11/01/2010 Monday – GBPUSD Early Breakout – Break Even trade

January 11, 2010

FX Trading, Trading Set-ups

So after spending last week avoiding the snow and cold this week I would start to move through the gears on my trading.

Early start of 0545 and there was a 6am set-up for me.  Looked to trade the break in the direction of the trend.  Trade was placed to go long at 1.6104.  I had my reservations about resistance levels but this is just a simple breakout strategy to start the day with so the orders were placed.

So a Point 1 the trade is triggered and price heads north. Nothing excitig about that but I’m concerned about the upcoming resistance levels.  And I had good reason to be.

So what happens?  Well price  is triggered at Point 1 and nally heads north nicely.  However does anyone know what point 2 reflects?  That is the high of Friday and was also the high or the post NFP announcment.

What you can usually expect is price to edge past the last resistance level as traders hunt the stops / orders of other traders.  Once the orders are all cleared you’ll find price will fall back before working out what to do next.

In this case price pushed about 30 points beyond Fridays post NFP high and the fell back.  However this strategy requires you to move your stop to break-even after a certain number of pips which is what I had done.  So price cleared out the stops and then fell back and triggered my stop order which was now at the entry level of 1.6104. 

So overall my trade was a scratch one for no points.  Not the most glorious of starts to the week however at the end of the day it was a successful trade.  Why successful?  Becuase I planned my trade and trade my plan in accordance with my overall Trading Strategy and with proper Risk Managment. And that’s how I define success.

Now if you were super smart you may have used the pull back to try and re-instate your position.  That would have been a super smart move.  I wonder if anyone did that?

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About FXTraderPaul

A professional Trader and Coach, FXTraderPaul blogs about his adventures from the front-lines of FX Trading. A Trader and educator who can walk the walk as opposed to merely talk the talk!

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2 Comments on “11/01/2010 Monday – GBPUSD Early Breakout – Break Even trade”

  1. Allison Yannakis Says:

    Paul, can I ask what your target was on this trade? Depending on what your target was – for the price to rally 30 points to me is a lot – was there any point in which you thought hey 30 points is more than enough so I will just take the profit now and close the trade. I find sometimes I do that because I cant hold my nerve or would rather be in profit then not but at the end of the day thats not following the plan for that trade which I suppose will come with time.

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    • FXTraderPaul Says:

      Hi Allison,

      You’re correct when you say that for price to rally 30 points is a good move when intra-day trading. For my normal discretionary intra-day and swing trades I would look to scale out of my position . This allows me to lock in profit and provides me with the confidence to stay with the trade and let it run as long as possible.

      With this set-up I am just mechanically trading an early breakout. This strategy has set rules, one of which is moving stop to entry after a certain number of points. Whilst that does mean that I have break-even stop outs like yesterday, it also means that when the trade does work it provides an excellent Risk to Reward ratio which covers the many times I am stopped out for a loss or scratch.

      This all links into your philosophy of trading. If you are a newbie trader and still developing then I would suggest that you set some simple rules that you can follow. If your positions are big enough to trade at say £2 a point then look to take half of that position off at a certain number (somewhere between 15 – 30 points for an intra day trade, but makes sure you know the number before you pull the trigger).

      The idea is to build self-trust and confidence in your abilities to do the right thing when called to do so. Following a simple trade management plan that either involves scaling out or setting a profit target is something that should be part of your plan and adhered to rigidly when starting out as a Trader.

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