GBPCHF—fake-out

I originally wrote this over an hour ago but lost internet access and just got back in. Wow, that’s annoying. Things have changed a bit as the pair is now climbing again and will most likely hit my stop which is just better than breakeven (+5 pips). Anyway, here’s what I wrote earlier:

Yesterday I took a short in this pair at 1.6893, primarily because it was at the top of a flag/downward channel on the three-hour chart and because of the overall downtrend. It proceeded to reach a high of 1.6976 before turning back and is now inside the flag or channel again, currently at 1.6812. The breakout was a fake-out. Obviously, I have moved my stop to better than breakeven. I also took partial profits at +77 pips.

I had a wide stop on this pair because of the 1.7037 high on the pair earlier in the month but I would have probably taken partial losses had I been awake to see the mayhem going on while I slept. Yet, that would have been a simple loss of courage because the market isn’t telling me anything until it tops that 1.7037. That’s the nice thing about stops—they tell you when the market isn’t going along with your view of what you thought it would do. I was willing to put up with a wider stop because I thought the profit potential was high—to the bottom of the range as I blogged about last week, somewhere around 1.64 or possibly lower to 1.62. Hooah, if that happens! The problem is that the market seems edgy to me—pairs going up or down enough to violate perfectly sweet lines of support or resistance but not making any huge moves for the most part. That happens after large moves—the market tries to compose itself by dithering about.

Here’s the three-hour chart:



© Dianne Fecteau, 2010. 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.