ForexSpirit

Bias: Long
Conviction: Weak

Today my bias was wrong. Price action had been pretty muted since I traded yesterday, with the euro only dipping to 1.3780 in yesterday’s NY session, a 20 pip range during the Tokyo session and a retest of yesterday’s high of 1.3850 during London.

In hindsight there were two things that should have alerted me to change my bias to short soon after the start of my trading hour. Firstly there was the sharp move down beginning at 6:00 EST. Secondly, there was the 1.3820 support level. It make sense for price to continue the move down to test the support level, especially given the very range bound nature so far this week. 1.3820 was a lot closer than 1.3850.

Even with the wrong bias, having the opportunity to have multiple entries as part of a trade sequence can allow you to extradite yourself from the fire. I even planned for this contingency but messed it up in the execution.

When I placed the first entry in the red sequence I saw 1.3820 as a strong support level where I could place a second trade to average down. But then I jumped the gun with my second entry which was justifiable in that price was moving up at the time. Where I made the mistake was not taking off that second entry (i.e. cutting my position size back down) when there was no follow through. If I had done that then I would have had (hopefully) no qualms in entering my planned long entry at 1.3820 when price went on to touch and bounce from that level.

Unfortunately I didn’t cut my size back down and was stuck holding a 10:1 trade. I didn’t feel confident in averaging down such a position without a clearer indication of how well 1.3820 would hold. If it had touched the support a second time in quick succession and held then I would have averaged down. As it was the bounce was big enough to not offer another opportunity.

Thinking the longs were back in force I entered long again. This was another mistake, especially entering with the size I did, and in the middle of the range that had been reigning for the past fifteen minutes. I exited that portion of the trade, uncannily entering and exiting on the edges of the range.

When the second test of 1.3820 did not hold well I bailed out of the sequence completely.