Todd Gordon, currency strategist and active trader, Forex.com shares each of his January trades, pointing out the lessons learned from his successes and losses…
Gordon began by telling traders that losing is part of this business. He noted that the 12 traders at his company execute trades in a managed account worth around $30 million. And their strategy focuses on a specific amount of money they are allowed to lose each month—not on a certain sum they are permitted to invest in each trade.
However, to minimize losses, Gordon, stressed that it is imperative to use stop-losses and to analyze your trades, critically: what did you do right and where did you go wrong? From that analysis, you will learn essential lessons.
To demonstrate some of those teaching experiences, Gordon outlined every trade he made in January, as well as what they taught him. Here are just a few examples
USD/Yen, bearish on the carry trade since the stock market was going lower and the 13-year uptrend in the USD/Yen had been broken. The dollar should move lower with the S&P. Gordon was looking to be short dollars versus the Yen, but was stopped out. Lesson learned: too quick to call the end of the correction.
USD/Yen. Completed shallow wave C. Wave 3 is usually the longest and most powerful count. As it began to get bearish, Gordon asked himself—since he missed the first one, should he sell the breakdown? He decided instead to step back, let the market come to him and then get aggressive. He placed his stop loss, but only got one-half in execution. Although he had a winner, he missed a lot of profit on the trade. Lesson learned: to be profitable, you have to push yourself on the winner.
EUR/Yen. As bond prices move higher, the carry trade should decline. If you are risk averse, get out of the carry trade, so short the Euro/Yen carry trade but not the dollar. Traded with a ten-point stop loss. Wave 4 can be very complex and Gordon was stopped into a 4th wave correction. Lesson learned: getting too confident in himself.
Gordon took attendees through the remainder of his January trades, noting his successes and losses.
In closing, Gordon encouraged traders to keep a journal to analyze each of their trades to continually hone their strategy.