October 2021 Trading Review

Oct 31, 2021

Last month was a phenomenal learning experience. It seems that all the hard work and not giving up is going to start paying out soon. Even though I'm still in the red and I increased my drawdown (-0.71% absolute / -1.62% relative) - I feel that I gained invaluable knowledge during this month. Besides that, I developed myself psychologically and set myself on track to climb out of the drawdown next month.

Since the time I started learning with my new teacher, the hardest part for me was to put all pieces of his teaching together. I was always going for the easy way. If my teacher taught me 5 things to look for, I'd drop two of them "to make things simpler" and "because I don't know why those are important and won't bother to ask because I'm good at trading and I can trade without these". Then I'd find out it's not working for some reason, blame the strategy and teacher, and look for something else :) Then I'd find prove to myself (again) that retail strategies are full of bullshit and I have to get back to practising my teacher's professional strategy.  

I don't know how many times it happened - but enough to allow me to continue the drawdown. My head was full of retail crap. Retail traders are taught to look for a quick fix. A magical, mechanical, simple strategy that will bring them riches. But it's far from truth. Things don't work this way. To be successful, you have to be a great risk manager and to have a FULL and CORRECT understanding of how the Forex market works. By FULL I mean 100%, not just 90%. To gain this knowledge, one needs to spend a lot of time reading the charts.

So for the last week of the month I decided to do a learning experiment. Before that, I was sitting at M5, M15, H1 charts from 8am to 5pm - but I wasn't learning much because I would get bored so easily. Things move slowly on these timeframes. Often I'd jump into boredom trades without any trading plan. Which is a totally disastrous way of trading. How could I end up here? I thought I was different! I had professional education! Well... That's human nature. Boredom kills one's capital. Mother Nature doesn't like boredom. So it ensures that people who are experiencing boredom would enable their self-destruction mechanism. :)

So what was the experiment about? I decided to trade a single currency (EUR/USD - due to lowest spread) solely on M1 chart, from 8am to 5pm, for three days. And watch this chart all day. M1 is the chart where things move quickly (minute by minute) and it gives plenty of opportunities for learning. Because the same patterns that happen on Weekly, Daily, Hourly charts, happen on M1 as well.

I must say that the actual trading results were not too bad (+20 pips first day, +2 pips second day, -11 pips third day). But I was making 10-15 trades a day and, of course, commissions ate most of the profits I made. But that's not my point. My goal was not to make money on M1 timeframe (although it's 100% possible). My goal was intensive learning. I wanted to push myself to the wall and religiously focus on mastering my teacher's strategy.

Enlightenment came on the last October's trading day. My last few weeks were filled with horror and banging of my head against the wall. However, it was all erased when I finally put all pieces of the teaching together. I analysed last day's explosive price move on EUR/USD and I fully understood why it happened. It was inevitable and it happened exactly at the time when I should have expected it to happen - had I followed my teacher's lessons fully. If I had entered that trade with a proper risk management, I could have made more than 20:1 reward/risk. Then I looked at more charts from October and saw the same thing happening over and over again. When I put all pieces of the teaching together, I finally understood why, when and how it happens - and how I can profit from those insane price moves!

I'm excited to start the next trading month with my expanded awareness and knowledge about how the market works. Of course, there's still a lot of things to learn (and will always be), but I finally feel confident placing trades with higher risk per trade and to finally drive out of the drawdown I'm currently in and start generating absolute profits.

I also mentioned that this month I focused on psychology a lot. I understood that I can't become patient without exercising patience. In the same way like you go to the gym to exercise your muscles, patience is also a muscle that can be exercised. So I decided to force myself into being patient and waiting for good setups to form (not jumping into a trade too early). So that's what I did.

Also, I noticed that I'm becoming increasingly stressful. Stress brings disease. I started to feel unwell and weird things were happening with my body. Not to mention the tiring night's sleep filled with horror dreams. It was incredibly hard to withstand this and to still maintain a positive, upbeat attitude while watching the charts 8am-5pm and seeing how I'm continuing to generate losses.

