Question for experienced traders: what am I doing wrong?

Please see the (NZDUSD,H1) chart below and tell me where I went wrong with the trade I made last night. I’m not being sarcastic (I promise!) but I’d especially like a response from those who believe that exit is more important than entry, or that profitable trading is all about MM or psychology.

My entry rationale was to trade with the downtrend. There was a decent S/R flipover forming strong resistance (see pink arrows). I waited for what I thought was a bounce off this resistance (see green annotation), and entered immediately, with what appeared to up to 5:1 R:R. Then I exited immediately it was apparent that the resistance had failed (red annotation). The end result was a loss that dented my account by 0.5% of its balance.

Did the fault lie with my entry (should have waited longer for the bounce to confirm itself)?

Or my exit (cut the loss too short)?

Or MM (risked only 0.5% of my account balance)?

Or psychology (made a disciplined entry, and a disciplined exit)?

Or did I ignore fundamentals at my peril? (Is it impossible to trade profitably using TA alone?)

Or was I just unlucky? (Until convinced otherwise, I believe that prices move randomly, and profitable trading is very much a matter of luck).

I have no problem accepting occasional losses, but I’m afraid that this kind of scenario is happening all too frequently. My account is down 11% since I started trading live back in June.

Again, I promise I’m not being sarcastic. I definitely admit some frustration though, especially when I start to take trading seriously.

Thanks in advance to anybody who can shed some light

David

Hey David,

Take my interpretation for what it's worth. Nothing more then my views, and you aren't necessarily right or wrong.

I saw the NZD has winding up real tight. So taking any trade within the windup I would find as not really worth being involved in. So I really see this, with a breakout now, that also retested. I find it very difficult to get involved when I see some form of consolidation occurring. I always find it easier to wait to get out of the mess before getting involved.

Again just my views, and if I were to take a bounce in your case, I would have liked to see more price confirmation. The next bar is a pinbar of sorts that never breaks down, which would lead me to never of executed the trade.

Then using just your image(i edited just part of it) if I was looking at the same thing, this is how I would have looked at playing a bounce. The bar with the red arrow is a pinbar, and I would have waited for a break down under that(red line). Instead the next bar never breaks and closes above the resistance, as DBLHC(grey arrow). So we retested the pinbars low, and it just didn't have the push. This would have kept me out of this trade personally

Again just my views, not necessarily the right way

Hi hanover....

I've looked at the chart you posted.

It is a bit to "naked" for me....I'm visual.
I'd have to look at my Oanda charts for the same period, though I don't think that would help you with your style of trading....

What was your target price?

I do not believe in being lucky or unlucky in trading...I would rule that out.

I'm from the "camp" that $$ is secured on entrance ( entry ) and deposited upon exit. FYI...we all tend to jump early.

Wish I could be of more help
Fxj

Just technically speaking the trendline was busted before you went short. Not a good idea if you're using trendlines as a major tool. As a result you ended up going the wrong direction on the trade. Other than that the poorly (unlucky) timed entry (a little later, in the 60's, and you might well have broken even or better) probably cost you the most. Not to say you were wrong to choose the 6935 s/r level but in hindsight it didn't work. But we don't and can't trade on hindsight so just take it on the chin and move on S/R levels do sometimes fail.

Your exit was pretty good and taking the loss at that point was good trading (while in turned out to be poorly timed, you protected your capital while giving the trade some room).

You say you've been making bad calls lately. I would just chalk that up to not being in the zone. There will always be an element of intuitive decision making when you trade in a discretionary manner and sometimes your "feel" is spot on and sometimes you're just ice cold. I'd say just cut back on the risk and either spend more time infront of your screen or take a break for a while or both.

Don't beat yourself up too badly, sometimes you trade your best and you still lose - it's just part of the game.

My 2 Pips worth: I don't trade this pair, but out of curiosity I pulled up the chart.
Your trading on a 1 hour time frame w/o seemingly consulting the higher time frame. A look at the Daily showed that you shorted against a strong rising daily candle. (your trade appears to have been entered around 11AM) The daily had touched the previous days low and soundly rejected it.
The psychology behind this daily candle would be something like there were a lot of traders that probably went short at around .6845 and were just waiting for price to retrace back so they could get out. This would cause this kind of bounce.
Expanding your time frames may help you avoid these kind of situations.
Good Luck

Thanks very much for the feedback. Your time and effort is much appreciated.

Mike, I’ve followed the J16 material so hopefully understand the basics of pin bars. I had several demo accounts running concurrently for around 5 months each, to allow me to experiment with, and compare, different strategies. I saw plenty of pin bar setups that resulted in great profits, but ironically the ones that I tried to play somehow didn’t work out that way. I came to the realization that (apart from any "self fulfilling prophecy"), a pinbar was basically a rapid shift in momentum: a move to an extreme, and then a move back again, all within the same bar, or conversely, that depending on how the bar cut-off times captured the price movement, other formations described the same action. For example, two M30 "railway track" candles will create a kind of pinbar on the H1 chart.

I also thought about attempting to trade the ensuing breakout. Not sure how far or fast price needs to travel before one can be confident that it's not a false breakout.

I appreciate that everybody has differing interpretations which is IMHO what makes market analysis so fascinating.

FXJ, I find comfort in your comments:
“I do not believe in being lucky or unlucky in trading...I would rule that out. … I'm from the "camp" that $$ is secured on entrance ( entry ) and deposited upon exit. FYI...we all tend to jump early.”
This suggests that I’m thinking along the right lines, I just wish that I could get to the point where I can prove to myself (seeing is believing!) that profitable trading is more than just luck. However, I do believe that you folk are making money on a consistent basis.

