So, as you can see from this 15m chart, not much happened last night. There was no breakout, just the consolidation extending it's range. It wants to do something, but can't quite figure out what.
As for my trades, the prices just touched my BUY-STOP order. Just enough to trigger. Then as the night went on, just grazed my stop-loss and also activated the SELL-STOP order. These trades were placed with a 0.10 lot size, which means the BUY-STOP lost $67 dollars, and the SELL-STOP is now at -$23.90.
Luckily this is a demo account, as I don't trust myself enough to trade live again, yet.
What could be done to improve these trades?
I placed these trades knowing the consolidation pattern was quite narrow, and was hoping to catch a break-out. I didn't want to place the trades too close to the price action, because I knew that the consolidation usually extends its range once the London trading session begins. I thought the chances of a breakout were fairly good, because of a recent break of another consolidation zone, and because the particular consolidation pattern I spotted yesterday looked calmer than patterns from the last week.
So I placed my orders hoping for a breakout, but not too far that I would be whip-sawed and stopped out. I was hoping that in the worst case, the prices would extend enough for break-even to be set.
Unfortunately, the worst thing that could happen, happened. The price extended just enough to trigger my trades, but not enough that break-even could be set.
From last night, we can see the consolidation is still in place, but is wider. So I could possibly try again and place trades on either side of this larger consolidation zone. It doesn't look at tidy as yesterdays consolidation, though. If my trades were wider apart and the whip-sawing action continued, then I would lose more than $67. On the other hand, since the range of this consolidation zone is wider, the probability of whip-sawing action reaching these levels is less. In theory, at least. Shall we tempt the Forex beast?
Let's look at the EURUSD 4 hr chart:
The yellow line highlights previous support which occurs approximately 24th November, 2011 and acted as resistance on approximately 10th December 2011 and again 27th January 2012 and 1st February.
We can see that price action blew through this resistance level earlier this week, which then became support, and last night has just pierced it.
Looking at some other currency pairs (not shown), such as the GBPUSD, and AUDUSD, we can see some slight USD strength last night, which makes me think that the EURUSD may fall yet, today.
The 1.3200 level is quite close to this support line, which is also near the top of the previous consolidation pattern. So one trade idea is to place a SELL-STOP just below.
Because I'm trading a break-out strategy, I want to make sure I have any potential break-outs to the top covered, so I would place another BUY-STOP a little above last nights high.
The blue rectangle shows where I will place my orders. BUY-STOP at 1.33215 and SELL-STOP at 1.31711.
If this was a live account, I doubt I would place any more orders until we see a decent break one way or another. I've already been stopped out of two EURUSD trades this week - a break-even and a $67 loss. The consolidation seems to be getting more wild, and it makes me nervous.
Of course, if it was a live account, I would probably also check moving averages, Bollinger Bands, and end up so over-whelmed I would never place a trade ever again.
Since this is a demo account and I'm still learning and practicing, I'm going to place the trades just to see what happens. I suspect that if a break-out does occur, it will be fairly large. Since the consolidation is getting a little wider, it's possible a break-out will happen soon.
You may have noted that I was optimistic about getting a breakout yesterday, too!
I can't imagine the consolidation actually wiping out both of my trades again, as my straddles seem to be greater than the recent trading range. But being Forex, this is probably what is going to happen.
One more chart, another EURUSD 4 hour chart, showing a trend-line break. It's interesting to see the price consolidate under the resistance line, pass through the trend-line, break-out above resistance but fail to reach the trend-line again.
One more thing to mention is the Greece situation. It's possible the wild consolidation action will continue until Greece reaches a decision on whatever it's trying to decide now. Usually when they do, the EURUSD shoots higher.
And so ends my somewhat messy analysis for today. The trades are set, let's see what happens tonight!
Finally, I realize that if my trade from two nights ago was not set to break-even, it would have continued higher and been in profit (but not without more risk. The range on those trades was greater, so if the price had triggered a buy and broken to the down-side without break-even set, I would have lost a lot more).
Such is trading life.
