The Musings of Faith

I just trimmed a losing position and took a loss in the gut. But I still believe in the analysis and hold now a much smaller position.

I decided early to hold a 2 layer short on the GBPUSD. I closed the first layer (CA 1.6225) at 1.63 because price held true to its close and is higher at the open. According to my analysis, it can now go higher still. No reason to hold the 1st layer any longer. The 2nd layer is well-positioned for this anticipated move higher so let’s see what price will do.

Nonetheless, it still hurts. I took it in the gut and ego when I closed those trades. But nobody ever said risk management was always a pleasure. Capital preservation is A MUST. Live to trade another day. As my daddy tells me, “Medicine doesn’t always taste good but it’s always good for you.”

Tonight’s medicine tasted awful.

I had a great July. I took the month off from active trading and maintained a cash position the entire month. I was asked by readers to share thoughts at the end of this trading period. Hadn’t thought of it but thanks to you for asking.

July started on a good note as I closed June on a positive note. It is important for me to remember that I traded well into this no trading position. This positive psychology made it much easier to not trade last month. No need to revenge trade. No feelings of missing out. In fact, I didn’t miss the markets one bit and why should I? It certainly didn’t miss me.

The markets don’t care if you are trading or how.

So for the record, I did not place a single trade all month. I have a setup in mind for Monday. Until then, I watch the open with an open mind. The US debt debate has had a short term effect resulting in USD weakness. The interest rate outlook is starting to shape and we could see some continuations in pairs like the USDCHF and even AUDUSD. Both pairs are STILL in long term breakouts on the USD weakness. But the GBP has weakened quite a bit in July too. GBPAUD finally broke below 1.5500 and dropped an ensuing 700 pips to new lows. The euro is taking hits as Greece defaults and the core EU slowdown shapes into reality at the same time. That can’t be a good thing. With the USD, talks of QE3 are hitting markets in very real ways as unemployment creeps higher and output keeps lower. Add the drama of American politics and the USD doesn’t look like it can get any better. Cable looks well bid into the end of July but the pair is hardly bullish yet.

On a side note, for sticking to my trading plan in July, I earned a nice amount in an unintended “carry trade” as my account sat for the month. To my friends in Australia, I envy your AUD :)

Fun time is crucial time.

And I mean fun, non-market fun. Because trading is fun (or else we wouldn’t do it) so that doesn’t count. I spent the beginning of July entertaining 5 kids. I spent most of July back at my parents’ house (my childhood home). My sister took me all over San Francisco dancing and attending fashion events. I had a blast! We took my children out to San Francisco for a home grown scavenger hunt around the city and they had a blast. I visited childhood friends that I hadn’t seen in decades (can I really say that?!) and I had a blast. I walked in my first AIDS Walk and had a blast. I planned a birthday surprise for my sister. She had a blast.

My time away from the markets allowed me to focus on other details of life. I throughly enjoyed it. I think our forex markets with its 24/7 market hours can fry you if you don’t maintain a work-life balance. We don’t have the built-in time off that equity markets give their traders. I admit that I didn’t study my past trades. And I kept up minimally with how the debt ceiling was affecting markets. But I recharged my energy tank and hopefully sharpened my discerning eye with the time away.

Now with August here, I’m back! I’m getting my feet wet this month. I’ll be meticulous with my trade selection and position sizing. I don’t expect to execute many trades. But I do expect to hold solid positions with high probability of success. Here’s to another great trading month!

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