Well, today, I thought I was being pretty logical while preparing for a forex trade. The first Friday of each month is the announcement of the Non-Farm Payroll figures for the USA at 8:30 a.m. I have been trading the Euro vs US Dollar currency pair, or EUR/USD. Lately, the Euro has been doing well vs the US dollar, and so, I pretty much go with the trend, aka buy the EUR/USD (go long). As I was setting up my trade, I was loading up the buys, thinking the figures announced would be further in my favor. So what I did is set a rather shallow stop so if the Euro went down vs the dollar, my trade would not be a very big loss. And set a higher limit to give my trade plenty of room to run if it was in my favor...just statistically making sure I have small losses when I am wrong and bigger wins when I am right. But I was also hands on and ready to intervene quickly depending on how the live chart was looking.
Well, the trade was immediately going well in my favor at the time...but it didn't quite reach the height I had set to automatically take a profit so I hit the button to close out the trade with a decent profit, even if not what I wanted. I waited a minute or three for the trading to settle down just a bit, figuring from past experience that there would be a dip after that initial spike. So I re entered trading again on a dip, figuring since the news was rough on the dollar and the overall trend beforehand was also favoring the Euro vs the dollar, that it would go back again and I would bank another profit.
I was wrong. Despite the logic and my experience from the past, the Euro kept sinking vs the dollar. My trade stopped out and fortunately I had set that shallow automatic stopout to protect from any potential big losses.
Well, thought since it had dipped further down, surely it would be a great time to re enter again and the Euro would finally rise back up vs the dollar. Wrong again!
But later, on I was finally right when I entered again later on when there was an even further dip. So for the day, I only lost about forty five bucks total currency trading. My thinking seems prudent overall but the market is always right even if it doesn't always seem to make total sense...so since we can't make winning trades a hundred percent of the time, it is a priority to make sure trades are pretty safe and make sure the losses aren't too big. Then they won't detract too much from the good days when you make, say, thousands trading cryptocurrencies, stocks, etc.
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