So I decided to start exercising calmness and no-stress-response within the body. Exercising calmness? Sounds weird? Again, calmness is a muscle that can be trained. How did I do that? Simple. When trading on M1 chart, I was watching how my trades go into red. I felt how each tick to the red was giving electric (nervous) impulses inside of my body. During those periods, I fully focused on my body and my inner peace. I kept saying affirmations to me: "I don't exist; Stay in the trade".

"I don't exist" - what the hell, you may ask. Imagine a surfer who goes to surf waves at the sea. Each time he goes, waves are different. Each day brings a unique combination of waves. It never happens again. If a surfer has thoughts like "hey today the waves are smaller, what the heck, I want them to be bigger otherwise my strategy doesn't work" - he's an idiot. And he creates a stress response within his body. Because he has expectations that cannot be fulfilled. Because the sea (or the Mother Nature) is the ultimate source of truth. Its decision is final and cannot be changed. So complaining about it is useless. You have to adjust the expectations? How? Imagine that you're a wave. Imagine yourself as part of this endless sea, and as a part of Mother Nature. Just forget that you exist (as a human being). And then surrender to the sea. Let it teach you how to surf RIGHT AT THIS MOMENT. Because this moment is unique. It won't last forever. Yesterday's knowledge can help, but it cannot be used for setting mechanical rules for tomorrow. If you do - you'll fail. Because you don't have a FULL understanding of how the sea works yet. You're trying to come up with mechanical strategies for high tide, low tide, average tide, etc. But these are just labels. Each day is still unique! There's no such thing as absolutely HIGH or absolutely LOW tide. There's 5 billion shades of HIGH and LOW! You can't come up with a mechanical strategy for each situation. You'll be lost in this guesswork. So it's better to disappear, surrender, and become one with the sea. Then you're here and now. Then you've finally arrived. And then you only start to master the game. It's the end of banging your head against the wall and the beginning of true learning. And of course, the same logic applies to Forex trading. Remember that market is you. You're the market. When you fight against the market, you're fighting against yourself. If you don't humble yourself down, the market will do it for you. So the key is to stay humble. But confident. And act upon opportunities immediately as they present themselves.

And no I'm not saying that having mechanical rules is bad. They're good. Those rules prevent you from doing stupid mistakes and acting against your own best interest. But they're only the baseline. How often did you miss an awesome trade just because price didn't reach your defined entry point by 1 pip? What the heck? Is this rule actually serving you? The rules shouldn't be about pip by pip movements. The rules should be about risk management and what are you looking for in charts. When you master risk management, 1 pip inaccuracies don't make any difference anymore. Your rules are rigid, but your perception is flexible then. You know what you're looking for. But you can't be too mechanical. Because each moment is unique. Patterns don't come out perfectly. If trading was mechanical, then robots would be making profits. But it doesn't work this way. That's why a human judgement is required. What you're looking for doesn't need to be perfect. But if you know what you're looking for, you'll understand when you've found it. And when you do, simply implement your strategy along with risk management rules (i.e. what kind of Reward/Risk ratio are you looking for) and you'll be making money.

And by the way, I enrolled for additional lessons with my teacher. He taught me one additional strategy (scalping) and I still have 2 lessons left with him. His time costs me around €500/hour. It's quite significant to me at this point in my journey, given that I'm trading full time with no profits yet and had no other income source for the last 6 months. But I see how I'm getting better after each lesson. And I'm fully aware that a rich person knows that the only reason he's not making money yet is lack of knowledge. So when he's down, he invests into more knowledge. While a poor person asks for a handout or blames the government in such situation. You can be a rich man with no money (yet) and you can also be a poor man with money. Patience is profitable.

Goals for November 2021

  • Come out of the drawdown and start generating profits
  • Continue studying about the market
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