10/8/14: PM Session, Pulled the Trigger... but Made a Very Costly Error in Execution.... Another Lesson to Learn

There was extremely high news this afternoon at 5:30 pacific time when the Aussie unemployment figures came out for the month.  I wasn't sure if I'd find something to trade, but I sure did!

Take a look at the 5 Minute Chart.  The first thing to notice is that in the roughly 45 minutes preceding the news, the market makers created a long belief.  In fact, they took price just north of 1.8300 to open up what had to be a ton of long trades sitting at the double zeros.  Their next move was to challenge that belief.  Although it doesn't look like much on the chart, in the last 6-8 minutes before the news, they actually moved the market down by 17 pips.  So, very subtly, they opened up a ton of trades and also stopped out a ton of those traders out with a nice little liquidity swap.

Then at 5:30, it was time for the fireworks!  With absolutely no fake short, the market spiked up 71 pips within the first 2 or 3 minutes of the 5 Minute Candle (maybe even quicker).  This was very difficult to interpret.  Except for one thing.  Take a look at the Hour Chart and notice that the amazing SMP software had thrown up both a dot, and more importantly, a blue buy-liquidity line.  Incredibly, during this wild push up, SMP's brand new liquidity line was spot on.  In fact, price only crossed the line by 4 pips before price started pushing down.

I was still a little unsure about what was going on, but price fell pretty far short.  It came back up and was pretty whippy - all during that first 5 Minute Candle.  I remember looking at the clock and laughing because it was only 5:32 - let me tell you, the adrenaline was flowing!  After a little while, I realized that the since price wasn't pushing back past the blue line, we had already received a pretty strong clue that the market might push extremely hard to the short side.  I was hoping it would breathe back and give me a decent entry.

Luckily, price did breathe back up and I finally got in a short trade at 1.8339. The trade never went against me and I was soon up roughly 15, maybe 20 pips.  I had some phenomenal potential profit targets as indicated by the arrows I have drawn that are pointing at the yellow liquidity lines.  I knew that if the market makers manipulated the market that hard, it was a great opportunity for a HUGE run.  For risk management,  I had moved my stop so that the worst thing that would happen was I would break even.  So far... great job Cy!  But then, at the first sign of adversity, I fell apart.

The market breathed back.  I got out of the market with an 8.8 pip trade.  I have to tip my hat to the market makers because they are damn good at scaring woosy little traders like me. The amazing thing about this is that I literally got out at the exact very tip top of the breath.  How exact?  Within 0.1 pips.  Yes, if I would have had one tenth of a pip more guts, I would have pulled at least a 60 pip trade... in 15 minutes.  I honestly don't really fell like I pulled an 8.8, I feel like I left 50-110 pips on the table.  

The Trade Exit section of Wade's Trading Questions asks, "Do I have a sound reason to get out, or am I just feeling uncomfortable due to the current price action?"  It also asks, "Am I exiting this trade based upon emotion or based upon a sound reason looking at the current chart content?"  It is amply clear that I got out of the trade because I felt uncomfortable and WOOSED OUT!  

So once again, the SMP software showed us an amazing entry into a trade.  The lesson I must take from this is if I have excellent reason to believe there is a possibility to pull a monster trade and the worst thing that can happen is I'm going to take a zero... STAY IN THE TRADE!!!!!  I hope anyone reading this can learn the same lesson without making the same dumb mistake.  I must say I am glad to be reading the software reasonably well, but I clearly need to work on my execution.

As always, I'd love to hear your comments.  You can comment on the blog, or reach me at pipaddict73@gmail.com.