Sunday, February 15, 2009

Character Building-- One New Equity High at a Time! - IFCN Wk 62 –Friday- Equity: $2,727.50

This was another brutal week for followers of FirstStrikePlus. These weeks are inevitable, but when they happen, they still can sting. I'm glad there weren't any OneNightStand trades on Friday. When forex markets are as choppy as we've seen recently, ONS trades rarely make much money. Still, if they occur, the odds are to take them.

To add insult to injury, every day seeing the future world economy in the process of being savagely ruined by lovers of Mr. O. leaves me pretty cold too.

But-- back to trading; some have written to me asking why the Challenge account doesn't take both long and short trades, meaning if one of the orders gets executed and subsequently stopped out-- then taking the opposite trade. This week's action is one of the good examples of why I don't.

Over thousands of trades, if you consistently took the second trade in the opposite direction after the first trade loss, (and even a 3rd and a 4th if the previous trades get stopped out) your execution results would be very likely be quite positive. They have been significantly so in the past. But the actual drawdowns one experiences trading in that manner have been very extreme at times. Like this week.

If you continuously reversed in the Eur/Usd pair this week you would have lost 3 consecutive trades and be underwater in a 4th. If you continuously reversed in the Usd/Chf this week you would have lost 4 consecutive trades. If you were risking a mere 1% per trade you could have lost nearly 8% of your account equity in just those two pairs alone. If similar losses occurred in the other weekly trades you can imagine the bloodbath to your account.

Even if the reverse trades have a sizable edge, which they indeed do--- the immediate risk to capital is something to consider.

The best trades are those which get executed at the earliest part of the week and continue throughout the rest of the week, never backing up at all. I prefer to defer to those trades and leave the reverse trades to those who are willing to put up with larger drawdowns than I am at this point in the Challenge account.


Again, this week we've seen our trading equity severely reduced and our XAG position equity increasing proportionately to absorb the losses and continue on to new equity highs. Can this go on for much longer?

I doubt it. But I'll accept the situation like we accept the prediction of an early spring from the Punxsutawney groundhog. Tenuously.


FirstStrike Plus trades executed this week:
  • gbp/usd: Long @ 1.4970, stopped at 1.4653 for a 318 pip loss.
  • eur/usd: Long @ 1.3038, stopped at 1.2892 for a 146 pip loss.
  • gbp/jpy: Short @ 130.86, stop 135.46. Trade in progress.
  • usd/chf: Short @ 1.1510, stopped at 1.1648 for 138 pip loss.
  • usd/jpy: Short @ 90.07, stopped at 91.54 for 147 pip loss.
As mentioned above, no OneNightStand trades occurred Friday.

Trading account equity: $1,869.50

Silver position equity: $858.00
(Current XAG price: $13.69 – 200 unit position average: $9.40)
TOTAL Equity: $2,727.50

Keep up the good work. I know that I'm not the only one taking these trades. When you suffer drawdowns it may build character, but does character have to cost so much? Apparently so, when you choose to learn from the experience.

Joel Rensink

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

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