I am learning about (FX) trend retracement this week.
I am curious if you ever caught in a trade where market went up and then retraced some portion of the upward move; or went down and then retraced some portion of the downward move? How did you manage to close the position profitable in such trades? Are all trades in the given situation are closed with a loss?
Thank you.
It happens in every trend. Retracements are annoying but every retracement is an opportunity to either get back into the trend at a better price or to send the money elsewhere.
In general, my belief is that its a bad idea to let your account manage the trade once you are in a position. Whether the trade is in profit or in loss does not affect the probability of price moving either in your direction or against you. The market does not know about your trades and does not care.
The more rational approach is to review the trend’s TA at intervals - if its still in a strong trend, then the probability is that price will continue to follow the trend and you should stay in: if the trend has failed (not necessarily reversed), get out. As far as stop-losses are concerned, these can be moved with the trend as price moves but should be at a level far enough back so that they don’t exit you from a good trend.
Thank you. This helps.
Could you please share a personal experience of a pair or a relevant trade and how did you manage it?
A straightforward example would be see on AUD/USD, daily chart, recently.
18/08 -
20EMA and 50EMA are sloping upwards, the 20 is above the 50, price is above the 20 - uptrend.
19/08 -
Price goes higher early in the session but closes below the day’s range for 18/08.
20/08 -
Price falls below the 19/08 range early in the session but closes near the day’s high and above the close of the 19th: the EMA’s are still aligned and sloping positively and price remains above the 20, so the uptrend is not broken yet. Hold an existing open long (or enter a new buy order above the high of the 19th’s range).
21/08 -
Price prints a day’s range with higher high and higher low. Price goes on to print 6 successively higher closes.
Thank you very much. Now I can understand this much better. I’d need to test a pair myself, now.
This is a standard situation…
But about what to do next at this point, you make a decision based on each specific situation.
Each such moment is individual, and you can always do something unexpected.