Hi all,

Well not much to report for today's trading results as I sat on the sidelines all day without at trade. The reason? confusion! ... I have spent so long lately reading about different indicators, testing them out on different currencies, timeframes and charts that the brain was just getting way to jumbled for my own good. I knew this was the case when I was continuously trading against the trend on different signals, despite my number one item in big capital letters on my trading plan being DONT TRADE AGAINST THE TREND!

I took the day to watch the price action and see where things are going, I also don't like Monday trading so much as the long term trend is not always clear due the large gaps that form on the markets opening. For anyone in the chat room on Friday, I mentioned this concept, but I don't think I explained it too well, have a look at the charts to see some examples of what happened on the market opening Monday morning.

Notice the highlighted areas, where there are big gaps between the closing price at the end of last weeks US session, and the opening of Asia on the Monday. The gaps are as large as 50-70 pips on these two charts alone.

Another thing this warns us of is holding positions over the weekend. It is a classic example of why it can be dangerous to hold positions after Friday's close, as a lot can happen over the weekend in terms of economic news, and you are unable to see the markets reaction to this news until Monday's opening, at which point it could be too late. Some of you might think, well what if I just place a 10 pip stop "just in case" the price moves the other way to my trade? Well the problem with this strategy is, stops are triggered on each update of price, not per pip, so if you have a Long trade on the AUS/USD at 0.7540 with a stop loss at 0.7530, if the Friday close was 0.7550, and some economic news came in that was going to force the price down, the next "update" would be Monday open, which as you can see, can be 50 or more pips lower than the friday close, so your 10 pip stop loss resulted in a 50 or more loss!

Anyhow that is enough rambling, I plan to re-enter the market today with a revised, simplified strategy on a new virtual trading desk to keep track of it's performance, of course the running balance here won't change.

Happy trading!

Today's result: 0 pips | Overall: -121 pips

This entry was posted on Tuesday, September 20, 2005 at 11:15:00 AM. You can skip to the end and leave a response.