Do you think I am being slightly aggressive adding to the EURAUD at this stage in the trade?
Morning Stuart - as long as you can reference your entry to a broken trendline somewhere, you can be as aggressive as you like. Whether you are correct to get into the trade or not - well only the market can tell you that - by either hitting your stop or moving in your favour
This is a good opportunity on EURAUD to discuss how we might think about taking profit or closing a trade. I am very conscious that we have spent a lot of time on entries in this forum but little time on exits. So this is not going to tell anyone how they should trade this - it is simply a good example. For my own part, I have made it very clear that I see this EURAUD trade as a long-term position; but I am not you, and you are not me. You might have a different outlook, or a different risk tolerance, have a different position size relevant to your account, and so on. We all have to make our own trading choices, based on our own individual circumstances
In the
ebook, I mention that one of the ways you can determine whether or not you might want to think about taking profit is on a break of an opposite trendline.
We are in a bearish trade, so if the market breaks a trendline to the upside, that is a signal that the market is thinking about turning around, just as we take a trendline break to the downside as a signal that the bears may be about to take control.
The 4 hour chart of EURAUD shows what I mean. You can see we have a steep down trendline, drawn from the highs.
We have a choice to make here - and the individual choices we all make can all be radically different, depending on our appetite for risk. There is no right or wrong answer.
Option 1 - A conservative approach might be to say - look, I have 500 odd pips, its been a good trade, I will close on a break to the upside and take what I can.
Option 2 - A medium approach might be to say - look I really couldn't cope with price steaming off back to the upside, and I don't have the stomach to watch a potentially large retrace, or even a stop out at break-even. But I would like to see if this trade can develop further, because the monthly anchor chart looks really good. So I will take off some of my position here, leave some open, and if we get a retrace I will add again higher up. But I do this in the knowledge that there is also a good possibility that no meaningful retrace occurs and price could just continue to fall. If that happens I will just have to live with that cost.
Option 3 - An aggressive approach might be to say - look I have no big realised losses, my account is quite healthy, the monthly chart looks good, I don't really fancy sitting in front of my computer screen looking for more entries, I am just going to stay in and ride out any retrace if it happens. For all I know this could be the top price in this pair for 2014 and I could spend the rest of the year steadily racking up the pips and relaxing at the same time. I have nothing to lose, only pips to gain. So I am going to leave the whole thing open and let the market decide what happens.
There is no-one who should be making that decision for us - we should all be making that choice ourselves. It is our money on the line, so we alone should decide what to do. As long as we are comfortable in ourselves that we exploited the opportunity to its utmost and controlled our exposure, well that is the correct answer for us.
