I know I haven’t posted here for a while, so I thought I would write a quick update as I’ve had quite a few personal messages asking how it’s going. As I mentioned earlier in the blog, one of the reasons I haven’t posted much is that the blog was interfering with my trading. If I was going through a good period, and I reported it here, then it seemed to provoke a losing streak. I have much respect for people that can run trading rooms and trade their own live accounts at the same time. It is surprisingly difficult to trade well when you are reporting what you are doing. The mind plays subtle tricks on you and of course, the old enemy, the ego is always there to trip you up!

I will say that my goals are still there, my trading is going well at the moment but I am not going to report exact results here for a while. I have taken thirteen trades so far in January 2012 and my account is up. I am still in contact with Tom, my mentor, on a regular basis but do not participate in his trading room as it was distracting me. Once I have my emotions under control, and feel able to report my trades as I do them, I may post them up again.

Until that time comes I’m going to quietly try and master myself as I believe that is the key to becoming the best trader you can be.

This may sound like a recipe for disaster to many of you reading this, but I am about to embark on an ambitious project to super-aggressively grow a small fund to a large one. I am going to start with a fund of £1,000 and will attempt to grow it to £1,000,000 over the next 13 months (by December 2012). I have a plan, and I’d like to share it with you.

For the plan to work I will need to meet the following criteria
* Make 8R net per month, where R is defined as the Reward from risk taken and taking into account any losses
* Keep pressing my edge when the account grows in size and not scale back the risk
* Expect to take large monetary losses and deal with it emotionally – this is key
* Do not take sub-standard trades. Only take the “A grade” setups. I can do this now, I’ve learnt this lesson many times over.

The Plan

It is quite conservative in that I am only trying to make an average of 2R per week. I have had single trades that have returned me over 3R in the past so this should not be difficult to achieve, if I can keep my emotions in check, and the markets are yielding. I am not going to build wealth quickly by trading at small risk, so I am going to increase my risk to a large amount which I will outline below. I will have a plan to deal with consecutive losers and I will press a winning streak by increasing size after each winner up to a point. The alternative is to start with a large fund and take small risk, but I don’t want to solicit for funds or trade other people’s money. I’d rather trade my own money and take large risk on a small amount, than small risk on a large amount.

Risk

I am going to risk 10% per trade to start with and get out of the trade at the First Trouble Area (FTA). The FTA is defined as a “bump” in the path of least resistance as defined by price. So if going long, the FTA would be a support level above the entry price. If the FTA is less than 0.8R, then I will skip the trade. My win rate is not high enough (it’s around 65%) to take low R trades just yet and 0.8 is the lowest I’m comfortable with right now. I want my average R to be between 1 and 2 per trade. If my strike rate reaches 75% I may take the odd low R trade if at a good level.

Winning streaks: For each consecutive winning trade I will increase the risk by 2% up to a ceiling of 20%. When the ceiling is hit, the risk amount will reduce back down to 10% until a losing trade occurs. e.g. Trade 1: 10%, Trade2: 12%, Trade3: 14%, … , Trade6:20%, Trade7:10%. Get the picture? Whenever I get a losing trade, the risk drops to 10% for the next trade, in case we are at the beginning of a losing streak.

Losing streaks: When losing, I will reduce the risk by half to 5% after the second losing trade. If the third trade loses, then risk will be reduced to 2% for the next trade and I will stop trading for the rest of the current week. When a winning trade happens, risk will be “reset” back to the default 10%.

The reason I am using this risk strategy is for two reasons:

1. I don’t want to start trading a large account with my limited trading experience. I would rather gain experience by building a large account from, essentially, nothing.
2. I don’t want to trade other people’s money as that introduces complications and hassles that I could do without and which could affect the end results and my emotions significantly. I therefore have no choice but to start with a small account. To get rich from a small account, you MUST take large risk otherwise growth is too slow.

Trading Strategies

I will be trading the weekend gap on EURUSD, and S/R levels trading on my usual markets and any other outstanding level that I spot in any other liquid market. I am also researching currently the Asian Overnight Breakout trade and have some ideas incubating at present. I may include that later, but a few months of research is required on that before I add it to my strategies.

I am only taking A+ setups and will quite happily skip trades that don’t look great. As this effort will take a lot of strain I will be limiting posts to the blog to once or twice a month. Tom, my mentor, will be guiding me along the way.

I am taking most of the blog offline for a while whilst I evaluate why my trading went from stupendously well to hideously bad. I may be over-dramatizing things a bit, however I am not in a good emotional place right now with regards to trading. I am taking the rest of the week off and have pulled all my orders while I investigate why my performance went from stellar to diabolical. I will still post to the blog for my own use however all my posts will remain private except for the mentoring and performance review posts. I think three things have affected my trading:

1. The competition account
2. The decision to increase my risk to a high level (10% per trade)
3. The blog