EUR/USD killed me today. I was having fun buying 1.1380s and selling 5 to 6 pips higher but as usual, the market reminded me that buying dips when momentum is on the other side is like picking pennies in front of a steamroller. I did think EUR would be bid as USDTRY went from 7 to 6.40 but EUR didn’t bulge. Also bank traders were telling me flow was on the side of EUR buying yet price action went the other way. I should have went with my normal thought process. After 10 am, 1.1390 couldn’t be broken on multiple attempts and that was a tell.
In any case, I ended up giving up 20 pips of gains in EUR is a trade as EUR sold off into the 11 am WMR fix. I gave back the 20 pips and another 10 pips. Thankfully the day was not lost as I picked 30 pips trading USD/CAD on the long side from 1.3077 to 1.3116. That was pure buying the resistance line R2 as the NY session was in full swing.
Here is an important note about very short-term FX trading (scalping or tactical trading). Most of traders will have a tendency to counter the trend, thinking a pair has moved too far in one direction and a reversion to the mean should happen after an extended move. But frankly that is THE losing strategy. For example, Euro sentiment is to the downside. Most traders, including myself this morning, tried to buy the dip. You pick up 10 pips on a snap back but usually shorting the pops when momentum to the downside is a much better and profitable strategy.
99% I following this strategy: USD is bid, I short any $EURUSD pops or long $USDJPY or $USDCAD dips. I do not try to catch falling knifes. But this is not a natural way of trading. I do have to remind myself everyday what my strategy is before I start trading. That is part of my morning routine that includes reading the news and checking my charts.
Sometimes, I come in and I trade right away unprepared. On these rare days, I do notice I do the opposite. I counter trade and I usually lose money.
Something to keep in mind as fundamental and also a topic that I will expand on in the near future.
As to long EUR, I wait for Erdogan to stop smoking and release the pastor. That should get EUR popping.