Wednesday, February 04, 2009

Bear Trap

Traded British Pound Futures in the overnight session.

Read Full Post.....
The UK Central Bank was set to lower interest rates down to 1%, so I was looking for a break of the uptrend.

Short @1.4445, stop@1.4455, closed@1.438

Price was wandering sideways between 1.445 and 1.4425. It could have broken out of this range on either side, but again, I was looking for a break of the uptrend. After reviewing the Forex chart which barely showed a series of lower highs (not displayed here), I decided to enter short before it broke out of its trading range. When it rose up to 1.445 after i entered short, I was getting ready to book my loss, but price got rejected @1.445.

Things started to get a little more lively once it broke below 1.4420.
Once it dropped to 1.4370, I had a decision to make: hold on for a 2nd wave of selling, or get out now? I decided I wasn't interested in waiting around for a second wave of selling and it turns out that second wave never came.
In retrospect, that break of 1.4420 for whatever reason, did not attract new sellers, so it was a bear trap. Sort of. Price retraced up to 1.4430, so I wasn't interested in holding thru that massive retrace.

I'm interested in riding the wave, and getting out when the ride is over. I don't have the patience to wait thru chop for the next wave that may or may not materialize. So if I can catch the first thrust, all the better, if not, I wait for the pullback to finish before entering, so then I don't have to wait thru chop.

No comments: