Hope you have had a lovely Christmas, I for one certainly enjoyed my break from the screen, and in all honesty going through the charts now I’m doubtful I’d have made many pips had I been trading.
Initially the plan was to go through a random list of 2012 swing trades to identify where improvements can be made going forwards but in all honesty there were only a couple of trades where obvious improvements could have been made.
Before going into detail on those trades, here’s a list of all swing trades taken throughout 2012 and their corresponding profits and losses. In total a net profit of 3220 points profit was made over the Year and even at an average of only £2 per point that gives a profit of around £6500 which makes for a great supplement to normal income yet without putting oneself at serious risk of going broke were a particular market to make a huge gap up or down when futures start trading on Sunday evenings:
Firstly looking at the trades from early to mid January it’s comforting to know that all of those trades eventually went far against the entries taken over the course of the Year. There is nothing more frustrating than working all Year to bank 3000 points only to notice that the very first trade taken would have delivered that on it’s own were it left running!
Now, for the trades that really bugged me there are 2 particular candidates.
First off is the DOW long from 12th July. I was quite confident of the trade and felt reasonably sure the 12,560 entry was a great one. Everything on the chart pointed to a summer rally and although I was relatively reserved in discussions on the matter (I never want to encourage others to blindly follow my calls), a quiet confidence remained. In less than 24 hours the trade was showing over 200 pips profit. The speed of the rally surprised me, and with the expectation of re-entering the trade on a pull back I exited and banked the profit. Of course, the pull back came and I didn’t re-enter. Within 2 Months the Market was 1100 points higher.
The 2nd trade is a similar story and that’s the EUR:AUD swing short from May. Again, it gave an aggregate profit of nearly 250 pips, and I did close it at my target which is a fairly sensible thing to do. But, I’d already closed half the trade too early and I eventually regretted this because when it came to closing the 2nd half I believed price would go lower, but the profit on the table was too much for me to risk losing. In hindsight I should have kept the first half of the trade until my target was hit, then trailed the 2nd half based on my view at that time, which turned out to be the correct view since EUR:AUD continued to sell off for some Weeks following.
The theme across these 2 examples is the same; taking profits too early instead of running good trades even longer. But both trades were in excess of 200 pips profit at the time, and this is a psychological level for me as I struggle to hold trades beyond the 200 point profit level because it bloody hurts if price reverses and stops them out back at break-even!
Trailing stops is one answer, but it’s never been something I’ve been successful at because I find myself being stopped out on a bit of sudden volatility only to see price recover and based on the time frames I trade on, the nearest Support or Resistance for a trailing stop may well be back where my original entry was, i.e risk of 200 points profit going back to break-even or a loss.
There have been times when significant profits have turned into tiny ones where a trailing stop loss has been used, the GBP:USD short from January being one of them where a 400 pip profit ended up being a 91 point profit.
There have also been times where a tight stop loss has saved me significant losses.
I guess it’s all relative and probably not worth stewing over because the overall result is a 3220 point profit for the Year with 76% of all trades taken being profitable and an average 4.6 points profit gained for every 1 point lost over the course of 2012.
It’s also quite noticeable that I took a lot less trades in the 2nd half of the Year compared to the first half. It’s true that I had a number of other major commitments keeping me away from the screen more and more, but I did find it increasingly difficult to spot good trade set-ups in the latter part of the Year and can’t put my finger on exactly why. This is something I’ll need to review at the end of 2013 to see if there’s a pattern attributable to me, or whether Market conditions were simply less suitable in the 2nd half of 2012 and the trades just weren’t there.
In conclusion the fact that 2012 turned a decent profit is great, more so due to the fact that I analysed a large number of potential trades, but the relative handful that I actually took were generally the right ones.
Looking through some of the charts now I don’t see any obvious way I’m going to beat 2012′s points tally in 2013, the EUR:CAD swing short that netted a 757 point profit was a big factor in overall 2012 profits, and trades like that don’t come along often, well, they probably do but it’s rare I manage to hold them long enough to see such a great result.
If there’s one great call from 2012 that really sticks in my mind, it’s this one, from which, that target did eventually get hit, albeit with me out of the trade too early:
The CAD:JPY trade following on from the original analysis in this post was another memorable trade.
Going forwards, I’ve no idea what 2013 has in store, lets just hope it’s a year of trade-able trends rather than low volume chop!
Happy New Year to all.