Getting Stopped Out: Lack Of Skill Or Luck?
Ashraf Laidi | Nov 18, 2018 03:44AM ET
Getting stopped out: Is it a lack of skill or luck? On Wednesday, I was criticized after issuing the long GBPUSD Premium call at 1.2950 one hour before PM Theresa May unveiled her Brexit plan. Her speech and initial reaction triggered a rally to 1.3070. One day later, en-mass resignations in UK cabinet drove down cable to 1.2724. The chart below is one of the charts used to back my rationale. There's more below...
Wednesday's long was issued with a final target at 1.33 and stop at 1.2760. The stop was hit. Some accused me of taking a “gambling” trade as I issued the long before such an important announcement. Yet, the rationale I laid out for the trade was based on several charts and technical factors. Some say"why issue a stop at 1.2760 when you were so sure it would reach as high as 1.33”. The answer; I was focused on 1.2760 as a key support, therefore I based my reward-risk relationship on that, which led me to print a 1.33 target. Yes, I still see cable at 1.33, and 1.35 and eventually 1.45 most likely before March.“But Ashraf, that's a 13% rally. What's your downside?” Well, feel free to enter the Premium charts and find out my expected low for cable. By the way, I did issue anew long in GBPUSD yesterday at 1.2800 so we're in good shape. Actually, several clients tell me they lowered the stop, others did not even use one.
h2 Better Experience/h2But there are examples of more “lucky stories”. Our short USDJPY trade from late last month had a stop at 114.25. The pair tested 113.90-114.20 earlier this month -- while I refused to raise the stop—before tumbling to 112.70s.
h2 Bottom Line/h2If you are disciplined about entering with stops and final targets, make sure to have a key levels of support and resistance in mind and set your risk parameters accordingly (stops & targets). You can even work backwards if you have to (set your pips target from the support/stop). The other key matter: Feel free to move stops by 20 or 30 pips as FX is increasingly displaying deeper swings (courtesy of algos)/ And to those who say “I cannot afford to move my stops by 20 or 30 pips”, I say to you: Reduce your size, lower your leverage ratio, or both because the +$5.5 trillion a day FX market does not care where your stop is, neither do many of the brokers.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.