Yesterday I wrote about how the EURAUD was ripe for a fall. Catch up on EURAUD Bearish Below 1.42 if you missed it.
Well, price fell – it fell almost 150 pips since I put out yesterday’s article.
And something happened that will happen all the time when you trade: I missed it.
I didn’t miss the sell because I wasn’t watching the charts. I missed it because price moved without me. In this article, I’m going to cover what to do when price moves without you. In fact, I’m going to tell you what the only right thing to do is.
Here is what I would have liked the EURAUD to do:
1. Close below the lower channel support. Short order set.
2. Stop loss above the recent swing high
3. First target is just better than 1:1
4. Second target all the way down here.
Instead, this is what happened:
Price not only broke through the lower trendline, and closed below it, but it kept going…and going.
It went so far that our first setup would have had 150 pips of risk to make just 50 pips.
I decided that a 0.3R on my first position didn’t make any sense, so I did not take the trade.
We’ll get into what I’m going to do missing out shortly.
Missing out hurts. It’s painful.
This is a major pain point for most traders. For many, missing a trade is harder than losing a trade.
Is that true for you? Don’t be ashamed if it is, acknowledge it and let’s move on.
What to do about it?
There are really only two solutions here. You can chase the trade, which in this case would have meant taking on a trade with a lot of risk for very little reward. Or you can forget about the trade and move onto the next one.
This is my choice – I choose to let it go.
But, very importantly, this doesn’t mean I have given up on shorting the EURAUD. The opposite in fact – the move that we’ve already seen in further confirmation that there is more downside on the cards. My job is to wait for a favourable entry to take advantage of that.
So in a sense, nothing has changed. I still want to short the EURAUD. I am still only going to short it when the rewards outweigh the risks.
How might I do this?
The 1.41 level has provided support in the past, as price was moving up. A retest of that level from below could easily setup a sell, one again targeting our original targets and potentially offer an even better reward to risk ratio than before.