I wish to borrow Skype's "Banging head on the wall" emoticon because that is exactly how I feel right now - I gifted 38 pips away! I knew immediately after I took the trade that it was destined for doom - I bought on a resistance. I should have exited soon after this but I lingered and brood over it, while price traded down to my Stop - which had been perfectly placed below the most recent swing low - and rallied immediately after stopping me out! What?!!
It's an uptrend on 4-hour time frame, and I did well to spot a cluster of Fibonacci retracement and Fibonacci expansion levels (note region covered by green lines).
The cluster sat close to a former resistance which has turned support (note line red line) upon which price formed many reversal bars. I went long at 88.40, stop loss at 88.02 (38 pips - below the most recent swing low), and target was set at 89.52 (112 pips - above the most recent swing high).
The demand channel (regard blue lines) was a precautionary step to mark out levels that could bounce price against me.
EVENTUALLY
As it turned out, price turned after testing the channel. It didn't come as a shock. I had prepared myself for it. Even though I had bought on a resistance, I had calculated that price would decline lower to test the support side of the channel and then resume its rally. But what shocked me though was price rallying immediately after hitting my stop. I never saw that coming - and it still shocks me:
A doji formed on the resistant side of the channel and ushered the long bearish bar to my stop. My stop was perfectly placed, no doubt; but, my only flaw (principal one which could have saved me any loss) was taking a trade on a resistance.
Ah! Another flaw is that I should have exited upon discovering that my execution was faulty - Remember, cut the losses short!
Profit/Loss: - 38 pips
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