Ah and so to new beginnings… and I’m going to clear this point up right now before anyone reads any further. Post-trade analysis is always 20-20
Which means it’s challenging to put yourself back in the moment when you placed the trade. It’s inevitable that there might well be a lot of ‘coulda/woulda/shoulda’ in these types of posts so I’m open to suggestions as to how to improve them. Comments purely along the lines of ‘that was a shit trade’ are only welcome if you can point me to your blog/analysis/audited trading results.
The intention here is for me to objectively look at what I did so I can wring all the lessons from each experience. If you feel compelled to point out a bunch of mistakes then I’m going to insist you’re not a dick about it. That was a ‘Be Nice‘ warning on behalf of the ‘Feeling Slightly Vulnerable Here’ party. Thanks for your polite consideration.
I’ve started writing this up and have also begun to realise what an awful lot of work I might have let myself in for but lets press on regardless shall we? Need a brew first though!
Trade Thesis – EURUSD
Essentially although there’s been an equity rally the euro has just not gone anywhere the last few days so I’m looking at places to get short. Based on previous observations there’s usually a reaction when price gets back to the days range pre-europe open about 06:00-07:00. in this case that’s around 1.0342 for a short.
So the NFP number came out and it was near as dammit on expectation so there was a steady hitch up to that number. It sat in/around 1.0340 for 10 minutes without getting above 1.03048 so I did get short at 1.03042 as per my plan. Bonus points for sticking to the plan but many negative marks for not being patient enough to wait longer. If I had waited and stepped back from the trade a little things would have been much better.
My rationale for this trade was invalidated by the ‘non-miss’ nature of the unemployment number. The price behavior usually seen at this point was overcome by a larger part of the market seeing am opportunity to buy and I’d avoided an opportunity to look at the bigger picture – which I’ll get onto later. Other participants reading the situation differently meant I was going entirely in the wrong direction at this point.
Couple of execution issues also didn’t help. Firstly put my stop much, much too close to the action i.e. within the previous dealing range rather than outside it… This should have been above two dealing ranges (1.3071?) to give me some protection and I wouldn’t have gotten stopped out.
See the two boxes to the left in this screenshot to really see what I’m talking about.
So with all that in mind here’s the real error from this trade. Let’s remember the retro-active analysis challenge of this type of thinking but the next screenshot is what I had put up yesterday evening when I was looking before all this happened. The box with the red line and the arrow in it was where I was expecting price to get back to before falling further…
Quite… I’d basically drawn in a line where price goes right back to 1.3090 area which is exactly what it did do this evening. I got suckered into only looking at a very, very small extract of what was happening and entirely forgot the bigger picture. All I was focused on (unfortunately) was the price in Asia pre-market and the sell off without reference to the higher time-frame.
[Hindsight warning] I should have been buying at 1.3034’s and I’d have had a defined take profit already in play. With some further thought I guess I could well have avoided this but I’m only just coming back to look at everything now rather. Still it was an interesting exercise.
The last screenshot is something I’ve just noticed while writing this which is that when the payrolls number was announced a clear trendline break occurred. Having focused only on the price from this morning without the larger context I made the wrong directional call.
There you go.