It has been some time since I took one of my trades under a magnifying glass. Almost every post has a description of what I do, but not much of my activity is really taken apart to bare bones. Today is as good time as any to do just that, because of what happened last night. Not that anything earth shattering took place, but situation developed which can show both strengths and weaknesses of my trading practices. One of these days I hope the strengths will be firmly in control. Maybe.
Trade in question is the one included in yesterday’s post, a buy of EUR-JPY. Order was placed at 128.85, just above a minor high on hourly chart. On this chart, price started to reverse and moved above 100 SMA, which I use as a support/resistance in some of my strategies. By the time order was placed, price not only moved above 100 SMA, but also retraced to it for a test. Move to the upside from that point would yet another positive development. That’s exactly the moment chart from yesterday captured. That point also provided good, in my mind, stop/loss level. Price started to advance and buy order was triggered few hours later. Only to reverse soon after.
As I mentioned above, previous minor low had become a S/L level. Now, for these type of trades I don’t use firm stops, especially if I expect to be in front of computer. Rather my stop is “mental” and I watch how the price behaves in this area and decide then. It touched the 100 SMA, which was followed by a bullish candle. Next hour, though, witnessed a price collapse. This time around it went under previous low, and 100 SMA. More importantly, from my standpoint, that’s where the candle closed. This had decidedly bearish undertone and I pulled the plug on this trade at 127.40, for a good size loss of 145 pips. As soon as this was done, price reversed yet again, which means I closed the trade at just about the worst possible moment.
Next hourly candle closed above 100 SMA and above preceding candle as well, making it a bullish engulfing line. I entered into a long trade again on the close of this candle, 128.01. Situation like this is when I use a firm S/L, just under last candle. There was no need for it, price finally moved in my direction.
After that slow down few hours later, I decided for a target at just under last high. Closed it at 128.93 for 92 pips gain. Considered holding on for longer. To about 131.00. However, price is not moving in a very convincing way, other crosses don’t support this move. With only few hours left in trading week , decided to sit it out. I will review it over the weekend and decide what to do next.
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Hi Mike. Very interisting you chose to dissect a loosing trade. How come?
Why not? Just as important to look at loosing trades as it is winning ones. Besides, this one had this awfull exit, but still it made sense to me at the time. That’s what I wanted ti highlight.
This is a great explanation of a trade. Thank you.
This is a lot of coverage for one trade. Do you do this kind of reasoning for every trade you take? Just seems like this whole process takes a lot time
GR, one bar(candle) represents one hour on this chart. Plenty of time to do any kind of analysis and make a decision.
For the first trade, the entry is alright. I was wondering how you set the stop loss order. Do you use mental stop or set it at the former swing low? I like you re-entry. It’s a beautiful high probability setup. Good job.
In most cases, for the trades mentioned here, it is just like you think, stop is mental but it depends on how price behaves in that area. In the trade above, had that hourly candle closed just above previous low and 100 SMA, trade would not have been closed. I was faked by few pips. Nothing is perfect.
Hi, interesting post. I have been wondering about this issue,so thanks for sharing. I’ll definitely be subscribing to your posts.