FX Trade Setups, Entries, Management and Exit

Two trades today. The first was a eur/aud long at 08:30 BST. I have no idea why it looked good enough to take at the time. The momentum was certainly up, but it had made a lower low and had crossed below the 49 average which is a dire position from which to head long, normally – and as it turned out in this case too. No notes to suggest why I thought it was worthwhile at the time.

The second trade was a short gbp/jpy taken at :32 BST. The rationale for the short was sound, but not perfect (are they ever?) and the basis for staying in when it got a little less than impressive was technically valid, but I’m sure had it gone against me I would have found equally compelling reasons to have got out earlier. Followed the price down perhaps a little too tightly and got stopped out for 8 pips less than I could have bagged had I waited for a technical exit. However, it was a much needed win. Although I made 39 out of the 51 on offer at its best, it got me thinking to how I could get closer to the MFE for an exit – obviously.

I saw a potential short on cable and the momentum, was such that I probably would have taken it on that basis alone (see eur/aud above) but realised it was against the underlying trend so stood back – really glad I did not just because it immediately went up, but because I stuck to my rules and trading plan.

Key points from today’s trading:-

Keep better notes (Plus Read key points from previous day as this one was on Friday’s ‘Key Points’ too.)

Create a physical Checklist for trade entry requirement rather than just trying to remember them. All the mandatory criteria and more nice to haves with ticks than not. Keep it structured.


As for the P&L, I was only trading a quarter normal size, risking 0.5% capital per trade. My net gain for the day was +1.14% of a risk unit which equates to an absolute gain of 0.57% of capital.
 
A number of recent posts on risk, risk management, expectancy (thank you all for your inputs) had me looking at my stats. My W:L is rubbish, my R:R is nonsense and my average win (from memory) pales into insignificance compared with my average loss.

One thing that sticks out from my review is that winning trades tend to have an MAE in single figures. If I introduced a rule into my trading plan that required me to cut any trade that went 10 pips or more against me it would certainly help in cutting my losers quickly, but not sure an arbitrary rule such as that makes sense after the effort of constructing a 'sensible' stop of say 30 or 40 pips.

Does anyone else use any metrics based on absolute MAE to kill their trades?
 
gbp/chf above open and coming back possibly to test yesterday's high and the half-century at 4650. Underlying trend is up. If it doesn't make a new below the potential support area it's a long candidate pending confirmation of momentum. Doesn't look very likely as the Swissy is strengthening across the board at the moment.
 
gbp/chf - fell into old habits of looking for a reversal point rather than recognising that momentum was already there - but in the other direction! Not planning on taking a short, but neither am I a long.
 
chf/jpy solid support at 108.50 from the half-century, weekly pivot point and today's open. It's been in a 30 pip range since yesterday afternoon. It's in an underlying up trend. But a sensible stop of 108.45 would likely mean around 50 pips risk on entry which given the daily range on this pair would not probably be justified by the potential reward. Off watchlist.
 
gbp/cad on weekly and daily R1 and 49 average.In an up trend. Higher highs and higher lows. Sterling is strengthening and Canadian dollar weakening. but waiting on confirmation of continuation of that momentum.
 
The importance of momentum - and waiting for it. In the old days, I'd have be in long - and stopped - on gbp/cad by now.
 
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