August 19, 2011

Weekly Trading Update - 15-19 August 2011

August continues to be a frustrating month (which is generally the case most years because everyone's on holiday and the volumes are lower), but at least I managed to make a decent profit this week after the disappointment of last week. I only placed two trades in total. One was a losing breakout trade but the other was a big winner.

Let's talk about the losing trade first of all. I've been trading breakouts a lot in the last few months, but this week there was just the one trading opportunity on the GBP/USD (the overnight trading range was too big on the other days and on Wednesday the breakout candle was too big) and that happened yesterday morning.

Unfortunately after entering a trade right after the markets opened at 8.00 when this pair broke below the overnight trading range, it turned out to be a false breakout and I ended up taking a 25 point loss.

Luckily the other trade more than compensated for this loss. There were no trading opportunities on the GBP/USD, EUR/USD or USD/JPY pairs this week using my main 4 hour trading system. However there was an excellent opportunity on the FTSE, and is was a complete no-brainer in all honesty.

On a technical basis the Supertrend indicator was still red on the daily chart (and nowhere near the level needed to turn green (5587)). So I was looking to go short anyway on any EMA crossover on the 4 hour chart, but you just knew that the slightest bit of bad news would send this index sharply lower after bouncing back from 4720 to around 5400.

The EMAs were looking like they were going to break downwards at any moment and eventually there was a decisive move yesterday morning (the 8.00 – 12.00 candle). I didn't mess about waiting for a slight pull-back after this candle closed because I didn't want to miss the boat, and simply entered a short position at 5224.

After seeing the price continue falling sharply I held my nerve before I eventually succumbed and closed half the position when it reached the 5100 level for a profit of 124 points. My price target was always 5050 and although I didn't hold out completely, I did at least close the second half of this position when this target was reached for an additional 50 points profit.

I didn't think it would go as low as 5000 but it has actually dipped below that level today. However I was delighted with the overall profit for the week, and it certainly compensates for some of the paper losses in my long term share portfolio.

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