I have a Word document for each individual currency along with Bonds, stocks, Oil, and Gold. …so 12 Word documents altogether. There’s nothing in them at the moment, but I first wanted to see if this is the correct format for recording the news snippets. So if, as an example, you have EUR news out from Bloomberg….you’d cut and paste the pertinent information into the EUR Word document….does that sound right? Or maybe perhaps you just have everything under one Word document only and then separated out in some way for the individual currencies?
Also, once it’s in the Word document, what then? Do you go back and read what all you recorded at the end of each day? Each week?
Yes, that is exactly how I have it set up.
I have one folder for every year. Every year has 12 files in there:
I have that folder synced up to the Google Drive cloud, so I can access it from any computer.
If there is EUR specific news or anything related to the Eurozone or anything that moved the EUR or could move it, then I put it into the EUR file. Now if there are Eurozone tensions that moved the S&P or other markets, then I include that information in their own respective files as well. Usually when I check out the Bloomberg or Reuters article on what happened with the equity markets, they may have 1-3 sentences that I copy into the S&P file if I agree with it.
Sometimes the same news snippet can be used in multiple documents. For example if the news snippet says: “Eur sold off on fears of Spanish and Italian political turmoil, and the S&P fell on risk aversion stemming from the Eurozone” or something like that, then you can place that both in the EUR and the S&P files, or anywhere else that it is applicable.
I don’t use one word file for everything. That would get confusing fast. That is why I have separate master files, and separate scenario sheets. So you can find what you are looking for quickly. If I want to know what happened for the EUR on February 5, 2013, then I open up my EUR file and scroll to that date, then done. If I want to anticipate and make some predictions about what the Federal Reserve is going to do at the upcoming meeting, then I will open up the USD file and scroll through the past few days and weeks, to see what Fed official comments I have recorded, and the economic data that has come out.
I open up all my 12 files simultaneously. I have my news article on one monitor, then my currency/financial instrument files on another monitor. Then I read or skim the articles and if I agree with the reason, then I copy over the news snippet, or phrase, or sentences, etc into the proper financial instrument file. If I don’t agree with the reason, then sometimes I can develop my own reason, or just not write in anything if it is so confusing.
While I am doing that, my subconscious mind is working to figure out the right 1-3 sentence explanation for the days movements for that financial instrument. When you see my daily habits on the website and I write in “EUR rose due to x, y, z tripped topside stops (or barrier), then macro exhaustion, etc. When you see me write in that 1-3 sentence explanation, then that is me going over all the day’s action and distilling the news, sentiment, expectations, macro, scenario, stops and barriers into 1-3 sentences that explained the market action for that day.
Once, my word documents are finished, then I still keep them open. I use them to help guide me to prepare for the next day’s news releases. I look through the past news releases to determine whether a news report is potential trade or not and to help me to establish some general news triggers by seeing how the market reacted to previous upward and downward deviations. I want to avoid the whipsaw.
I also use my 12 files to create my correlation/sensitivity sheet. I see what scenarios occurred during that day, and I play out the bullish and bearish scenarios and write those into the correlation/sensitivity sheet.
So for example in the February 1, 2013 sheet that I posted, I wrote in:
“Will crisis spread to France or Germany? Credit downgrade? Lower growth? Or are they expanding?”
When you see me write that, it lets me know what the market can be sensitive to. I want to project out future potential scenarios from the current market moment. I don’t want to have crazy scenarios playing out in my brain. I want to know the current market moment and then project out the nearest bullish and bearish scenario.
Then after I complete my correlation/sensitivity sheet, that is what I use to help guide my trading day. I close my 12 files, and just stick with my sensitivity sheet. Usually I have my scenario sheets handy if I want to refer to those. But the correlation/sensitivity sheet should have the most relevant scenarios on there.
Sometimes while performing my daily habits I get a trade idea and place it. Other times, it helps me form a bias for the next day. Sometimes I wait until my correlation/sensitivity sheet to place any trades. Usually I like to have my full daily habits done before I consider placing any swing trades or intraday trades.
Any time I see a movement, I want to ask myself, am I going to go with the momentum? Fade the move? Or do nothing.
