Monday, 23 November 2020

Trade #1: GBP/USD

Going into this trade, I had done a lot of thinking. I had a strong conviction of what was going to happen. I will try to describe in detail what then happened while recalling my thoughts at the time. This is how the chart of GBP/USD looked Monday, 23 November 2020:

This is a broad bull channel. It has higher highs and higher lows. Despite its trending behavior, I wouldn’t consider it very strong. There are lots of reversals in between the occasional tops. This is the basis for my trade. The last thing you see on the chart is the market trying to break out above of the bull channel. The odds of it successfully doing that are quite slim. For that reason, I’m looking to short even though it has rallied strongly on this particular day. Overall, that just might a vacuum test of the bull trend channel line. Let’s zoom in on the 1-hour chart to see things up close:

As you see here, this does not look bearish at all. In fact, it looks like a bull breakout. We just have to remember the big picture – the market is trying to break out of a bull channel on a higher time frame. My mindset going into this, as I said, was looking for a short entry. Let’s see things up even closer on a 5-min chart:

As the market touched the bull trend channel line, I was very willing to go short. However, I have a distinct memory which prevented me from pulling the trigger at this point. A months ago, the market surged during the European session to a clear double top. It was stalling, just like so. I went short anticipating sellers coming in at the double top. What happened? The market rallied for another 150 pips. I think that memory prevented me from going short at this point. I wanted a strong sell signal bar, and it actually came:

I sold short on the close of the bear bar closing on its low, hoping for a major trend down. Here is what happened:

I did get the major trend down. I was risking from the top of the big bear bar, 1%, and I could’ve potentially gotten out with 4%. Please notice the word potentially. I didn’t get out when I had really good profits because I was hoping for more. I was hoping for a bear trend. I did not anticipate that the word would turn up as violently as it did:

To be honest, I thought this bull reversal was incredible. I get that the bears had a sell climax but the way the bulls reversed up is just incredible. I still had my stop above the bear of which I sold, and I waited for the next day to see what happened. Unfortunately, I decided to get out during this:

At that point, I just didn’t think it was smart to hold short. I’m really disappointed that the market traded like this on this particular day but that is just the way it is. I could’ve had an incredible trade. It just didn’t turn out that way. I got out breakeven on this trade. Now, let me talk about my second trade of this day

Trade #2: GBP/USD

For once, I decided to add to my initial trade, while the market was still in a bear trend. Here was my entry:

I sold just at the moving average, thinking that we would test the lows of the bear trend. That never happened. I got out as the market reversed up strongly, same place as my previous trade:

I got -2% on this one. How disappointing. Finally, when I’m trying to do the hard thing, doing what is right, pressing the trade, the market reverses up strongly. Also, it was probably bad management on my part. I probably shouldn’t have waited until the next day to see that the market clearly rejected the low price. Next time, I probably need to evaluate a bit quicker how the market is behaving. I would’ve saved a lot of worrying, time, and money.