December 2021 Trading Review

December 2021 Trading Review

In December I faced new challenges but it seems that I overcame them and I closed my last 5 trading days of the year with 2.5% profit. But this number is not important at all. What's most important is that over those last few months I managed to shift my mindset and behaviour by working on my psychology every day. The last week was simply a result of the change inside of me.

So it doesn't have anything to do with the strategy. The strategy works for sure. But my brain and my fingers had to finally start working too.

December was no different than the previous 3 months: I struggled a lot. In the beginning of December I had 2 nice profitable days after which my ego expanded and made me believe that "I'm now a pro". So I signed up for an additional challenge at a different company (FTMO). The 10K GBP one. I thought of it as a booster to my progress, because FTMO gives larger drawdown and position size allowance so I thought I'll finish this challenge sooner than the one at CTI and will start receiving income from trading sooner.

However, I did it too soon. A hurricane of overtrading followed afterwards. I just couldn't handle such behaviour anymore. I had to stop trading for a while on both FTMO and CTI and get back into the briefing room. I wanted to dive deep again and follow my inner voice. I understood that I still had illusions which were hindering my progress. Somewhere deep down, I still believed that trading can be easy and automated - no human brain is needed.

So I started to build EAs (trading robots) to prove this hypothesis. My EAs failed completely. Whatever patterns I thought were profitable - when backtested over a long period with EA - turned out to be an exception rather than a rule. Meaning that for each case when a pattern worked, there were maybe five cases when it didn't work. I played with many indicators and variables to see how the relationship between win rate and reward/risk ratios change. It was a great eye opener. It totally killed my illusion that markets can be traded profitably by a simple robot without human intervention. It's not possible at all.

This experience allowed me to understand where exactly human judgement has a place in trading. There's nothing random in the markets, everything has a reason. The same patterns repeat over and over again. BUT: each day is unique and you will NEVER see the price to play out identically in the future. Because of that, automated pattern identification is already hard enough. But in actuality, it's not the pattern that is most important. Understanding of WHO created this pattern - retail traders or the big players is even more important. In many cases it's not so obvious - not a question white or black. So how can we define a rule for a robot if even for a human it's hard to understand? The only way to understand it better is to study many charts, spend a lot of hours, gain experience and let inner voice help you. This can happen only in a human brain.

After I broke my illusion, I was still left with a particular behaviour pattern which was bringing me losses. With my trading system, I am watching 28 currency pairs all day, on M5 charts. I get quite a lot of trading signals with my indicators (around 100-200 per day) and I have to manually filter them out. When I do this every 5 or 10 minutes for a day and I don't find anything nice, at some point I lose my patience and simply click that button. Hoping and praying "finally this time it will be a good trade". I know it's terrible. It's because the more I look for something, the higher the probability is that I'll eventually fool myself that I've found it.

So I decided to use my recently acquired MQL4 programming experience to semi-automate my trade waiting. I built a scanner panel which scans all 28 currency pairs for signals (without having to actually open those charts) and then it filters them out, gives a score and sorts those currency pairs on the panel by score. This way it already filters out 80% of signals and alerts me only when a really high probability signal happened. I save a lot of time and don't need to be glued to charts. Sometimes as much as 40 minutes can pass without any signals, which is great. This is how my scanner panel looks like:

Having this panel totally changed my trading experience. I finally had my first profitable week and I remained calm and confident. It doesn't mean that all of my trades were winners. I had small losses + small wins (break-even trades) and bigger wins (up to 2.5 R/R). But I didn't have big losses (1 R/R). Because by having this scanner panel I managed to detach myself and wait it out for good setups. And because I kept my mind calm, I was able to exit unprofitable trades early - as soon as they showed first signals of going south - rather than waiting and praying until it hits full SL.

And now when I freed up my time, I started thinking that I need a second, positive sum activity besides trading. (Positive sum is creating value to others - win/win, zero sum is playing a universally agreed game and beating out others - win/lose). For a few reasons:

  1. Detachment from the chart helps me to keep my mind calm.
  2. This leads to better trading results (profit).
  3. Zero sum activity doesn't give emotional/spiritual satisfaction. If I look for it in the markets, I become a gambler. So having a positive sum activity to satisfy my senses is essential to avoid unnecessary losses in trading.
  4. When I spend so much time waiting for trade setups, brain deterioration happens if I don't do any other activity. My head started to feel like a vegetable.
  5. Money. It's always great to build as many income streams as possible. And it's even more important for me at this point - since it will take a few more months until I will start withdrawing my trading profits.

I won't talk about my positive sum activity in this article yet, because I'm just beginning with it and testing things out.

Today is my last day of FTMO challenge. My worst drawdown was -5%. Over the last days, after coming back to trading, I managed to climb up to -1%. I need just one profitable trade today to come back to above break-even to get a free retry of the challenge. If I don't manage it I'll simply buy another challenge. Now I know that if I keep my trading attitude as it is now, I'll achieve the 10% in a month and complete the FTMO challenge for sure.

Now I understand that the problem is not the strategy - and never was. It was all about me and my psychology. When I improve myself, my results improve. So it's not JUST the strategy. It's about having a FULL understanding of the strategy keeping my psychology in tact.

Happy trading and happy New Year!