The problem with trading a failed breakout, as I did with AUD/NZD, is that a failed breakout doesn’t give you a level to which the market should not return — i.e. a place to put a stop loss. The market breaks out, and then comes a bit back into the previous range — is this just a fuzzy re-test of a breakout? Is it the failure of a breakout? Or has the market forgotten what you think is an important techical level?

A chart of AUD/NZD illustrates the point:

I shorted it when the price came back into the previous range — I should have stood aside. Click for trade sheet and analysis.

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