First posted 10/12/09

Another lesson learned today, from another loss. I thought about risking 0.125% of capital on this trade, but in the end risked 0.25%.

LINKS TO FILES STILL NOT WORKING SO I HAVE PASTED THE TRADE SHEET INTO THIS PAGE.

TRADE SHEET

Long EUR/NOK 10/12/09

Trade Description

Long Euro vs Norwegian Krone from 84954.

Details

Technicals

EURNOK is forming a triangle pattern with an up-trend and resistance at around 86014 on the daily chart. I would plan to trade a breakout from this triangle. Short term the range inside the triangle looks tradeable. Intra-day the price has broken out to the downside but I expect it to find support around 84629. There is a chance to put a tight stop-loss here.

Fundamentals

This is a technical trade.

Stop Position

84629. Loss-to-stop = 0.25% of trading capital.

Trading Plan

Cut on run towards resistance at 86014.

Entry Checklist

Are you trading against the trend? Against the 220d MA but with the short-term trend. This is a short-term trade.

Is there a fundamental story? No

Is there a technical buying opportunity? Yes

Are you placing your stop at a point where the market would tell you you were wrong? Yes

How much conviction do you have? Low

Does the risk accord with the conviction? Yes — 0.25bps

Do you have a plan? Yes

If you are wrong, will you live to fight another day? Yes

Trade Analysis

Closed out after stop was hit. This was a frustrating trade because I was right but my execution was poor. I made two mistakes. The first was to miss a buying opportunity around 10:00 because I was indecisive. I jumped on the trade after that, but that was reasonable given that I expected the market to come back into the triangle range. The second mistake, and the really bad one, was to get my stop in the wrong place. On a long-term trade it may be OK to be fuzzy about the stop level, but here I placed my stop very close to the support level without realising how wide the dealing spread was. The support level held, but the dealing spread dropped below it and I was stopped out. I should have widened the stop to account for the dealing spread. The charts above run up to around 15:30 on the same day; I entered around 10:30.

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