11/6 – Surprise RBNZ Rate Cut & US Retail Sales

Markets for my select list of instruments looked very choppy all day long – particularly on the 5M timeframe.  I kept on looking at the charts of Cable, EURUSD, EURJPY and USDJPY but they all just looked horrible so I didn’t trade those at any point of the day.

However the DAX continued to trend nicely so I was in that a couple of times.  Secondly, the Reserve Bank of New Zealand unexpectantly cut their benchmark interest rate by 0.25% which has caused a lot of weakness for the New Zealand.  Consequently I took trades in two of the Kiwi crosses – which I normally don’t do.  I only considered crosses where the spread/commission was reasonable.  On GBPNZD this equates to 4-5 pips – however i used a stop of 150 pips for this one.

In the end I had one winner on the DAX, three scratch trades and two partial losers, to finish the day at +0.68R.

Today’s topic: Position Management

My key observation today again revolves around the issue of managing an open position – when/how do I tighten my stop – when do I close the trade?  With the charts it is so easy to beat yourself up after the trade is all closed up because you can see what would have happened if you taken an alternate course of action.  Lately I have been struggling with this.  Some trades I close only to watch price go much further.  Others I don’t close and price reverses and I end up with nothing.  Still others price returns to the level of my adjusted/tightening stop loss, triggers the stop loss and then goes on to progress towards the target.

Is my broker screwing me?  To some extent I think that my broker must be playing games with me – in that he takes out my stop on purpose.  But that surely is a stupid argument – why would a broker care about a tiny wee position? Secondly my broker (FXCM) assures me that they are purely a liquidity provider – hence they would have no motivation to close out me out.  Unless of course they are operating some hi-tech algorithm to take out positions such as mine – and make it look good.  Finally it could be that I simply put my stop in places where many other traders place their stops, and then the real “market makers” do actually engage in stop-hunting to take all of us out.

Some of today’s trades illustrate what I am talking about (the first chart was yesterday’s late DAX trade):

428 DAX jun10

429 gbpnzd jun11

431 nzdusd jun11

430 432 DAX jun11

433 DAX jun11 (1m) Post IMF comment

Action Point for me (re position management)

I am on the journey to answer the question of how to best manage my positions – and I am coming across some factors that play into the decision-making.  However, for now what i consider will help me greatly is to ensure that I try to enter trades at really good levels as this makes the position management a lot easier.  This typically means getting on a retracement such that the risk of heat is minimized.

Thus action point 1:

  • Enter at really good levels
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