / FUNDAMENTAL VIEW
This short section of the blog looks forward. I share my macro / fundamental thoughts and views for the coming 3-6 months on factors to consider from my Macro, Fundamental and Geo-Political perspective.
The push to get back to normal, is simply taking longer than usual. A global pandemic in the 21st century has shown very clearly that “A HERD MENTALITY” simply does NOT exist when it comes to vaccines. There are extreme views either side of the those set in the centre.
Vaccine and Mask wearing mandates are getting closer to full scale implementation in several countries. The Covid-19 pandemic has NOT gone away. To be frank it is NEVER going away in the short to medium term. Suck it up and get your head around this fact. More variants will be noted over time as the virus mutates and vaccine efficacies will be tested to the limit.
The pandemic has had and is still having a choking effect on supply chains of goods shipped around the world. I see this just continuing as infection rates dive lower and then spike back in areas of the world that create local trade and supply issues. It is a full-on domino effect.
Inflation is a real concern as the supply and demand economic curves are proven to be as relevant today as in the past. Job vacancies are at all time highs around the globe as social changes take effect, lower paid jobs in particular are harder to fill, especially in the hospitality industry. To attract workers’ wages offered have been increased. This is wage inflation at the base level and wage inflation is NOT transitory.
I could add in a Climate Crisis as well as a concern. With many governments up for change and electorates clearly disappointed with many governments handling of the pandemic, traditional parties share of the popular vote is being threatened by alternatives such as the “Greens”.
The bottom line is that the issues noted above are here to stay. If the uncertainty exists, the moves by the bigger Central Banks to normalize are just potentially going to be pushed out.
We are potentially going to see very extended timelines to get back to “Normal”.
If we have uncertainty the likes of the FED and ECB will just not update Monetary Policy. During this period, FEAR & GREED prevails in the markets as usual.
It is very clear to me that until the pandemic is controlled or eradicated nothing really changes, we continue to drift in a state of limbo vis-à-vis moving forward. There will always be reasons for remaining cautious. We may see Tapering, but a return to interest rate normalization, at times seems to be somewhat of a dream, the way things appear at the moment.
5: TRADING PSYCHOLOGY
For me, TRADING PSYCHOLOGY is a very important key aspect of trading that is often misunderstood or just ignored. How we use our conscious and unconscious minds when trading is crucial to our longer-term trading successes.
Over the coming weeks, it is my intention to cover areas and aspects of trading that may be new to many readers. Sometimes things can be right in front of us, and we cannot see it.
HEAD MANAGEMENT and HEAD MANAGEMENT strategies for consistent success in trading is crucial to long-term success.
HOW FEAR INFLUENCES TRADING DECISIONS
Of all the emotions we have, FEAR is possibly the most unpleasant of all. It has a compounding effect, when markets get panicky and skittish, it is often said that we as traders follow suit. This type of sentiment spreads far and wide and has far reaching consequences. Even if you as a trader can mange fear, you simply cannot avoid the effect that fear has on the market. Remember the markets run on FEAR and GREED.
Personally, I do NOT think that you can avoid fear. Its human, its natural and even reasonable. Losing money isn’t, that is just unpleasant, and it can have real and tangible consequences.
Fear to most is a defence mechanism, it alerts danger and to be careful. But the mechanism itself can kick start you into making bad trades and it can be somewhat paralyzing.
Franklin D. Roosevelt famously stated that “We have nothing to fear but fear itself”. This statement sits well in FX. From my perspective, I believe that the actual things that we are afraid of usually pose much less of a danger to us than the actual sensation of being afraid.
Fear will lead you on a path that you do NOT want to tread. If you go down that path, you will end up selling positions that you should hold, and you’ll pass by sensible trading opportunities that you should have taken.
I have fallen victim to this scenario recently as WEEKLY FX PREMIUM subscribers will duly note vis-à-vis EUR/NZD short trades. I removed loss- making trades well ahead of my designated stop loss because of fear, which was FOMO related and as a result I closed out positions with losses of about 400 pips that within 36 hours were trading profitably in line with my initial trading conviction.
Do not let fear dictate your trading choices or options, do not go overboard. Whenever fear exists in the markets, get hold of the facts, and understand what the real risks are, at the same time, do NOT ignore fear. Remember, it’s all too easy to fixate on one piece of good news like say, a drop in unemployment claims and then make an unsafe, impulsive trade.
6: CLOSING THOUGHTS
6.1: THE WEEKLY FX PREMIUM – SUBSCRIPTION INFORMATION
If you like my approach to the market and are wondering what my trades are like from, a live perspective and what is the WEEKLY FX PREMIUM all about, check out my website https://wwww.weeklyfxdrivethru.com
The WEEKLY FX PREMIUM is my subscriber-based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries via Twitter, TwitLonger and ZOOM.
Further information about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.
6.2: THE LAST DROP
Always remember longevity in Forex trading can only be achieved through trading with a good MINDSET, RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.
Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
BLOG VERSION: #425 FREE NEWSLETTER
DATE: 3rd October 2021