I am constantly plugging in all the information I consumed during the day and in doing the daily habits into my mental macro model.
For example, on February 13, 2013, after doing all the daily habits, I saw the NZD was acting good. I saw it rose 80 pips due to good econ data. I also saw that on Feb 12, in my NZD files, I wrote that the Finance minister of NZ, said that the NZ was overvalued and it was creating pressure, and the the govt would like to see a lower NZD dollar:
I wrote on Feb 12, 2013 for my NZD files:
Feb 12 – Finance Minister: NZ dollar is overvalued, creating pressure
– Govt would prefer to see lower NZ dollar
– Lowering NZD like being in a war zone with a pea shooter
NZD did not go down.
So the NZD was shrugging off the bearish Fin Min comments, which was a bullish sensitivity signal.
So I plugged all this information into my mental model. Playing out the battle of scenarios in my mind to figure out if I should do anything and if so, at what price, and if how much size.
I played out the bullish scenario of the NZD shrugging off the fin min comments, and the good econ data, and I played the bearish scenario of the high NZD hurting the NZ economy. I also remembered what happened to the AUD/USD as it tried to break above 1.0600. It struggled to do so because the high currency was hurting their economy and some macro players knew it.
So I played those battles out in my mind and I decided to Short NZD, but only if the barrier at 0.8500 and stops above were broken. So I set a sell limit order between 0.8505 – 0.8510. In this case I was “fading the upmove.”
That is what trading is about: Either you go with the move, fade the move, or do nothing (or in other cases the market is consolidating, and you want to place a trade betting on a breakout). You interpret the information flow to figure out what you should do.
So I shorted NZD/USD at 0.8505/10, I had to hold through the spike up on Feb 14, and hold through the 25 pip drawdown or so, but I held through it. Then on Friday, Feb 15, the market finally fell and the trade paid off.
Ideally, I should of covered on Feb 14, before the NZD retail sales, then played the NZD/USD long for a quick 20 pip profit, on a news spike + go for small intraday move after the good NZD retail sales, then took profit and shorted it again. That would have been the ideal way, but no one can capture all the fluctuations.
I forgot to mention on my prior question on the format for keeping the master files……is the correlation and Sensitivity Sheet also its own separate Word document? So that would make a grand total of 13 documents altogether? Or are you just keeping all information in only ONE Word document?
The Correlation/Sensitivity Sheet I write it out by hand every day. Probably 10-50% of it is rewriting the same scenarios into from the previous day it if they haven’t changed. What changes is the financial instruments that go into the columns, and the 1-2 sentence description of the trading action during the day for each currency/financial instrument (sometimes copied over from the master files) and the potential scenarios and catalysts for the future.
If you want you can keep it on a Word document instead of writing it out by hand. That would be faster. If you want, you can use a cloud based service. I have been testing out Google Drive and it seems to be doing the job nicely keeping the files synced between computers.
I have the currency/financial instrument master files separated by year. So there are 12 documents/files for the year 2012, and then I created 12 new ones for the year 2013. Some of them can grow to be 200 pages long, so I don’t want to be sifting through that. So at the end of the year I create a new folder, and start fresh. Although sometimes you may have to refer back to them if you want to see how the market responded to news back in December, or what some key officials said, etc. Don’t fall into the trap of looking at data or information that is 6-12 months old. I did that a long time ago and I was pulling my hairs out trying to figure out what I was doing wrong. The most important information is the current market moment and the near future market moment, and any recent data or key official statements over the past few weeks or 1-2 months that help you anticipate the future.
I have 12 files:
Treasury Bonds (notes, etc, in this same file) (There can be divergences between the bonds, and the notes, and t-bills, etc and even more divergences between US bonds and Spanish bonds, etc, but for this file I just keep it the U.S. Treasury bonds/notes. Sometimes the UK Gilts and German bunds, etc can also trade in a similar fashion and the yields can move in the same way.
Now, if you trade certain stocks, then you can keep separate files on the stocks that you like to trade. Or if you trade Corn futures, or Natural gas, or anything else, and you want to gain an interpretation advantage and figure out when you have the overwhelming news/sentiment/fundamental/macro order flow on your side, then it would be advantageous to keep files on them.