What a year!  Initial patience was rewarded by some great results, only to be followed by a disappointing retracement.  Then finally things started going my way towards the end of the year taking my overall account to a new equity high, and to an acceptable year-end result.   2004 also saw me fully automating my trading  with an api (trading commencement of which is represented by the blue dot), and I have at last been rewarded by seeing performance from this effort moving into positive territory. 

Those who have followed these reports from the beginning might remember the goals I set myself at the beginning of the year.  While I didn't quite get to  'outstanding', I did get a sniff at it with one sub-account getting up to over 1300%  before fading away into a disappointing heap (it wasn't an easy year!); the overall results are certainly in the top percentage range of professional fund manager results.  

During the period a lot of ideas have come and gone.  In fact, following this month's clear-out (see the 'stopped' section), I am not trading any method now that I was even a few month's ago, although it has to be said that nothing has been wasted and I am conceptually trading in a similar fashion to that of the beginning of the year.  Everything that I've tried and discarded has provided invaluable market knowledge, and has given me a much stronger base to build upon.   It's been an evolution;  the bath water has been thrown out (several times), but not the baby!   (Just as aside, but in relation to consistency of approach, I tried to read Alan Farley's 'The Master Swing Trader' during the year.  While I'm sure it's a good book, it's so 'un-me' I couldn't get through it.  Just a reminder that as traders we first have to be true to ourselves).

The world of private fx trading is a strange one.  In most cases we do not have immediate friends and/or even acquaintances with whom we can discuss this passion of ours, to exchange ideas and experience and to generally watch out for each other during the inevitable difficult times.   However, through this website and the OANDA forums,   I have come to know some wonderful people whom I now consider good friends, even if we have not necessarily met.   You know who you are!    Your ideas, your sharing, curiosity, caring and enthusiasm have all contributed to this year's success, and to the optimism I have for the forthcoming year.   A most sincere 'thank you', to you all.  May your trading dreams become a reality.    

Finally at year-end, it is only fitting to say thanks to my wife Suellen, for her continued understanding and support.   You've been brilliant- thank you!  Who would be a traders partner?  I really don't know.

Individual components

For the last time this year, the following charts again show individual equity curves in percentage terms of the various trading components traded throughout the period.    The charts are from the beginning of reporting, or inception. 

I don't think I've commented a great deal on this wall chart before, but it's crucially important to my trading.  Losing days are a fact of trading life, but their regularity and severity give so much guidance to one's further trading.  Looking back, my single worst day was a consolidated loss of nearly 8%.  At the time this was too much as my normal trading was only producing around 1% a day, with some 6% losses thrown in.  A clear indication that my exposure needed to be cut back, which I indeed did.  More recently my daily returns have started to move up to around 2% a day, with some days approaching 3-4%.  In this context I feel that I can now start to increased exposure (leverage/trade size)  once again.

Looking back at the major breaks,  3 or 4 of the very worst days have come from news event days, which I blithely ignored - not being a fundamental trader.  I have held the view that since backtesting does not take into consideration news events, why should actually trading?   One thing I've noticed though is that my worst three losses this year came on the two last days of the month.  I think part of the reason is month-end position squaring, which seems to disrupt the regular flow. Also, both NZ  and Australia have key indicator announcements.   Ignoring these events has certainly cost me in the latter part of the year, so I've now implemented an economic calendar into my api, and will be automatically shutting down my normal trading in all pairs related to a pending release for an hour or two in future.  One can only take so much punishment before one tries to do something about it.   

  Trade Components 

So nice to see everything ticking along nicely!  Just to put things into perspective, by 'High Frequency' I mean that I am re-evaluating my trades approximately once every minute, 24 hours a day, although the average trade length is probably more like 4 hours.      

New Stuff

Stopped during month

AUD/JPY II has simply been rolled into AUD/JPY, while my two breakout systems haven't worked since April-May.  It all just goes to show that the market works in cycles of sorts, and we have to retain a certain amount of flexibility in order  to survive and prosper.  

Looking ahead to 2005

I've got genuinely high hopes for the coming year.  I'm generally very happy with my market maker, my risk control, api and the methods I currently have in production.  

As for goals,  I really want to make triple figures next year, so I am adding some more precision to that of my original 2004 goals.  However, the risk issue doesn't change.  It can only happen within the framework of not endangering too much of my capital, so I will continue to be more conservative with baseline capital than with any profits that may eventuate.  

Goals for 2005

In brief these are to:

1.     Continue to strive to give myself the chance of making spectacular gains (500%+), while making a serious attempt this year to make at least triple figures, without undue risks.

2.     Risk Control: ensure that I don’t jeopardize my ability to trade in the future due to excessive drawdowns.   In other words, make sure that l can always trade tomorrow.   

      If push comes to shove, point 2 is the most important, but not by a huge amount!  I want a triple digit return for the coming year really bad!

3.   I also have a certain sustainable trade size goal as well, but I'll keep that number to myself.   However, I will quote from dgcfx on the OANDA forum -  ' I would like to have to really worry about the 10 million unit trade limit'.   Yes, a nice problem to have, and a worthy goal!

4.  And for continued inspiration I'll quote from something Blueingreen said on the same forum, and to which I very largely subscribe: 

      'I understood, that the key to getting to a plateau of a self sustaining professional trader, was a frequent, high probability and small dispersion style of trading, that had to be applied on a very sustained leverage.

This trading style has a very strong appeal of being able to take you in a relatively short span of time to trade pretty much the maximum of what a private day trader can handle - a 10 million position. At that point you can stop increasing your size, and while you continue making money, your leverage drops, and you can start taking a breath every now and then.

The road to get there, is full of 30,50 or even 80% drawdowns, but the fascinating part is, that even if you start really small, you can still make it big in 2-4 years of time'.

     Full discussion:

    http://www2.oanda.com/cgi-bin/msgboard/ultimatebb.cgi?ubb=get_topic;f=15;t=002218#000007

For the traders reading this - may your trading goals come true as well!  Good trading in the year ahead.