I intend to keep the candlestick study close to my hip until it has around 100 trades recorded. At that point I will have a sample size that is starting to become statistically significant. In the meantime I need a little self motivation and something to talk about, so I will periodically post information about it. Today I want to take a look at the profit curve of the 6 closed trades on the books. I have it set up so I can input any % risk per trade, to get an overall % P&L curve. For now I am keeping the % risk model at 1%.
Below is the profit curve of the current trades in my study. As I said before, I will normally risk 0.1% – 0.5%. This is all in percent terms because I am not trying to count dollars to know how many steak dinners my wife and I can have, but rather absolute performance. If I want to count theoretical steak dinners I can figure that out pretty easily from this chart and my account size.
Starting with the most recently closed trade which was also my first loss of the study, I closed an XLE bear call spread for a loss of 0.3x maximum risk (0.1% loss in real terms). I would normally not subjectively close a trade out like this, especially in a trade that is technically still valid and in play, but I had to stick a fork in this one for a number of reasons. The most important reason is that I made a hasty, dumb decision on my entry and pretty much violated how I would normally enter a trade. Because of that I got one of the most sub-optimal entries possible and sat on a loss all week long. In reality, if I would have stuck to my rules, which generally involves a 50% or greater price retracement of the entry signal, I could have actually closed this out for a profit. The sub optimal entry had both negative psychological effects as well as greatly increasing the risk I had to take for this trade. There were some other lesser reasons such as I placed too much % risk in this trade, especially considering this was a counter trend trade (which I very seldomly do unless the stars align). Overall it was a big mistake of a trade and not surprisingly the first loss out of the 6 trades of this study. I properly chewed myself out for it and I am fairly certain it is not going to happen again.
Moving on then, I have 4 trades currently open: short AUDUSD, two short NZDUSD, and short EURUSD. I entered the 2 NZDUSD shorts at different price levels using 2 different entry techniques. The technique I use to enter a trade and the aggregate performance of each technique is a metric I am tracking with this study, and why I am tracking these as separate trades.
I haven’t checked my charts yet to see if there are any new setups that have formed today. If not I expect to continue to hold these into next week until they are either stopped out or hit their targets.