Forex Swing Trade Error http://www.netpicks.com/swing-trade-error/

I messed up on a swing trade and it cost me money. The hardest part of the entire event is that I know better and have written about it many times

in these trading tips blog posts.

Yes the trade made money which is much better than taking a loss but in all honesty, I can accept a loss much

easier than what occurred this morning.

Let's go on a journey of the trade from start to its demise and hopefully there

are some takeaways from it. It was a swing trade on the EURUSD

Forex pair and even before it was entered, I felt there was a lot of

promise in it.

1. After price traveled sideways, there was a healthy push from this level.

I've written previously that when price does something that is different from the action that came before it, take

notice. See *

2. This indicates the strong move away and if you were to tighten your

charts so you could barely see the candle details, these types of moves

are obvious to see.

3. Price traveled back into the level in a slogging sort of fashion but the

details of the travel is important. You can also see price did not break the bottom of the level and rallied out

after a little bit of retracement into the zone.

* The common description of this event was that there was a strong imbalance of buyers

than sellers at this area which is indicated by the strong move. There are a few people on the

internet that teach this way of trading but the reality is that with an understanding of the market and price acceptance/rejection, you

could figure this out on your own

Some traders may pass on trades like this where price does not just drop

into the zone. The other issue is the ledge just above our zone of interest.

The upper shadows I've marked off is actually price returning to where price

resisted and dropped and what is happening at these shadows? Orders

are being filled.

The red box and yellow highlight? Again, sellers being filled on their

orders and by the looks of it, anybody who wanted to sell was given the

opportunity.

We also could have break out traders selling the break of the box plus

traders selling when price retraced back into the area of the break.

Conclusion?

When price hits the zone where the large move started and then starts to rally, the sellers above the zone are already filled. Price will likely have

little issue rising and the triggering of protective stops will help propel the

move faster.

The key was watching the price descend and then seeing small rallies

to fill more sellers and weaken the potential resistance above my zone.

I wanted to buy at an area where price certainly fit a "that's different"

characteristic. And I did.

The plan was in motion and while the trade chopped around for a time, the

stop was never tested and price began to rise throughout the day.

Later that night, I was looking at the chart and noted that price stalled after

rising 102 pips from my entry. On a four hour chart, the majority of the

move occurred in one candle and price was beginning to base.

Made sense to lock in some of the profit in case there were buyers

looking to take profit. The problem was that there was nothing to the left of price that would objectively speak

to a pullback in price.

All those shadows that are highlighted speaks to the highs finding enough

sellers to bring price down. Even the highs on the left of this graphic have

already moved up into an area where sellers were sitting.

I locked in gains based on...nothing. The structure of those areas were not

red flags to be overly concerned about. If this was a day trade perhaps

there are areas I would look for reactions but for a swing trade, you

expect bumps along the way.

It gets worse!

In the archives of this trading blog, I spoke about price action entries and one I speak about is called a failure

test. You can read about failure tests at this link:

http://www.netpicks.com/no-trading-indicators/

Essentially it's where price breaches the low/high of a range and is quickly bought/sold back. In the direction of overall order flow, it's a great trade

entry.

Textbooks always talk about placing your stop just below/above the swing level or on either side of a range. The problem is that these are easy targets

for those that move the markets because they know these areas are

loaded with stops.

Trigger the stops, add order flow, get better fills, and propel price.

I placed my stop exactly where I would have looked for buying.

Price ranged and the test of the low of the range is bought back up after

exceeding my stop by 2 pips. Price went on to rally over 130 more pips.

.here's another thing..

This is a new sub-account where I want to build it up without adding

funds from another account. Risk is 6% of the trading account per trade and when combined with fairly tight

stops due to the nature of the setups, position size can be a handful of mini-

lots.

If I adhered to what I write about, this trade would have been a great account

builder as it is just shy of what my target was for a scale-out @ 1.1260.

and my ultimate target of 1.1330.

Update: Price rallied to a high of 1.1389 which would have triggered my profit

target at 1.1330 giving a trade of 284 pips

with a 7R

Many of you may be wondering how I made such a amateur mistake when I clearly know better. The answer is - I

was multi-tasking. Interesting enough, I wrote about focus not too long ago.

http://www.netpicks.com/focus-not-overrated/

I hope you take away a few things from my mistake with this swing trade.

Most of all, silly mistakes can cost you not only profit but too many of them will eat away at any success you may

have.