What a difference a day (trade) makes….Holding short EUR/USD

What a difference a day makes. And to think that I started the day with a bloody nose on account of two of my systems buying foreign currencies against the USD at what now look like sky high prices. I was looking set to end an otherwise dull trading week with a small but disappointing loss but the Fat Lady was yet to start singing. If I recall one of the trading greats (Larry Williams I think?) said something along the lines of having the ability to flip a position being one of the most important attributes of a winning trader. Someone else put it better with “when events change I change my mind, what do you do?” The key point to remember here is when trading it really does pay to know a) when you are wrong and b) how to take corrective or aggressive action based on the new information.

I trade a range of systems (‘HF Systems’) which are built around short-term trading techniques which I have found to work very well over a long period of time. The methodologies the systems use include a combination of breakout, false breakout and pattern recognition strategies and include ‘trend filters’ to filter out duff trades and ‘time based stops’ to reduce risk. While it is great to have a system which tells you what to do and when to do it I think it can be really advantageous to use multiple systems (sometimes for the same markets) so that one can benefit when the ‘wind changes direction’, as was the case today.

My EUR/USD multiday (MD) system didn’t buy into the bullish tone set earlier in the session but one of my intraday systems did. Indeed the system bought EUR/USD at 1.10489 placing an initial stop loss at 1.0985 which was later adjusted to 1.10045 as the session progressed, cutting the risk. ‘Luckily’ my multiday system sprang into action as the price reversed (‘Break and Retrace’ trading http://www.hf-systems.com/#!/c1usl), going short at 1.10305 in the same size as the long position effectively forming a hedged position which locked in a loss of around 20 pips. This for many can be the hardest part of the game as one can become emotionally attached to the current (long) position, perhaps not ‘pulling the trigger’ on the short trade as one always should.

As the day progressed the Euro fell out of bed in a move which saw the long position stopped out while the short position racked up some nice profits, hitting the first profit target at 1.09859 where some profits were taken and the stop loss moved to entry price. As the system holds positions overnight and indeed over the weekend there are currently open profits ‘on the table’ which will hopefully be realised on Monday. What a difference a day (trade) makes!