My plan on Wednesday was to trade the US forex session; not because I expected the best opportunity at that time, but because that would be the only time period that would not be impacted by ‘family time’.
Then unexpectedly, at around 7:15pm (early UK session), my wife and kids decided to head over to a friends place for an hour or so. Awesome! The Manufacturing Production figures come out in 15 minutes. That should create a little volatility and allow me to get in a trade or two before they return.
You can see the results on the chart below. The shaded area represents major support in the area of 1.4875-85. The entry and exit are indicated by the blue and pink trade markers. The news release was at 19:30 my time – the large bodied red candle.
My plan for a news driven momentum move such as this is very similar to how I like to trade a climactic move, as discussed recently in this article here: http://www.yourtradingcoach.com/trading-process-and-strategy/Climactic-Reversals-Entry/
Any countertrend move, if I were to take one, should be only on clear evidence of a stall or reversal within an area of major support or resistance, or (even better) on a lower momentum second test of the area. In other words, wait for the shaded area, or for the lows to establish themselves and then retest.
As price fell there was evidence of some buying halting the decline, in particular around the 1.4910 area. This led me to get the idea that it might not quite make the 4875-85 area, possibly encountering some buying around the 4900 area. Next thing I know – I’m hitting the buy button at 4902.
Don’t you hate that feeling you immediately get when you know you’ve violated your plan!!! Actually, it’s a good feeling as it allows you to immediately correct an error.
Price pushed quite easily below the zeros level, so I exited at 4895 to minimize any damage. I left the room for 30 seconds or so to ‘shake off’ the error and return refocused, ready to wait patiently for a proper trade opportunity.
Price never quite reached the support zone, so I didn’t take another long at the lows (although it did hold up quite well above the 95 level so was tempting – but I was being ‘patient’). The pullback didn’t quite go deep enough to attract me – I was looking for more around the 20-25 level.
Waiting patiently though I was rewarded around half an hour later with a low momentum retest of the original lows. An entry long at 1.4995 for a short rally back up to the previous swing highs, as noise from the garage door indicates the family is back home.
No profits overall – basically a scratched sequence. But a good reminder of the fact that I am, and always will be, susceptible to dumb, impulse trades. Rather than panicking though, I’ve learnt over time that when I get that uncomfortable feeling it’s best to exit the trade and reassess. Take a short ‘time-out’ if necessary to refocus, and then return and recover through proper and patient application of the trading plan.