December 2023 Trading Review

Dec 23, 2023

It's the end of the year again! What a beautiful time to stop and reflect. December last year was the most profitable month for me - 28.8%. This month I made 24.8% profit, with a total of 8 trades, trading only one currency pair in the first half of the month and two pairs in the second half. 2 of those trades brought me most of the profit, 3 were small losses on entry and another 3 were small lot trades during NFP announcement that brought me a small profit.

However, the big difference is that last year I was trading without stop loss, so my risk (in theory) was unlimited. I say in theory because exiting a losing trade when trading without stop is a discretionary matter, so in reality risk is limited to some extent, but it is dependent on trader's discipline and understanding of the market. On the other hand, trading with a stop has limited risk in theory, but in reality it would still be unlimited in the rare event of a flash crash because stops don't get filled in such cases.

Now I trade with a stop (except for rare cases but with 40x smaller lot) which is dynamic and dependent on situation. Why do I talk about it? Because it's risk-adjusted returns that matter most and define the level of professionalism that the trader has achieved. If you track only the profitability % then it's hard to understand the full picture. I knew this long time ago, but it was so much more convenient to trade without a stop. It allowed me not to be punctual nor sharp, make bad entries and still earn money. However, I had to trade small lot and that was hindering my account growth. So I realised that no-stop trading is more suitable for a semi-retired trader who has already achieved everything that he desires, trades a large account and simply wants to enjoy life somewhere at the sunny beach as opposed to sitting at the computer from morning to evening (it's exactly what my trading mentor is doing now as he's nearing the age of 60, but he used to work even longer hours than me in the past).

Therefore, last January I realised that I will have to make transition to stop-based trading, but change is never easy and I hesitated a lot. I tried to come up with extra rules to make my no-stop trading more performant without compromising safety, but none of those worked well enough. I feel like I reached the territory of trying to bend the curve through over optimisation and unfortunately this always leads to a dead-end. I talked with my mentor about it and he advised me to trade with a stop. So only a few months ago I started the real transition to trading with a stop. It was a hard job as it was a very different world to me, with a whole new array of challenges and internal battles to overcome.

I even stopped providing my signals and managed account services because I needed a quiet time to reprogram my mind to be able to continue making money trading with a stop. When there are other people involved in my business it becomes very stressful because they have expectations (even though they say they don't, but in reality they do) and I have to focus on fulfilling their expectations by doing the same stuff that I was doing before. Changing something is scary because other people's financial futures depend on me. However, being consistent with what I'm used to and trying to change at the same time is like trying to sit on two toilets. It's simply impossible. So I had to stop those extra activities, get back to ground zero and work quietly.

The positive results of this December have shown me that the transition is in full speed right now, but there's still a lot of room for improvement. I still miss an enormous amount of trade opportunities. I blame myself for how stupid I am almost every day. I manage to take just a fraction of opportunities - only the easiest catch. Probably because I spent so much time in horror in the past, experienced so much pain that I've become very restricted and disciplined in my trading. The very thought of doing something against the trading plan makes me scared now and brings up all the bad memories of the past. Which may be a good thing after all. I do make changes in my plan from time to time, but I've learnt to do it very slowly, with a lot of thought, and very scarcely. Because a frequently changing trading plan is not a plan anymore - it's a nonsense of jumping from one shiny ball to another.

There's a thin line between greed and healthy desire to improve. To avoid entering a dangerous territory of greed, I am reminding myself every day that I can't have it all and I need only a few quality trades per month to reach my long term goals. Even one trade can be enough. But on the other hand, I have a natural desire to improve so I can't ignore that, because it really feels shitty when I spend the whole week sitting at the charts and I don't get any trade, and so many good moves go without me. I mean, the problem is not that I feel shitty because trading is almost never comfortable and for that reason I do emotional self-balancing every day. The problem is in the numbers - the speed and level of growth in my trading account :) I naturally want to improve so that I could take more of those good market moves. But I can't let greed overpower because that brings a trader to hell. So I have to be eager to improve, but I can't be too eager. I also have to be patient, but not too patient so that I would fall asleep and stop improving. Again, as always, the key is in the balance. Being a human in trading is both a good and a bad thing, so embrace both sides.

Wish everyone merry Christmas and an exciting New Year!

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