"Take Risks: If you win, you will be happy; if you lose, you will be wise. Nothing ventured, nothing gained."

Tuesday, February 2, 2010

Ass Kicked After RBA Held Rates on Aussie - Merciless Slippage

Trade Datas on Aud/Usd:

Entry on New York, London Crossover, Closed out on Asia Session.
Duration: 1 hour, 12 hours 30 minutes, Split Second (3 positions)
Timeframe: 1H.
Technical: Nil.
Fundamental: Speculation on RBA rates hike.
Strategy: Buy Stop hit prematurely before US ISM Manufacturing PMI announcement for first two positions. Closes position when profit is able to meet second position's stop/loss. Therefore, second position s/l is at breakeven of day's trades. Third position is buy limit, hours before RBA Cash Rate announcement.

Duration represents three positions, and first two positions in green, meaning winners. last position, a redundant (i'll explain why) in red, a loser. Please bear this long story post as i'll try my best to cut it short.

A good strategy taught by Kathy Lien from the book Day Trading and Swing Trading the Currency Market on securing profit. i went in two buy limit position. first position on 2/3 size, second one 1/3. got all red juz minutes after entry hit. but soon retraced into positive. i take the s/l of the 1/3 position into consideration, say 30 pips away. as my first position 2/3 was good enough to cover my second position's stop loss, i closed it. in this case, even if my second position hits the s/l, i will simply be at b/e becuz my first trade has already covered the second trade's s/l. this leaves a flexibility for my second trade.. as i went to sleep.

morning i woke up with my second position at +58. i protected my profit by adjusting my s/l at +30pips. with that, i secured a +30, i put in a buy limit 20 points below (3rd position i am speculating a rate hike from Reserve Bank of Australia from 3.75% to 4.00%), with s/l of 30 pips away. so if this third position, happens to hit s/l, it would b/e with my second position without further loss. all sounding perfect.


Why? If you would take a look at my second and third position transaction history below:

2nd position: s/l set on 0.8885, but price closes 0.8872 - 13 pips slippage!

3rd position: buy limit - position closed the moment it enters, in addition - 7 pips slippage! <-- very dumb trade, that was why i said it was redundant.

all these slippage costs me 20 pips. and it happens commonly during massive breakout. Massive breakout? I was basically watching the price in my office. it basically drop 100 pips in less than a minute. my browser refreshes, the price difference for a moment, had me thought i had mistakenly stared at a different pair.

price spike down. i was in long position. u noe how does that feel.. after the 100 pips pitfall? it was like a golfer who swing and misses his golf ball and the golf club went right to ur balls instead. but i thought i had a good protective armour around it to deflect the impact, and this protective armour is called the stop/loss. who noes? when i got home to see the transaction history, i still find some crack in my nut. and this crack is called slippage.

im so sorry to use these language, pls pardon me. anyway, juz to let u see the spike down. here is the chart:

Winners and losers all over in that single long bear candle. speculating the interest rate of aussie might have another hike and placing a position before the announcement, was simply gambling. lesson learned on slippage, and having positions open while not on my trading desk. lesson for u? please don't try this at home.

thanks to my first position, closed the night before, secured a +16.


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