How long should you argue with a trade?

• ragheehorner
• October 28th, 2009

As I’m writing this it’s just before 3:00pm EST and the bond close.  I am watching the last hour of the equities trading day to see if 9,800 on the Dow is going to hold, break, or stage a rally into the close.  On any given day any of those three could happen going into the last 3,600 seconds of the trading day.  And my hopes aren’t high for 9,800 buying support…

As a forex trader what goes on in the Dow and the U.S. Dollar ($USDX) is of particular interest since they are moving inverse to one another.  Taking that one more step, the strength in the Dollar is coming from the Dow’s weakness.  I watch the Dow mainly because it’s still the psychological barometer of overall equities strength or weakness.  The play between two monster markets is pulling the $EURUSD lower.

I like to write and post charts of many of my trades and I admire anyone who does:  It takes balls.  Ofcourse, as a woman mine are proverbial (and brass!).  The only way anyone is going to glean any insight from anything I write is if I can communicate what I am thinking and why I am acting.  The more transparent this is, the more helpful it is for the reader and frankly, the more intimidating it is for the author.  I won’t kid you, trading in “front of an audience” is daunting and showing people what I am doing puts my ego on the line for a bruising.

I have posted some of my thinking behind my $EURUSD trade over at chart.ly and it’s no secret that I am long the daily chart.  I started off with and have continued playing swing shorts on the 60 minute chart as you can see from my October 27th post at chart.  http://chart.ly/rbybx4

The downtrend on the 60 minute chart has allowed me to short bounces into the 34ema low (the bottom line of the Wave) three times since the breakdown on the morning of the 26th.

However as prices began to sink into the Wave support on the daily I 1) bought into the weakness and 2) lightened my position size on the 60 minute shorts.  I should mention that I keep my end of day trades and intraday trades in separate accounts.

Trading the weakness on the 60 minute trend as it led into the correction on the daily time frame is what I call a “one thing leads to another” trade.  Now there’s no doubt that my daily entry is taking heat as prices head towards the 34ema close, which is the middle line of the Wave.  As I mentioned in my chart.ly update this morning http://chart.ly/9zxce8 I am not interested in taking much more heat if the Dollar is not going to retreat from the highs and that’s just not going to happen unless the Dow recovers.  Since neither is happening today I will keep what’s left of my 60 minute short position and reevaluate tonight and tomorrow.

The validity of the $EURUSD daily buy extends down to the bottom line of the Wave.  Today I see that the major psychological level at 1.4700 and the 61.8% Fibo have held keeping me from my pulling the plug on my daily position but notice it’s not dollars or a percentage that is guiding this decision…it’s price support.

I want to mention that for those of you who don’t or can’t keep two positions open simultaneously as I have here, the simple solution is this:  The daily chart is not going to rally until the swing trade on the 60 minute chart either stops out by breaking the resistance of the 34ema high or until the market cycle transitions.  So waiting for the 60 minute swing shorts to play themselves out and then looking at the daily swing buy based upon the correction will allow you to get long as momentum shifts.

Do I always get it right? Ofcourse not!  But I do know where I won’t argue with a trade because the levels are staring back at me from the chart.

p.s. here’s a follow up chart of the 15 minute and daily $AUDUSD –> http://chart.ly/vhttd7

– Raghee, http://stocktwits.com/u/RagheeHorner

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: $EURUSD, $USDX

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