Did not again change currencies this week. Reasons to myself :
1. Good currency pair I feel, that fits in with my working hours. The Asian trading session should establish the tone for the following session too, with hopefully a reasonable statistical average, as most of the active zonal trading is between 2300 GMT and 0800 GMT next morning, and its reasonable to give up some sleep. So far, not many huge moves during my office working hours, though I have always kept an eye on my mobile phone.
2. Volatility of this pair is quite high, in 2013. Around 110 pips daily is very good,
3. Being in the same zone I feel buffers the pair against moves against European / USD currencies.
OPENING TRADE MARCH 4, 2013 ( midnight)
Possible a slightly better trade than before, I have calculated the profit targets and R : R ratios. Plus convergences of nearly all 4 premises.
Will have to monitor still. There might not be a huge movement until Australian economic releases later this week.
What happened next :
Even with the best of trade entries (like I supposed above), the trade can go completely the wrong way. Within 2 hours of the above trade, it became clear to me that an ‘unexpected’ ugly downtrend was on its way. It went down so fast, that I had little time to react.
The reason however I did not abandon / liquidate the trade was because the AUSUSD was very close to a strong resistance level (plus USDJPY was on way up). In addition there was this obvious MACD divergence supporting a reversal in the short run. For the next 4 hours, watched the Aussie slide below medium term strong support, but cross (AUDJPY) was stable at support, as JPY was going up. I was actively waiting for an AUD reversal, as it was so lose to a strong support line. It finally happened after 10 hours, and the reversal began. I was quite keen just to liquidate the trade on a zero trade basis, as the Aussie GDP announcement was due 30 minutes after midnight. Finally got the chance. Ended trade at no loss.
1. I think once the trade goes a wrong way, its pragmatic to just minimize the losses the best we can. As I use psychological stop losses based on the point at which the trade gets invalid, often, a sharp drop leaves me paralysed. I accept this is a drawback of psychological stop losses, but I would not change this attitude for the time being : My risk tolerance is slightly higher than average, as this is essential for capital growth through BIG MOVES. I CAN SEE THAT THE SINGLE BIGGEST FACTORS THAT WOULD ALLOW ME TO STAY IN THE TRADE IS LOW LEVERAGE. SCALING UP TRADE SIZE ISN’T A BAD THING > ONLY I NEED MORE SKILLS IN THIS AREA.
2. I used double the trade size that would have made me really comfortable, while anticipating the bounce back. Perhaps this needs more work.
3. In cross pair trading, I have been watching the base pairs to calculate the probabilities of move in a particular direction, and that’s fine. I think I might also use correlation charts (www.forextickets.co.uk) too for putting trades on.
Useful learning opportunity, but I am sure I missed a better trade elsewhere in sticking to the AUDJPY. May be I need to focus on RH’s market scanning techniques better.