My target: I saw some support around 6900 and then (assuming price was able to cross the weekend gap) 6870, so had price stalled around those areas, I would have taken some partial profit, and maybe then left 1/3 of the position to run using a trailing stop. At least, that was my basic initial premise.

Faure, an excellent point re the trendline. One aspect that I have difficulty with is in deciding which carries more weight: horizontal S/R, trendlines and other chart patterns (wedges, triangles etc), Fibo retracements, candle patterns, timeframe confirmations, etc. I do try to look for confluences, but if I examine every possible criterion, then I can always find a reason not to trade (not to mention the chart can end up a mass of lines). I guess it’s a case of developing enough experience to know which criteria are significant, and which are not; but it is not easy, sometimes trendlines fail while S/R holds, and vice versa.

Since I started going live, a lot of trades have gone wrong. I know that screams “faulty psychology” but, even after reading a lot of Fijitrader’s material on the J16 PF, I don’t believe that’s my problem. I’m still looking to find “the zone” that everybody talks about!!

MrGreen, I did look at the daily chart but didn’t realize that a rising daily candle was so significant. Again, it’s a case of my trying to understand which criteria are more important than others (for example, the daily chart shows a downtrend since Aug 27, and the rejection you talk about is reflected by the double bottom on the hourly chart, and the climb back to the 6930 area where I entered). I was trying to pick up a profit somewhere between my entry point and this double bottom.

By default, I am trading purely on technicals, but would definitely value any insight as to the underlying sentiment that drives price behavior – how the big players think – which you have apparently considered here.

Anyway, sorry, I guess I’ve analyzed this trade to death, but just wanted to let you all know that I have read and digested your generous responses thoroughly, and that I really appreciate them.

Many thanks
David

Hi David! I'm not a live trader or even a confident demo trader yet, but I think I have something to say about the above quote. Probably because I spent a while thinking the same thoughts. I think this line of thinking involves believing that you have to guess where the market is going, ie guess the future. We analyze a chart on a technical basis to discover what we should be paying attention to as price nears important levels. That's all. Now that you know what the significant levels of S/R are, you should be watching how price moves with respect to them during the trading day. I think the point is to let price tell YOU how it feels about the future, and lay your bets when it succeeds in painting a convincing picture.

A convincing picture, in my mind, is something along these lines: based on your technical analysis, say you find a setup that involves a level/line/trendline that just seems impossible to break. Confluence of multiple s/r elements, all that jazz. If price actually does bust through that point, it tells you something interesting. Now, if price not only busts through the point, but comes back to test it, then takes back off again, you have found serious confirmation of immediate market direction and may be looking at a 'high probability' trade.

Not to say that you can't fade S/R levels...of course you can. I think it's just a little riskier. I also appreciate the advice about always checking out the higher timeframes to make sure your trade doesn't have a big cloud hanging over it.

I'm just a newbie but hope that helps.

Hanover,

For what its worth Mike, FXJ, Faure,& McGreen are all right but I thought i would put it in a picture format so it was easier to understand. Also McGreen hit it on the head when he said.

Now on to the picture.

Hi David,

I might have done the same thing as you, honestly.

Although, I like wedges (coils, pennants, whatever). Hopefully I would have seen the wedge from 5 Sep 2300 to 7 Sep 0800, in which case I would have played the downside breakout, and taken maybe 40 or 50 pips before getting whipped back up to resistance.

Other than that, had I wanted to go short, and was really, really patient... or, more likely, just opened the chart and saw the perfect setup -- failed breakout to the upside, snap back below and long white candle, then pullback to resistance, to me that would have been the perfect place to sell, right there on the spinning top. Then, the next candle had a long wick, showing that the market was still rejecting the higher prices, so I might have stayed in.

Then, I'd have been stopped out around 6970 or 80.....

I really think that, the more popular forex gets, the more profitable stop hunting will be by the big traders, since there's more inexperienced folks out there with stops in all the old familiar places. We're getting more double and triple fakes across S/R or TL's. Very frustrating.

Nothing "went wrong".

In trading, "anything can happen"

Finally somebody gives the correct answer.
You're dealing with mostly random markets, we can retrospectively read the tea leaves all we want looking for reasons, but it will not help.

Hmm, now why would a senior member want to suspend Toddfx? I haven't noticed him breaking any rules. Did he step on someones tooty toes?

Ohhh, so it was your tooty toes!! Lol! Sorry, Scott.

I googled TRO once to see what the hell it was all about but didn't really get a clear answer. I lost interest after about 5 minutes of exhaustive research.

an old and dead thread, but your answer is one huge cop out in real life trading --- take what i say as you wish, but one could easily see the downtrend had been broken and he simply entered a short which should have been a long.

had the man a few indicators showing trend and direction, the trade should never have happened and the thread would never exist and YOUR incorrect answer would never have been posted.

enjoy and trade well

mp

ive known TRO since way back when we both moderated stock groups, and i maintain MUCH knowledge of the man.

offtimes TRO is someone else, or a few some one elses, and while i personally think his banning is usually wrong, its not that he cant be a pest also !

much split thoughts on the subject, but one has to wonder just who he is on many a thread, as ive run into a few "problems" myself !

mp

K. Thanks for the clarification. These personality conflicts hold zero interest for me. Distracts from my fun.

Finally somebody elucidates what I have been thinking for some time

i wouldnt go that far with dislike -- he trades, and profitably

dont ever get carried away --- its not deserving.

faults may be faults, and often the attitude is strong, but thats about it

mp

I decided to remove my posts from this thread, because they do not belong in this thread of Hanover's, a person I respect greatly.

Scott