Morning PipHutter. Lets have a chat, you and I, about money management. If you are reading this signal then no doubt you have already read the money management article we wrote so long ago, and the How to Succeed in Forex Article, and the Win More Trades article. Most likely, too, you have some bad trading habits that you are aware of (if you are a complete newbie then buy some books and start reading so you can become aware of your shortcomings) when it comes to money management. Perhaps sometimes you stay in a bad trade too long, hoping it will turn around, and then when you finally cave in and close it - voila! - it turns around and goes in your direction.
Or maybe it gets a little in the profit and, fearing it'll turn around again, you close it out for a little bit of profit - only to have it it move 100 pips or more in your trade direction! Sometimes it can even feel like the market is out to get you, as if there is a man in a suit somewhere just watching your trades and making you suffer just because he can. If any of these sound like you then it's probably not the man in a suit causing you heartburn - you suffer from poor-money-managementitis. This is your reminder that it is not about the # of trades you win - you could win 1 trade for every 5 you lose - it's about solid money management and making sure your wins are bigger than your losses. For those counting we took a small loss on Monday, a small loss and a break-even on Wednesday, and then took a monstrous profit yesterday. That's a win % of just 25% - 1 out of 4 - (2 out of 4 if you count the break-even as a win, which most strategists do, but we're trying to make a point here) for the week but we are still very much in the profit because we let our profits run and got out of bad positions by letting them hit our tightened stops.
Now we normally have better accuracy than 25% but you see the point - trading is not always about being right, or knowing exactly where the market is going to go. Sometimes you can have the perfect technical analysis and the fundamentals to back it up and the market still moves the opposite direction because some bank or hedge fund in Asia decided to load up on a certain currency one day, or some central bank wanted the exchange rate to be more stable. The point is you can't control those things - what you can control is what you are willing to risk on each trade (stop-loss) and how much profit you are going for.
Food for thought. (We have to put in a plug here: coming next week to a CandlePRO near you is TradeWizard - where you'll be able to see strategy backtesting for different TP and SL levels for every single candle signal generated. Really powerful stuff).
When you enter the markets, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business. You are in a highly specialized industry.. under the intense study by men whose economic survival depends on their best judgement. You will certainly be exposed to advise, suggestions, and offers of help from all sides. Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound. - John Magee
The art of technical analysis - for it is an art - is to identify trend changes at an early stage and to maintain an investment position until the weight of the evidence indicates the trend has reversed. - Pring
Daily Outlook: Bulls tripped, fell and landed square on their snouts yesterday as the EUR/USD plummeted 216 pips from high to low yesterday. In fact, here is a picture of one of the bears riding away after the looting:
(bear victory lap)
Anyway, we have NFP and other US employment coming out today, not to mention it is Friday (where we normally stand aside) so we will not be trading today. Plus the big move we've been waiting for finally happened yesterday. But for those brave souls still testing the waters today we see upside as limited. There is a better possibility of an upside run if 3660 is broken (23.6% retracement of yesterday's fall) which will open up at least 3700 and 3750. But really we see the most likely scenario being more downside risk as bears have been eating support trend lines for breakfast, lunch and dinner recently. We've had two major support breaks this week - not a good sign for Euro bulls. The 4h GMT charts should also give any bull fundamentalists pause - after the big support break and drop we now have had four candles that look very much like a pennant formation after the flagpole drop.
For bears a sustained break of 3600 is necessary to open up further downside with 3570, 3540, 3515 and 3475 as the next support lines. Of course, we could be wrong - and that is what good money management is for. Have a great weekend everyone, as mentioned before we are flat before the weekend.
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