It would be easy to develop a bad attitude towards this pair, wouldn’t it? Is it going to start up again or just wallow in the miasma within which it seems to be stuck?
Yesterday it dropped to a low of 1.0407. I blogged that I was looking at going long because it appeared to be dropping to a November support level of 1.0418. I made my buy at 1.0413.
Do I like buying when a pair is dropping? No, I hate it. I can’t imagine ever liking it. I could not have done it if I hadn’t been closely following this pair for some time. It fell to a support level I had previously identified as being significant. So what am I supposed to do? Throw out all my analytical work because of an emotion? No. I can’t trade that way or at least I can’t trade and make any money that way. I bought. Let’s face it. Because I’m fanatical about my entry points, my risk was small because I could set a tight stop. If the decline continued, I would be out. Would I have tried again at the next support level? Possibly, depending on the current price action.
In any case, I took some partial profits off the table this morning at +50 pips and have my stop slightly above breakeven.
I’m not thrilled with yesterday’s behavior since it broke the daily uptrend line. On the three-hour chart, I’ve left the old line in a lighter color and drawn a new one in black. One can see the pair is (or was) coiling inside a symmetrical triangle. This is great news as far as I’m concerned because when it breaks out of here (and it will at some point) there can be a large move. Unfortunately, false breakouts can occur before this large move but that’s the nature of trading. It’s impossible to know, at this moment, whether yesterday’s move below the trend line was a false breakout or a harbinger of further declines. It’s encouraging the RSI didn’t plunge too badly—on the three-hour chart it became only mildly oversold at 29.96. When it does break out, a throwback or pullback is not uncommon. (Throwback if it breaks upward; pullback if it breaks below). Within the triangle, though, it’s accumulating the energy for a move. I, for one, will welcome it, in either direction. For now, yesterday’s low of 1.0407 (which formed a nice hammer on the one-hour chart) serves as near-term support. Here’s the three-hour chart.
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.