This is my favourite chart of last year.
It is my favourite chart not for the reasons that might immediately spring to mind. I do a year end review of trades that come my way – the aim on doing so is to perform a rigorous form of self assessment. Over the years I have come to the conclusion that traders need to be their own unreasonable friend – you need the capacity to ask yourself very difficult questions about your own performance, why things went right but more importantly why things went wrong. Looking at what went wrong is profoundly uncomfortable but it is is the most valuable part of this exercise. This chart is my favourite because looking back I was very inefficient in what I got from the trade. To be perfectly honest I didn’t make anywhere what I should from it – my performance was quite poor with regard to the overall trend and the question is why and it is a question I am finding hard to answer. I am finding it hard to answer because of this chart.
The $A charts presents a passing similarity to crude – a period of consolidation and then a breakdown. This is my second favourite chart of the year because I was very efficient in trading this move. This presents a paradox of how could two near identical moves produce markedly different efficiencies and to be honest I dont exactly have an answer as to why yet. However, searching for an answer is proving valuable since asking yourself unpleasant questions is infinitely more gratifying than asking yourself easy questions.
Love the way you put it CT. I’m having a hard look at my AUD/USD trade wondering similiar things.
Might tie back into the thread on the program…quality analysis.
CT, can I ask which instrument you used to follow the crude oil downtrend? I investigated on IG how I might have tried to follow this trend, and there were a number of choices ( different expiration contracts, ETFs etc.).
All the crude options on IG’s platform show the same trend – tradition causes me to simply go with Brent Crude.
Thanks, I thought as much, more trying to decide which option to use.
What are your rules for options buying?
Sorry, I’m not being clear. By option I meant choice of instrument eg. ETF, ETC , futures contracts etc. I am not currently trading options on commodities or currencies – still just trying to get some experience using CFD’s with no expiry to worry about. Probably your suggestion that all crude instruments show the same trend is sufficient answer, I will have to think and decide which one I am most comfortable with.
It is also which one your account can afford – often the universe of instrument you can trade is dictated by account size, which is a pain in the arse but is a limitation everyone has.
Hi CT
I find your comment very interesting on Crude oil: “I was very inefficient in what I got from the trade.” I was wondering if you have worked out why you didn’t make as much as what you should have from the trend?
As a new starter in FX and commodities these charts will be placed on my wall. Nice trends. From my end I got in $A at a later stages of the down trend. It has been a great learning excercise for me.
Good question MM – I am still ruminating on this one and to be honest I dont have an entirely satisfactory answer.
Hi Chris, I really hope you will post in due course what you finally conclude. I fiind this whole line of thought very fascinating – “However, searching for an answer is proving valuable since asking yourself unpleasant questions is infinitely more gratifying than asking yourself easy questions’ – Yes it is – provided we get dome sort of answer!! :). Your answer, should you get there, may be very valuable for others for others as well, or simply unique for you. Either way, it is a great exercise as most people wouldn’t think of going there let alone perservering.
cheers, Peter
The best I have come up with so far is that sometimes you simply screw it up and all those subconscious bits and pieces you try to keep under wraps exert more influence than you are aware of.