If you were following the AUD/USD pair yesterday, you would have eventually noticed that it completed an amazing V-reversal that it finally started pulling back on today.
The move was shocking, really, since you normally need a trading range at the end of a trend to complete a move like that. But instead, it took off, leaving trapped bears behind in the dust.
Finally, I decided I wanted in. So, I got in at the market, not waiting for a pullback.
Most traders trap themselves out of this kind of move for fear that it will reverse again, or that they somehow need a huge pullback to enter. However, by the time that huge pullback happens, you may miss the move altogether. I think it is just better to jump in, as I did here:
The green line represents where I entered and the red line is my stop-loss order. The white line represents where I will move my stop if I do indeed get another higher high. Incidentally, since there was no real pullback on this move, this will be the first higher low.
Still, most people freak out when they see a stop loss so far away. After all, how can I risk so much?
The secret is, I am not. My position size is about a third of what I would normally have on.
I also left myself with enough capital to scale in at the first major pullback. That way, I can exit break even on my first order and with a small profit on the second.
Or better yet, I can add to my position as the market continues up.
The most important thing is, try not to let wide stop losses deter you from trading. Simply trade smaller and allow enough room to let the market do its thing.
