27/11/09 GBPUSD Failed Pivot and Broker Challenges -29 points

I’ve been in the City this week working from the floor of Saxo Bank in Canary Wharf.  Unfortunately by the the time I get there and set-up most of the good runs had already kicked off. I’ll write more about that in a later post.

Anyway today (Friday) was the same, fears of contagion from Dubai left asian markets tumbling and with that the currencies followed as capital ran for perceived cover in USD and Yen.  Cable had already dropped 120+ points by the time I’d set-up.  I was literally setting up my laptop at 7am when it crashed south again hard.  Not surprisily my early morning relative strength analysis was showing Yen and Dollar strength along with Sterling weakness so I was looking for an opportunity to sell GBPUSD.

Had I been set-up and alert I would have loved to have sold the pivot off the descending triangle sloping resistance line but instead I was left to watch price plummet.

After such a sharp drop price was always expexcted to rally and it promptly did so.   As price rallied back to original support line I was waiting to see whether it would become resistance as I was still looking for an opportunity to short GBPUSD.  The next chart and comments explains the trade well.

 1. Price has rallied back to previous support which I’m looking to now become resistance.  Had I been on my game and operating from my office I may well have ‘sold the line’ at approx 6370.  That is part of my next evolution as a Trader. When price fails and produces a hammer then I ‘m happy to be a seller and place a short order at 6376 should price go back to that level.

2. The next couple of bars are nice small inside bars which lead me to believe that price is not going to head north to my level but will just drop south.  I’m going to hit the short at market if its drops.  Which it does.  I short @ 6353 with a stop @6382.  1st Target is 6333 for +20. Open 2nd target but I’m eyeing previous support at approx 6280.

3. Price drops then comes back to the 5 min 15ema.  I’m comfortable and happy so far. Price forms a hi-test reversal bar (positive hammer, shooting star, call it what you will.)  I’m comfortable being aggressive today and I decide to add to my position if it continues to drop.

4. Price does break the low of the hi-test bar and so I sell at market. ‘Order rejected’ comes back my broker (for reasons best know to himself).  I try and hit sell again and once more my order is rejected.  I’m confused and angry…and taken out of the moment. I’m fuming at my broker. I reckon my broker must be overwhelemed with all the market shenanigans this morning and can’t handle my huge whopping £1 a point add-on position.  I place an order to add at 6328 should that price drop that low. 

Also at point 4 price hits a low of 6330 on my Tradestation and Metatrader charts and I have my 1st tgt order at 6333…….but my order at my broker is not filled!  When I check their charts they say price never got below 6334!  I’m now using a fair amount of foul language to describe my broker and how if they were here in my office they’d be leaving the building via the 26th floor window.

5. So having not had my add-on position filled and my 1st target order not filled what does price do?  Naturally it reverses on the spot and slams back north.  With wondorous hindsight I should have just closed the postion at break-even on the entry point and stepped aside.  However things were happening fast and I was out of the moment wondering about what my broker was playing at.  Price did honour the resistance line at that moment.

6. Price decided to continue north and hits my stop loss at 6382 for -29 points.  Frustrating to say the least on what should have been a +20 or break-even trade at worst.

Points learnt:

1.  Brokers will always mess you around.  You need to be able to deal with it in your stride and not let it distract you from your charts.

2. Nice idea on trying to add to my trade…though I admit it is ballsy to be adding to 5 min chart trades.  But I’m comfortable that it looked like a good set-up.

3. As the saying goes “When fear and doubt reign…cash is king.” I should have just closed the position at break-even when I had the chance.  I was distracted by being in a room full of 30 people and by pace of market movement and my brokers shenanigans.  Just get off the bus, there’s always another one coming along.