Here is a long trade I took on the 23rd of September 2012 on the NZD/JPY. Here is my entry chart for this trade. (click chart to enlarge)
As you can see, price had closed above the 6ema (yellow line) for 12 consecutive days. It looked like we were in a nice uptrend, and I entered long on the touch of the 6ema on the expectation that this pattern would continue, and price would keep moving upwards. I risked only 0.5% of my account on this one because I had a bit of a losing run and was very low on confidence.
Here is what happened.
The next day I woke up to find that my stop loss had been hit. 0.5% of my account had disappeared. As you can see from the chart, I was fighting against a bearish pin bar a couple of days earlier at a swing high that suggested a reversal. I ignored it because at the time I did not know any better, and as a result lost money. In hindsight, I should not have taken this trade. My reasoning was that price had closed above the 6ema for 12 days straight. Obviously as soon as I entered it made a large move below the 6ema, took me out, and also closed below the 6ema at the end of the trading day. Was I unlucky? No. I was stupid. I should not have ignored the pinbar from a couple days earlier that suggested a reversal of the uptrend. Lesson learned. From now on, I will NOT take a 6ema touch trade if I see a bar or pattern that suggests a reversal of the trend, even if price has been respecting the 6ema for many consecutive days.
Forex..... I'm coming for you....
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