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EUR/USD Forex Trade Short 25/08/2011

Going into the NY session the trend was down and as you can see on the 5M chart above we have consecutive lower lows and lower highs. Again we were waiting for out standard volume based forex trading strategy to come together. Things started to work out when we got a higher than average volume candle at resistance, which was candle #1. After that we then look for a candle to move down as far or further from high to low, but yet do so on clearly less volume.

Candle #2 didn’t quite fulfill this criteria, and besides that it was right above support. Taking a day trading entry short right above support is a common sense no no. After we weren’t happy with candle #2 we then waited to see if candle #3 would fulfill that criteria. Candle #3 finally gave us what we were looking for which was a candle that moved as far from high to low as candle number one, and did so on less volume. Additionally it closed below support which gave further indication of another push down. You can read more about our volume based forex trading strategy in the forex education articles section of the site.

About 5M after entering this trade it was announced that Warren Buffet was putting 5 billion into Bank Of America. This caused a large spike in equities. The EUR/USD and GBP/USD have been tracking right along with equities lately, and when they spiked up the EUR/USD went with it. What is frustrating about this trade was the fact that this was completely out of our control. We were in the right direction, and as you can see the market went that way after the initial spike. Plain and simple it was a case of bad misfortune. That’s part of being a profitable day trader that stands the test of time however. You have to be able to forget about things like this and simply move on to the next day.

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