15 trades, 8 losing, 5 break even, so only two winning trades.
So a terrible win rate (13%). This is what I need to focus on, i.e. stop taking trades unless I understand why they are high probability trades.
This is a great example of the importance of risk management and as my virtual mentors are always saying “it is not important how often you are right or wrong, what is important is how much money you make when you are right and how much you lose when you are wrong”. If I had had another single win I would have made money.
My two wins were from shorting Deutsche bank (totalling 3.8%), one of the many European banks that almost 10 years on from the last crisis are still over leveraged and under capitalised. With the European Central Banks massive QE programme having little effect on creating growth and inflation in the Euro Zone, as the world goes into it’s next recession (not if, but when) it is hard to see what else the ECB can do.
I took the trade because:
- Some recent data showed weakness in the German economy, the ‘powerhouse of Europe’,
- I know European banks are vulnerable to any upset or economic weakness, Deutsche bank being one of the worst, probably followed closely by Italian and Greek banks,
- As shown by daily chart, the price was at top of downward channel,
Daily Chart showing downward channel.
I took my first trade on the 14/09/2016, and also placed a limit order in case the trade went against me (without stopping me out) so I could increase my position. My limit order was hit the next day.
4 Hour Chart – First Entry
4 Hour Chart Showing Limit Order Which Was Hit on 15/09
I took my profits when price got to the lows seen at the beginning of August and started to rebound. As shown by the chart the price subsequently dived further until a dramatic retracement.