So today we opened two trades, and they have not worked out as planned yet. We went long on USDJPY and short on GBPUSD. I did expect US inflation to be firmer than expected, and yet it was right on the mark. The opposite is true of the UK inflation which showed a small increase of 0.1% YoY which gave the GBP bulls a brave moment. Let them enjoy it, it will not last.
So clearly, things did not go as planned for myself today. In all honesty, I had intended to try to close the cable sell position and then open another one that would be focused more long-term. The fundamentals dictate that this pair has another 200 to 300 pips of downward movement before the end of the year. I’m sure many people that are long on the pair will say opposite and will not want to hear this but unfortunately the truth of the matter is that the market is going to go where the fundamentals drive it in the long term and there is nothing that any of us can do about it. Whether we like it or not the market will do the market does.
At the time writing this, overall equity is down 1.8%. However, both trades are very safe. The account is EXTREMELY safe and I am very confident that both these trades will yield a handsome profit tomorrow or before the end of the week, hopefully with us reaching an overall increase in account equity of 6% by the weekend. I expect that Hawkish minutes from the US Federal reserve meeting will support both of these trades and in addition, I expect very soft data from the United Kingdom in the form of weak and declining retail sales. Minutes from the bank of Japan should also highlight the extreme trouble that the Japanese economy is having (evidenced by their third consecutive quarter of GDP contraction and their official entry into recession) and this will help the USDJPY buy position.
Before I forget, there are two questions that I wanted to address. Someone asked me on Etoro why I didn’t close the positions when they were green. The reason is quite simple, I expected that they would do better. Of course it is very easy in hindsight when something has reversed its gains to say “you should have closed earlier when it was an small profit”. I don’t work that way. I set myself targets and I try to meet them. This is trading. If you expect me to to close every single trade as soon as it turns green, And then we will be 1000 years old before there are any noticeable gains in the account.
The second question someone asked me is, if I was confidence in this trade, then why didn’t I open a second trade once we were slightly in the red? The answer is very simple, it is highly risky to commit a significant amount of your portfolio to one single trade idea. Anything can happen at any time and you don’t want to leave yourself exposed. A 10% loss is can be recovered. Why this month alone my portfolio is up by 58%. However, a 50% loss is very difficult to recover from and can set you back months. Never overcommit, you will always get caught out at least once if you do and when you are caught, it will wipe out all of your gains and possibly your original equity (Just look at the issues that one of the grid traders who got stuck on EURUSD is having atm, if the FED minutes are hawkish tomorrow, 70% of their account can be wiped). Remember, there is no such thing as a sure thing. If there was, then you wouldn’t be reading this right now. You’d be on your private plane flying to somewhere where the weather is nice and the food is good.
As we go into tomorrow, let’s keep a positive attitude and let’s hope did things go our way better than today. Best regards,