The Week of Monday 28th December 2009

On Monday 28th December, we didn't get any clear entry signals. This is not uncommon around this time of year simply because the markets are closed on some days and have very little liquidity even when they're open. This often leads to a bit of inconsistency in chart patterns. Most times I suggest that traders stay out of the markets during the holidays unless a very compelling trade comes along.

On Tuesday, the market started out drifting in the upward direction. The first barrier encountered was the 1.4382 Resistance line. Price breached this level around 8:15am and we took a conservative Long position. Entry was at 1.4385 and the first position was closed at 1.4411 for a profit of 26pips. The second position was closed at 1.4427 around 2:30pm for a profit of 42pips.

On Wednesday, the market started out drifting upwards and it encountered resistance at the 1.4342 level. We were looking to go Long on a breach of that level but when price finally broke through, it closed too far away. This wasn't much of a disappointment because the market soon turned around and started heading south. We also did not take a Short trade during the US session because we had clear positive divergence on the MACD which was later followed with another strong reversal pattern.

Thursday's trading started with the market trending upwards and so we were primed for a Long opportunity. When price broke through the relevant resistance level which was at 1.4375, it closed too far away and this stopped us from entering the trade. Some traders would have taken this trade based on a different entry parameter but as always, we're sticking to our pre-defined strategy.

Another important lesson from Thursday's trading is never to chase the markets. I've mentioned this in the past but I think it's a good time for me to reiterate it. If you find that the market has moved way past your entry point, just let it go and/or wait for the next appropriate entry setup. Chasing the markets can be likened to attempting to hop on a train after it has pulled out of the station; it could be a very risky venture. It is also a sign of emotional trading which is a potential account killer.