The aussie dollar... This damn currency has been hurting me lately. Not only making me lose money but mocking me. Missing my entry by one or two pips and then going onto hit what would have been my profit target had my order been triggered. Going against me to scare me into cutting the trade short for a reduced loss, and then reversing as soon as I get out to hit my target. Anyway here's a trade I took on the 24th of September 2012. My entry chart (click to enlarge). This was another 6ema touch trade that I shorted.. Price had closed below the 6ema (yellow line on my chart) for 13 consecutive days. I set my short order on the touch of the 6ema, hoping it would make a move down and close below the 6ema at the end of the trading day. Risk was 2%.
Here is what happened. As you can see, the bar that I entered on ended up closing above the 6ema at the end of the trading day. Therefore I cut the trade short and got out for a loss of around 0.5% or £30.
Had I left the trade alone, it would have gone on to make at least 2:1 RR. In fact let's see what happened after I exited.
Looking back on this trade now, I have just noticed something. As I said, I exited the trade once the circled bar closed above the 6ema. However, you might notice that the close of that bar was in line with previous bar lows which I've pointed out. It was also in line with the 1.2660 area. I've drawn this as a red horizontal line on my chart, and it was a previous support area. This is significant because looking back now it seems as if this support area then turned into resistance, which is why the bar I've circled in green could not close above it, and price then continued downwards.
If this situation cropped up again, how would I handle it? Would I exit as soon as a bar closed above the 6ema? or would I leave my trade open and trust an area like this to hold as resistance? To be honest, I'm not sure. This is an area where I seriously need to improve as a trader-money management. Getting into trades is easy. Knowing what to do once you're in.... well it could be the difference between financial freedom and being broke.
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