Monthly Recap: January 2025
January 2025 marked my return back to trading after a restful holiday. In my previous post I reviewed my performance for 2024 and identified some learnings for me to incorporate into my trading this year. As the next year goes by I intend to apply these lessons and continue to improve my trades.
This month I completed three sessions which produced a combined total of -0.97R. Here are the results of this month's trades:
- 6 January 2025:
- Trade 1: -0.53R
- 13 January 2025:
- Trade 2: +0.01R
- 20 January 2025:
- No trades (Bank holiday - Martin Luther King Jr. Day)
- 27 January 2025:
- Trade 3: -0.45R
6 January marked my first trading session of the year. I was eager to get back into it, and apply a few learnings after spending some time trying to improve my price action knowledge. The session's trade is displayed below:
After a gap up at the open, the S&P 500 broke higher with large bullish candles. Price then started to convert into a tight bull channel trending higher at a steady pace. I began my session a few candles after the two-bearish-candle pullback that rejected the trend line. Given the tailed candles and preceding bearish presence I was sceptical of a continuation higher until buying pressure began to increase again. As the next few candles formed, bullish candles grew larger and bearish candles became smaller as price continued higher, renewing the buying momentum. After signal Candle A broke above the highs of the previous candles and closed near its own high, I decided to open a trade long at Position 1 after Candle A's highs were broken by the next candle. I targeted resistance levels on higher timeframes.
As the trade continued it was evident that the buying pressure which preceded my trade was very quickly diminishing. It seems I got in at the top, just in time to watch as price toppled over – it struggled to move higher and was starting to wick downward. There was minimal follow through. After the large bearish Candle B formed – taking out the lows of my signal candle – along with previous wicked rejection candles, I cut the trade. Fortunately closing the trade early saved my stop from being triggered as price fell further.
One observation from my review last year was that I needed more technical price action-based reasons to exit trades early / manually. On the other hand, my review also revealed that simply leaving my trades to run within the bounds of my targets and stops would have produced improved results (on average). There are merits to both approaches, so I think this year I will seek to balance the two in order to improve on my trade management and exit.
My next trading session took place on 13 January. One trade was completed as displayed below:
The S&P 500 opened with a gap down on the day and started to form a trend higher which turned into a trading range. I started my session just after price reversed its move downward to test the top of the trading range day once again. After a few successive shrinking bull candles were formed, price stalled at the top of the range while attempting to break higher. Immediately afterwards, large signal Candle A was formed which rejected the breakout and suggested a reversal at the top of the range. After the lows of signal Candle A were broken I opened a trade short at Position 2 targeting the bottom of the daily range.
Price initially moved in my favour, but then began to stall at the top line drawn in the figure above. Price moved sideways for a few candles then eventually began to break higher – Candle B took out the highs of the previous candles, aggressively pushing higher. Given price had stalled and Candle B was taking out higher highs I cut my trade just below break even. Shortly afterward Candle B reversed back down but the candle which succeeded it broke and closed higher. Price, however, had overextended and then moved back lower to try retest the bottom of the range.
My target was just off of the turning point in the range. Had I left the trade to do its thing, my result would have been breakeven anyway. However, if I had been a bit more conservative with my target and not cut the trade I could have landed a 1.5R result. One could view my decision to cut the trade as being quite hasty, but given the price action leading up to it I feel my judgement was fair. I am, however, struggling with this discretionary form of trade management. As I mentioned above, I may need to start exploring a fixed rule-based exit strategy or decide always to leave the trade to its own devices, to hit either my stop or my target. Of course, my results from last year suggest that the latter approach would be more successful (on average) but my strive for exit-point optimisation (often an internal struggle in the moment) may hinder my trading results at this stage.
Given that the 20 January was a bank holiday in the US, my third and final session for January 2025 took place on Monday 27 January. My trade results are as follows:
The release of China's new and more efficient "DeepSeek" AI model shocked the US tech industry, sending AI-focused stocks far into negative territory. This, in turn, dropped global stock indices considerably. Weighed down by substantial negative sentiment, the S&P 500 gapped down 2.1% at the open of the trading day. I started my session just after prices began to make their second leg higher for the day, seeking new highs after the rush up at the open. I watched prices moving higher, thinking there would be some increased bearish pressure for the day given the massive gap down at the open. Price action eventually turned lower and began to break previous lows. I was tempted to take the reversal at the top but my uncertainty kept me on the side-lines. Price broke lower very quickly and the sentiment was shifting bearish again.
I watched and waited, the end of my trading session approaching, but then an opportunity finally presented itself. Price started to pullback and retest the 20 EMA. It did this multiple times then eventually rejected it, forming lower high candles. I opened a trade short at Position 3 after the low of signal Candle A was broken, targeting the lows of the day and a measured move target. Given that I opened the trade near the end of my session, I left my screens and went on with my evening.
While I was away, price had reversed significantly and come close to my stop, but it moved back down again. When I returned to my desk (two hours later), I decided to cut the trade. It did not hit my stop or my target, but I have a strict rule not to hold short timeframe trades overnight. It was a tough decision, but it had to be done. Eventually price would have actually hit my stop, so I saved myself a bit of capital in that regard.
Something I think I need to do is revisit my journal and review the typical trade length for winning and losing trades. Using those metrics I can calculate a more concrete time stop in order to help with these cases. If nothing happens for too long it potentially points to signs that the market is stagnating or changing its sentiment which means my original trade premise may no longer be valid and it's likely time to exit.
It was a negative month overall for January but we move on and learn. Evidently, I struggled this month not to interfere with my trades. Going into next month I'm going to try be more conservative with my target setting and rather let trades play out. Its a tough thing to do when you constantly want to optimise your results and front-run your stop but it can have its drawbacks over time as you cut the trades that may have eventually hit your targets too.
Until next time :)