AUD/USD 28 Feb 11 - Another Miss!

by Eva
(from Forex Trading Beginner)

This is getting embarrassing. My third miss in a row. But I am blogging about every trade, the good, the bad and the ugly, so I need to bite my pride a little and share this experience.

Click on the above pictures to make them bigger.

I'm noticing an interesting pattern with my losses as well, but more about that later...

So, I spotted a good opportunity on the AUD/USD, and a mallet formation (see pictures) formed at the point of convergence between a trendline, an old support line and a fibonnaci line.

So I dived straight in, risking 25 pips for a potential reward of 35 pips.

I entered the market at 1.0161, placing my stop at 1.0136
and my limit at 1.0196.

There was an announcement due on the USD at midnight my time (8am New York time) so I knew I needed to be out of this trade before I went to bed.

As it happened, it was only a matter of a few hours before my stop was taken out and I lost 25 pips.

Ironically, that stop was the formation of another mallet which saw the market rise up to the level where my limit would have been, which would have earned me 35 pips!

This leaves me questioning whether my strategy of placing my stop at 10 pips below the lowest point of my entry candle is my best bet - or if I should risk 5 more pips each trade and put my stop at 15 pips below.

Coulda, woulda, shoulda. In any event, I lost out on this trade.

It's becoming a pattern - the market is coming down, taking out my stop and then springing up to where my limit would have been.

Is this a tactic used by bigger-time traders to take the little guys out of the market?

Or, is it a ploy by the brokers to get us to risk more on each trade?

Anyone got thoughts on this? Feel free to comment :)