Review of Todays NZDUSD Trade

In my last post I showed the setup for an entry long on NZDUSD based on limit orders to be triggered at a pullback to the 61.8% fibonacci level (adjusted for spread, my entry price was 5435). Actually there were 2 potential swing lows that I could have used to for the identification of the pullback level, I marked them as A and B on the chart. I used level A, although usually I am more conservative and would use the more significant level B. But I did decide to place my stop below level B for added safety (it was still within my money management limit for the trade). One check I did was to overlay the fib retracements for both levels A and B:



Fib levels for A are in blue, those for B in red. the 61.8% level for A coincided with the 50% level for B which gave me more confidence in the selection. And as you can see the entry worked perfectly with a clean bounce beyond the recent swing high from where the pullback began.

As I mentioned in last post, I created 3 trades so that I could scale-out of the trade. I like my first exit to be close to the 23.6% fib level, and subsequent exits to be aligned to fibonacci extensions from the pullback. My trading platform takes stop and limit levels as a relative number of pips from my entry price, which is frustrating because I know the absolute price levels and so have to compute the relative size. So frustrating in fact (especially when I am trying to quickly set up 3 trades) that I use a rule to simplify the process; I use multiples of my stop to define my exit levels: 0.5, 2, 5. The last one is discretionary, I can also use 4 or keep it open. For this trade I used 0.5, 2, 4. However, this should be based on the stop being below A, whereas I used a stop at B and didn't compensate for this, subsequently my exit prices were higher than intended. The chart below shows my exit levels with horizontal lines in blue and green representing intended and actual levels respectively:



As you can see there is a big discrepancy between my actual exit levels (green) and my intended exit levels (blue). And the net result of this is that the trade is still active, whereas it could have been wrapped up by 1pm. This problem resulted because I use multipliers on my stop level based on the assumption that my stop is closely aligned to the 100% fib level, but in this instance I had used a much more conservative stop. However, this stop is below the low for the day and I have exceeded breakeven, so on this basis I've removed the limit exit on my last part of the trade and am allowing the trade to run on to tomorrow (lets swing!).

Another problem with using multipliers of the stop rather than calculating from absolute price levels is my final level was above an important round number (5600) which also corresponded to a historical level I had identified on longer term charts (I did say I was bleary eyed!).

So tomorrow, we'll see whether the price breaks the 5600 level.