“People don’t seem to grasp easily the fundamentals of stock trading… When I am bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don’t buy long stock on a sale down, I buy on a scale up.” –Jesse Livermore
This week is liable to be fairly light when it comes to the forex world. Today we see a bank holiday in France, Germany, Switzerland and Canada. That’s a lot of liquidity to not have in the currency markets. And, at the time of writing this, the Euro is about five pips off from where it opened.
The larger question is when will the Euro take a meaningful breather from this downtrend. A day trader may have bought at support levels on the way down for a few pips, but once we broke a few trendlines and significant daily moving averages the safer bets were to sell. It’s natural for someone to see a huge sell candle ending right on a support area and say “ok, this thing can’t go down forever, I’m going to buy on this level”. And, if you’re careful you can make money that way. But, I’m always amazed by people (often myself included) who fight for the little pips and completely ignore the easy big ones.
In a trending market, instead of picking the bottom or top- which is fun and exciting and all that nonsense – perhaps the trader should worry less about entry and more about direction. In the last six trading days there were some great buying opportunities for 50 or 60 pips, but one would have had to be very careful and practically babysit the market.
How many good selling opportunities were there? I don’t know, it depends on what method you use to get in the market. But I’m fond of telling new traders, when you’re in a trend, entry isn’t as important as direction. If things are trending, wait for a small pullback (or don’t) and get in. And that’s the important part, get in. If your entry is bad in picking a change in direction, you will lose money. If your entry stinks when trading in the direction of the trend, you simply won’t make as much as you could have. Which of those sounds preferable?
GOOD RULES TO TRADE BY
Use all those sensible trading rules like: don’t over leverage, and manage your risk with a sensible stop. But if those traders so proud of themselves for buying a bounce in a market selloff would use the same diligence in selling that bounce, think of how much less risk they would face. If you can pick a daily bottom and get 30-40 pips out of it, why not just find a trending market, worry less about the exact entry and jump in and enjoy the ride. That’s where the real money is made.
