Due Diligence
Trading takes diligence, among other qualities. As a trader you also need to understand why you follow your plan to the letter. Despite having hit the snooze button once, I was up and ready to go at 3:00 AM CDT to open the shop . And it was our old friend EURUSD which popped right out at me as being one of the only markets which we cover which fits our trend trading criteria. We always put trending environments ahead of counter-trending, and with EURUSD already up on those important higher time frames, we focused right in. Initially I was pleased that EURUSD backed down, as this meant we should get an opportunity to get long.
The retracement was a shallow one, which told us the underlying trend was strong. The dip was short-lived and stopped just short of the 50% retracement of the Tokyo session up-move, price then curled higher giving a buy signal. Unfortunately the signal was too close to structure – potential resistance at Pivot R1 — to take a position. I have to follow my trading plan which says “structure must compliment the trigger”. This means we only take buy signals above structure, not below it. After staying on a market like a bloodhound for hours at a time it’s not always easy to back off and do nothing, but that was the only thing to do. On Tuesdays and Wednesdays we do the Live Market Exercise for 3 hours during the London session, and the 3 hours was coming to an end. It also means this is when we all have to be our most diligent. It’s easy to stay on point in the Exercise where I’m pointing out exactly what we’re seeing and the appropriate response based on our method; easy for me, because that’s my job, and easy for the clients because they can hear me on their computer’s speakers. (The service is free for active clients). But once I turn off the Go-to-Meeting I naturally relax a bit, when what I need to do is stretch out, maybe get a quick bite to eat, and get right back to focusing on that next signal.
Today turned out to be a good day because the EURUSD did pull back again just ahead of the U.S. stock market open, and then up-ticked and gave us a buy signal – this time above structure. Today reminded me of how diligent a trader must be because that buy signal occurred 5-1/2 hours after I first sat down – which is a long time to sit and look at a screen. And at that point you still have to manage the trade.
To attend a live, interactive webinar today at Noon CDT on how to determine market direction go to: Overview of Directional Lines
Jay Norris is the host of Live Market Exercise, a complimentary service for clients of Clovernest Financial Group, and the author of Mastering The Currency Market, McGraw-Hill, 2009. Jay’s second book, Mastering Trade Selection and Management, will be in book stores in May.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor!
