Account Risk: 0.4%
Short: 1x @ 1.6469
Stop: 1.06529 (50 pips). Above 500MA
Target: 1.6374 (95 pips, 1.6x RR). 4H 50 & 100MA.
Mindset: Unsure, I jumped into the trade.
Saw the divergence setting up on the GBPCAD in my morning scan. I do my scans from a FXCM data feed which doesn’t correspond with my ETX bar open/close times. I had a divergence setting up on the FXCM feed, but no close inside the bands yet. My ETX chart showed a close inside the bands – but I didn’t notice the MACD wasn’t diverging on this chart until after I’d placed the trade. So technically I shouldn’t have taken this trade.
Here’s the trade …
I did spot a couple of other things that supported my case to get short. Price was at the top of a daily wedge pattern and the 4H 500MA was overhead acting as a resistance point.
However, there’s a weekly bullish double divergence in play which indicates I’m going against the direction I should be looking to trade.
Once I realised my mistake, I thought about cancelling the trade, but decided to leave it and see how it worked out, even if it wasn’t a true divergence it was still interesting to see what happened.
Note: One thing that surprised me when placing the trade was the spread (5 pips) – I’m used to EURUSD and GBPUSD (1 pip) – so the stop and target both had added space for the 5 pip spread.
Update: Target hit – 01 Mar 2017
I feel very fortunate about this trade, my limit order hit just after lunchtime for almost 100 pips. Some news came out in my favour and drove price down. I feel lucky about this. The chart doesn’t show the divergence I was looking for and I think it was a mistake and I got away with.
During back-testing I’ve said to myself to take the marginal divergence trades – even if they are not strictly meeting the criteria. However if I had lost this trade I would’ve been berating myself. So I’m grateful it worked in my favour.
Next time I’ll wait for a close on the timeframe I’m studying and then move to the ETX timeframes. Also I will try and maintain the spirit of being open to opportunities and not being a perfectionist about trades.