[B]Student’s Question:[/B]
Hi, I placed a few trades yesterday, USD/CAD, GBP/JPY, GBP/USD and AUD/USD. I was up by 300 pips at one point but now am down by a total of 90 pips. I was wondering if I could run the AUD/USD chart by you to find out what I did wrong as its quite frustrating.
[B]Student’s Question:[/B]
Hi, I placed a few trades yesterday, USD/CAD, GBP/JPY, GBP/USD and AUD/USD. I was up by 300 pips at one point but now am down by a total of 90 pips. I was wondering if I could run the AUD/USD chart by you to find out what I did wrong as its quite frustrating.
I had a look at the dailyfx chart briefly for the AUD/USD and went short, as indicated in the first chart. Here is the chart at present (the 2nd chart)
I opened at 0.76208 and stop was at 0.77271
This is 107 pips so my limit was 214 pips from entry at 0.74068
At one point I was up 107.5 pips so moved my stop to 0.75991 to breakeven
Although the candle is bullish the overall trend is down.
When I looked at close it had reached my stop and closed with a profit of around 7 pips.
What should I have done here, how come it jumped from 107 pips at one point to fall by 100 pips to close near the stop?
Did I read the dailyfx chart properly, even if I had the overall trend is on the down?
Many thanks.
[B]Power Course Instructor’s Response:[/B]
Indeed…that can be quite frustrating.
Two things come to mind…
First: If the trade was to short (sell) the AUDUSD, the trade would have been [I]against[/I] the prevailing trend. Trading in the direction of the trend on Daily chart will be the higher probability trade. While there are pips that can be made going against the trend, they have a higher risk associated with them.
Take a look at the chart below for a visual…
The pair has been making higher highs and higher lows (this defines an uptrend) since about the second week of March and it has broken above the 200 SMA (green line) which is also a bullish sign.
In an uptrend such as this, we would wait for a pullback to occur and then buy the pair back in the direction of the trend. (It appears as though you may have traded the pullback and then gotten caught when the pair reversed back in the direction of the trend.)
Second: Good job on moving the stop to breakeven.
Something else to try is at a certain level of profitability…say 50, 75, 100 pips, for example…close out a portion of the trade, half the lots. By doing that you lock in at least a portion of the the profit and if the trade does retrace dramatically, you will have a bit more profit to show for you efforts.
Lastly, I find it helpful to use the [I]full view[/I] of a chart rather than expanding the view to only show a few candles…it provides a better understanding of how the pair has been moving. The general rule is to always have at least 50-75 candles represented on a chart.
