January Recap

Over the past few months, my trading strategy has changed 180 - I went from taking a contrarian approach to trend-following. This has to do with the podcast episode I listened to in this post. It's simply the fact that trend-following is really the only way to size up bigger positions.Stats wise, I've been tracking basic trade details in order to calculate my expectancy on a month-over-month basis. Side note: I am thinking of creating another page that just lists my expectancy each month.

The expectancy formula is as follows:

        [ ( % of Winners ) x (Average Win  $) ] - [ ( % of Losers ) x ( Average Loss $ ) ]

This is essentially an optimization problem. Ideally, you'll want to increase both the '% of Winners' as well as the 'Average Win $'. Realistically, the former is very difficult to do so I've been focusing on two things:
  1. Increasing 'Average Win $' by not prematurely exiting profitable positions, especially now that I am using ATR-based take profit targets.

  2. Reducing 'Average Loss $' by exiting a trade before it hits my stop loss. I've been getting better at exiting trades that go against me by having the mentality that a second barrel is always possible.
At the end of 2023, I was able to achieve two months (November and December) of positive expectancy. The first half of January 2024 was off to a great start as the Japanese yen pairs were undergoing reversals due to exit of negative rates territory expectations. 

By mid-January, my performance was up close to 12%. Unfortunately, the month ended with a loss as the market became choppy due to an oversteer in rate cut expectations. I had a few concentrated positions in US dollar shorts that ended up.

That said, even in hindsight, I wouldn't have changed in a thing. I did what my system told me to do and got out when needed. The second half of January simply represented a series of data points where trades didn't work out.

February's start was also a bit rough as I didn't observe many clean momentum plays. However, I've been conscious of not overtrading and I expect to continue refining my process for the month ahead.