I had to cut losses on this one quick, as the Aussie failed to show more bullish momentum and a short-term reversal signal formed. If you’re wondering what I’m referring to, make sure you read my initial AUD/NZD trade idea first.
I was trying to catch a rally for this pair after the Australian economy printed a stronger than expected quarterly CPI of 0.7% versus the projected 0.5% gain. However, other inflation-related releases from the Land Down Under missed expectations, leading traders to suspect that downside price pressures are still lingering.
This allowed the 1.0750 minor psychological level and double bottom neckline to hold as strong resistance, even causing the pair to make a tiny double top pattern and attempt to break below the short-term neckline support at 1.0600. With that, I decided to get out of the long position on a quick bounce to 1.0625 and trim my potential losses.
In retrospect, I really shouldn’t have been too excited to get in a long trade right after seeing the headline CPI reading. I already had a buy stop order in place above the 1.0750 mark so I probably should’ve just waited for more bullish confirmation to hit that area instead of buying at market.
I ended up with a 100-pip loss on this trade for a tiny 0.1% dent on my account since I only risked 0.25% on this first position. Still, I could’ve avoided that loss had I been more patient with this trade. Not really a new lesson for me but I guess this was a costly reminder!
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See also: Q3 2016 Trading Performance Review
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