How To Make Objective — Not Emotional — Trade Decisions
Stocks 1, FX 0
That pretty much
described my day yesterday. The action on the opening offered a
handful (3) of solid HVT set-ups that
provided some good pops to the upside, after that I went into defensive mode,
which proved to be a wise decision. The afternoons ahead of an FOMC
meeting are typically quiet.
Meanwhile, I am sure you are wondering why I said
FX was a ‘0’ in my book for yesterday. Simple, the trade set-ups did not meet
my parameters. Did I lose out on some nice moves (i.e. opportunity costs)? You
bet I did, and frankly I was a bit ticked off, until I realized that not every
trade is going to meet my set of rules. I always remind myself that even if I
had taken the trade, my ‘comfort level’ while in the trade would not be there.
Under those circumstances I will make emotional decisions rather than objective
ones.
What was it about the trades that did not meet my
criteria? The same as in HVT, they were counter-trend trades. Yes, many were
at some good support levels and the oscillators were a bit oversold, but I will
leave those trades to the traders who have developed a knack for that type of
set-up. What I am seeing now though is the potential for some continuation
longs in EUR, GBP,
AUD and CHF as a swing trade.
Keep an eye on these levels as support and if the dynamics of a long set-up come
into play at the same time, it should be a pretty robust move higher:
EUR:
1.2575
CHF:
1.2440
AUD:
.7765
GBP:
1.8200
Absent these set-ups, I continue to hold shorts
in EUR/JPY and EUR/AUD.
You will recall from Monday’s column these are Position Trades based on
macro & technical analysis as well as some assumptions regarding the upcoming
G7 meeting. These trades have generous stops and are not met to be
micro-managed.
There might be some solid scalp opportunities in
both the equity and FX markets on the heels of the FOMC announcement
today. Any deviation from the now famous “considerable period” language will
throw the markets into a frenzy, the key is to listen to the qualifiers after
the rate announcement. I think it is safe to say that interest rate policy will
not change, just perhaps the language, which is far more important.
AM Update:
The levels mentioned above for FX held in well
over night, before getting broken rather decisively early this AM. However, the
point I wanted to make was that the levels in and of themselves were not enough
to trigger what I would consider a ‘solid’ trade entry. For some odd reason I
woke up around midnight last night to see that in fact these levels were being
tested, yet the chart did not display what I would consider a pattern or dynamic
that gave me a lot of conviction. Did the pairs move higher off of those
levels? Yes, but not enough to justify the corresponding stop loss. I suspect
that the FOMC meeting has most players on the sidelines and as a result
the price action is erratic yet very seductive. I would lay low until the
FOMC decision has been made. However, the lower than expected Durable
Goods order has once again thrown the DXC below the key 86.50 level, this
bears watching.
As always, I welcome your
comments and questions. If you would like to have your email address added to
my FX Mailing List for actual trade recommendations ahead of my FX
Service through TM in mid-February; simply send me your name and
email address to: aspendave@yahoo.com.
Dave