I haven’t posted in a while simply because I’ve been far too busy trading, writing my book and maintaining a few posts over at FX Street. Fortunately the book is close to being done and I’ll be able to finally bring this blog up to date!

This week something happened that I had to share because I think it is an important lesson you can learn from. I go out of my way to blog my trading blunders with the goal of making you a better trader so I hope it is working!

I’m a discretionary trader which means I do not trade a set of rules governing my entry or exit from the market but it doesn’t mean I trade without a plan. I trade a trend based methodology many of you know as “The Remora” which is a core topic in my upcoming book. The problem with discretionary trading is without black and white entry rules sometimes you can seriously over think a trade and in my experience cleverness is often not rewarded to your liking.

The Trade Setup

AUD/USD has been on a strong trend since the 28th of April and had just closed down forming a “pull back” day within an uptrend. These “pull back” days are what I look for when considering whether or not to join an existing trend so it put me on alert for a potential long trade.

The Trade Entry

With the bias to go long based on trend I started looking for fundamental reasons to back the trade. The evening of the 5th I got my wish when the Australian retail sales report posted a 2.2% gain over an expected .5% gain. The initial reaction was a sell off smack into a support area which offered an excellent opportunity to buy the pair and join the trend on the back of positive fundamental news.

The Clever Mistake

Even with everything going my way I convinced myself when London opened they would test the support level again and I dropped an order at $0.7337 instead of buying at market. I wanted to keep risk low and figured that support level would be probed again but I was dead wrong. The market never dropped and my long order was never picked up. For the sake of risking another twenty pips I missed out on 300 pips as the AUD/USD rallied for three straight days closing today at $0.7679.

I could have easily reduced my position size, increased my stop loss and bought at market but I tried to be clever and I missed out. I knew the trend was strong, I knew the fundamentals were strong, I knew the support layer had been tested but I was convinced of something that hadn’t even happened yet. Talk about a rookie mistake!

The moral of this story is that you can only trade on what you know and not make assumptions about what you think you know. It doesn’t get any better than this trade setup and when it happens again make sure you just pull the trigger!

I hope you’re making a killing in these crazy markets! Have a great weekend!

Best of luck,

Ryan