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AUD/CHF Trade Example

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Last updated 3/10/2010 7:33 PM EST (GMT -5) 2 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

You will make mistakes no matter how many rules you have, how much discipline you have, or how much experience you have.  An example of not pulling the trigger is a bearish butterfly that completed yesterday.  I had been tracking this pattern for days.  It has good price symmetry and completed with almost perfect time symmetry.  However, I did not post the trade because I could not find a good long term compliment to this bearish trade.  As you can see on the Weekly Chart, the pair has been in a steady uptrend for a long time.  The trade would also have been stopped out before the 78.6% Fibonacci retracement would have been tested.

As I sat in front of the computer last night, I debated whether I should post this trade.  I wanted to post it because the time symmetry was shaping up perfectly.  In these cases, I would typically place the trade without a second thought.  I especially like trades where both Fibonacci ratios are 161.8% extensions.  However, I chose not to post the trade.  I think the reason I didn't post the trade was because according to a lot of traders, the trade would be "against the trend".  However, I have long felt that the true "trend" is the path of least resistance.  In this case, my experience has taught me the path of least resistance was "down" from 0.9872.  Regardless, I didn't place the trade.

As you can see, the trade reacted almost to the pip.  The pair then shot down and would have been an easy winner.  However, I didn't post the trade because I didn't stick to my rules.  Instead, I let what the masses might think affect my decision making.  I also didn't want to set a seemingly bad example by betting against a long term uptrend.  All of this flies in the face of what I believe and write about on the site, of course.  This just goes to show how easy it can be to ignore a strict set of rules that will be kind in the long run.  Hopefully this example encourages you to follow your convictions when faced with seemingly difficult trading decisions.

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  • Weekly Chart - There was no long term convergence for this bearish trade.
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  • 2hr Chart - Successful bearish butterfly.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

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Comments (2)

MoneyManager

March 10, 2010 at 11:51 PM ET

Post 'em. ^_^

I think you should add any caveats you think are worthwhile of course. But "long-term trend", while certainly a consideration, gets taken out back like a Chinese criminal and a bullet gets put in its head. Seriously, I mean that it's the *last* thing to turn, and at the turns (and they come, eventually) one can get murdered sticking to the long-term trend.

You're a smart guy. Post 'em, with whatever commentary or caveats you feel necessary. I, for one, at least want to monitor as much of your thinking as possible.

naijafx

March 11, 2010 at 04:06 PM ET

wow! absolute sincerity! not many will do what u just did............ this will even motivate novice more as they feel professional traders are superb human being without error. nice one!

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