Each night at the New York close, I review pairs and classify them in one of three categories:
RIPE
FORMING RIPE
NOT RIPE
The term "ripe" is a word my mentor and I used to describe a "cherrypick" opportunity, because we only wanted to take those trades with the highest probability of success. Anything less would be akin to eating fruit before it had reached its full maturity. The best tasting fruit are the ones where you can sit back and enjoy the succulent juicy flavors exploding in your mouth. Most cherries do reach this level of ripe, and that is when you want to pick them.
As of Wednesday morning, my quick list looks like this. I'll take any trade opportunities that form on a "ripe" pair right away (after proper human discretion, of course) and I'll just keep my eye on those that are still "forming ripe."
Aussie/Yen (long) -- RIPE
Pound/Yen (long) -- RIPE
NewZealand/Dollar (long) -- RIPE
Euro/Swissie (short) -- RIPE
Euro/Dollar (short) -- FORMING RIPE
Dollar/Yen (long) -- FORMING RIPE
Dollar/Swissie (long) -- FORMING RIPE
Euro/Pound (short) -- FORMING RIPE
Of course it's possible that a "forming ripe" pair will get a worm, and fall off the tree. We want to see certain characteristics that tell us when the trade has fully ripened for the highest probability opportunity.
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One of the things I do before entering new trades, and sometimes also on the tail-end, is that I journal what is going on in my world. At the very least, I need to record the specifics of the trade I'm entering, and take a few screenshots of what I'm looking at. But it is also helpful to record your emotional state because truly, this is one of the most difficult components to master.
It happens frequently that shifts in global markets cause trading opportunities in multiple currencies all at once. I think of it somewhat like continental plate tectonics: it's a behemoth to get moving, but once it's in motion everything quickly aligns in harmony. (Sidenote: this is one reason I plan to incorporate currency correlation figures in my trade calculations soon. I want to use that information to better understand risk.)
Anyway, my point is that... when multiple cherrypick trades appear all at once, it causes me stress. The stress comes from my desire to grab all of the cherries, but also maintain proper discipline and discretion when putting real funds on the line. I have already evaluated the currency pair and categorized it as "ripe," but I always want to make a final judgment call before committing to the risk. To make matters worse, I don't like to make mistakes in the calculations because one mis-entered figure -- one slip of a decimal point -- could be disastrous. So in addition to the human (visual) discretion, I also have a fair amount of math to properly gear the trade to ensure my risk objectives are maintained.
So yesterday I added some computer assistance to the mix. I've broken down my trading method into some very basic parts, a pattern that I look for in the chart. When this pattern appears, I would normally begin human evaluation of the pattern to determine if it is truly a cherrypick. So I've told the computer that if it sees this pattern... go ahead and assume the trade is happening, and chug out all the math for me. So (hopefully) at my next group of trades, the computer will have already done all the heavy lifting math I need. Of course I will need to double/triple check for awhile, until I can trust the computer program. But man... I'm really looking forward to the day I don't have to stress about the math (I hate math btw).
Another day is on the horizon. This week is full of nasty-looking economic reports. Can't wait to see what kind of chaos they will breed!
