Having a surplus or break even on the balance despite having a loser trade is one the major abilities that successful trader must have in the long run. Surely there is huge difference between chasing the trade after the loser and planning hedge trade when market shows high likelihood of trade going opposite direction than originally anticipated. The first scenario is pretty much doomed to give even more pain than initially anticipated as those kind of trades in most of the cases are very much based on emotional responses. Last week presented another example when we had down move south continuation on EUR/USD pair. Bullish Garlteys pattern looked quite promising at the start of the week when adjusted target 1 was nearly hit price reaching 1.3020's area on Tuesday. At the same time premium for weekly PUT's option of 1.2900 became very much in the lows, where very small risk was involved in order to take opposite direction of originally anticipated long. These kind of setups are no brainer once trader gets familiar with how options are working in combination with raw price action. Even before i got stopped out on initial long when this pair continued to the downside the option trade had the initial loss covered with the good margin on top of it. The key is to have a plan of attack not just when trade goes right direction, but more importantly when it goes against. Recently i started using flow chart diagrams that became very helpful while taking decisions as i need to just follow through the flow of the chart that was constructed in advance instead of taking decisions on the spot. See the flow of the setup on EUR/USD posted last week.
Looking at the next week two setups worth attention in my watch list. French CAC40 has very much counter trend setup for short at 4076's. Looking at the daily chart this area proved to be major pivot point in the past, however i will be looking for more confirmation in order to get involved.
Much beloved EUR/USD has another potential congestion area, that can give strong bullish signal. Two AB=CD patterns completing at the same area between 1.2775 and 1.2750. The pair is very much on a way to bearish mode based on 50 and 200 MA's on 4 hour chart. The area on the chart below is pretty much the last barrier. Will be watching this space next week
Have a good one traders!