*Talking through the analysis, entry and very quick loss on my recent GBPJPY trade*
Happy “hump day” to you all. Wednesday is here and it’s half way through what appears to be a week full of fundamental influence. Just looking at the economic calendar on DailyFX, it is evident that we might be in for a very bumpy ride across the FX and Indices markets during the second half of this week.
We have high impact events on CAD, USD and NZD due to occur this evening from around 7pm GMT and then starting from early tomorrow morning we have high impact data releases for JPY, AUD, CHF and GBP.
You can check these out for yourselves by using the brilliant economic calendar on the DailyFX website which can be found by clicking here or by clicking on the images above. Although I am primarily a technical analyst and trader, it always pays dividend to be aware of high impact economic events in order to be able to avoid unnecessary risks and control exposure before they occur.
Now, back to the main topic of this blog post, I am going to talk you through my trade entry and then rather quick loss that I took on the GBPJPY FX currency pair last week. I explained my favoured short trade entry set up at the ebgininged of last week in a previous blog post which you can find by clicking on the link below.
I was essentially waiting for the rules of my trendline break strategy to be met and this involved the bullish 1hr trendline to be broken. There are multiple other rules and confluences that need to be confirmed but the first is the trendline break and a bearish daily candle closure.
It actually took another 2 days before I managed to confirm all the rules for my strategy and this can be seen on the chart below.
You can see the trade and track it’s progress live via the TradingView platform by clicking the link below. As always, I use the TradingView platform for all of my technical analysis and charting because it is so easy to use and great value.
At this point in time, I had the bearish daily candle closure formed from the day before, the 1hr bullish trendline was broken and price had made a new lower low on the 1hr timeframe. I was happy to take this trade with a relatively conservative 50 pip stop loss and profit target at around 129.250. I won’t cover the full details of this strategy in this blog post and the profit target was determined using the higher timeframe charts.
As the title of this blog post states, this trade was unfortunately a loss. It ticked all of my strategy rules but was one of the quickest losses I have seen in a while which is always nice to see. However, taking losses is a part of this game and risk management and a good broker kept the risk within my parameters so that is okay and I believe I learnt something from the trade.
Top Tip: A loss isn’t a loss if you learn from it.
As you can see in the chart above, price almost immediately wicked upwards and hit my stop loss order. This was a volatile time in the markets because looking at the next few hours that followed, there was multiple price spikes up and down in a very short space of time.
With the power of hindsight, I of course wouldn’t have taken this trade right? It was a losing a trade and I never enter losing trades… rubbish! Everyone has a losing trade every now and then.
This trade ticked every part of my strategy and therefore I would take it every time. Reviewing the trade now, I could have perhaps waited for a better 1hr candlestick closure before entering short because I entered directly after the large bullish engulfing candle which is not always ideal.
I could have also waited for a slightly more bearish daily candle closure because the candle I used did close as a nice wick rejection but there was no real daily resistance zone at this level so it was rejecting thin air. The daily close price was also slightly above the daily open on GBPJPY for that day so it was technically still a bullish day.
Top Tip: Review your own trades. Do what I have done and look at your past trades (winners and losers) and confirm you were following your rules and whether you would/should take that trade again in the future.
Reviewing your trades is a great way to further increase the confidence in your trading skills and strategy and this in turn then increases your own trading psychology.
Something else I would like to suggest is that you check your brokers spreads around times of volatility like this. A lot of the smaller and less common brokers widen spreads massively and you can often see 1 pip spreads jump to 10 pips which is detrimental to your positions.
Slippage is also another downside when trading highly volatile and fast moving markets. If price moves quickly against your stop loss order, a poor broker might fail to execute your stop loss order efficiently. Your 30 pip stop loss might soon become 35 or 40 pips depending on the speed and size of slippage.
A lot of my readers ask me what broker I use to try and minimise slippage and reduce spread (both costs of trading). I use IC Markets for executing 80% of my trades as they really are good and I am yet to experience any problems with them.
You can find their website by clicking on their logo below.
DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.