We consider a momentum strategy. How distraction coupled with an uncertain approach usually does not go well. The European regulation effects our methodology, oddly in a right way. Our statistics, how did we do over the last 31 days?
We have two strategies that we have employed successfully over the previous month. One of which, however, in an earlier month gave us a loss.
The strategies are mentioned in our recent blogs.
(1) ‘Price value’ trading is where we look to buy or sell at the extreme value of a price. We do this by assessing trend and channel lines.
(2) In probability or ‘momentum’ trading we read the price action of the bar(s) and with measuring tools determine entry points, stop and target positions.
I learnt the lesson some months back that I cannot mix strategies and, of course, timeframes. I did this when on a visit to my elderly mum. (Don’t tell her she’s elderly!) With my daughters dog in tow and tried to trade through the distraction. I ended up mixing my strategies and my timeframes and took a well-deserved hit for my troubles.
With the European regulation coming into force very soon we need to think carefully about how the new rule may or may not affect our tactics while trading within a strategy.
As a reminder, the regulation significantly increases margin required. The margin is the ‘good will’ of a broker to allow a trader to leverage a trade. Without the leverage, other than institutions, few would be able to trade the currency market.
Margin does not affect the mechanics of a trade in any way. It does, however, change the amount of cash needed in our accounts to place a deal; and, more importantly, be able to correctly manage a trade when price often, and inevitably, goes against us.
For this reason, we (Slow Trader) are trading exclusively via our momentum strategy. We have increased our accounts so that we can bet as we have been before the regulation. That is, reward and risk remain the same.
We have chosen the momentum strategy because of the regulation but also as the procedure provides control and has a reduced average duration of trade compared with our value strategy.
Below are our statistics for the last 31 days (19th May to 19 June 2018).
Notice the reward graph at the bottom of the statistics; the shape of which is the desire of all traders.