It seems a fairly muted London Open session, following the Fed rate meeting last night. I was patiently watching for trend-following and mean reversion setups. Not a single instrument made it onto my shortlist of “trending” for either the 30-minute or 1-hour timeframes.
In the end I couldn’t quite stop myself and pushed myself to take a long on USDJPY on the basis of the 15-minute timeframe. Let me tell you about this trade because it was good reminder/lesson for me.
It wasn’t entirely a “valid setup” meaning that it did not meet the parameters I set out for entering a trade under either of my strategies. Yes, I had technical and fundamental reasons for doing the trade – spending years staring at price screens, that tends to happen.
In any case I took the trade and selected a stop and target, again based on technical reasons. However my confidence was not as high as it normally is simply because, strictly speaking, it was not a valid setup.
I thought it was interesting to talk about this trade because initially the trade went a 5-6 pips in my favor (using a 14 pip stop that is already a bit of distance). However, when price pulled back around 10-12 pips in the space of ten minutes, I abruptly closed the position telling myself “Well, I shouldn’t really be in this trade anyway” – a thought I would not have if I was trading strictly according to my rules and setup definitions. Invariably I closed the position within a single pip of the swing low before price rallied to my 20-pip target and then broke the 118 handle and just kept going – see the chart below – and booked a 0.3R loss instead of a 1.5R win.
I think this brings home the message that when trading, it becomes tremendously more difficult if one doesn’t trade within context of rules and parameters, because more often than not the trader’s emotions will just end up working against the trader. The situation that happened this morning was a great reminder of that for me.
On that note, I will take a half-day for today and head home and catch up on some eating and sleeping, before tackling my last trading session for 2016 tomorrow.