Case Study on USDCHF

USDCHF 4H

Just want to discuss a setup on the USDCHF 4H charts and talk about why trade management is so important. I didn't take this trade because I felt that the retracement on the daily chart wasn't strong enough; I wanted it to retrace to a stronger resistance level before considering any shorts. Of course in hindsight I should have taken it.

So anyway, the setup is a nice pin bar at broken support turned resistance and the EMA. A typical entry would be a break below the pin bar which came 2 bars later. Note that this was also an inside bar breakdown setup. Now here is the important part. If one did not take partial profits at the swing low or moved his stop to breakeven, he would eventually be stopped out with a 1R loss. This is so so so important, and I only learned this recently after studying sites like ForexSchoolOnline and James16. I've seen and personally experienced this so many times, where the trade initially went well before reversing and eventually ending up in a loss. It is so crucial not to let this happen, to take partial profits and move stops to break even once price has reached a trouble area.

Having said that, this is obviously just a preferred style of trade management for traders who fancy a high hit rate. The catch is that you'll miss out on larger gains (because you've already taken partial profits) should price just break the support and continue to fall. I personally prefer to be right most of the time and hence am adopting the above trade management strategy. I've seen my profits turned to losses way way too many times and really don't like that feeling. This strategy will minimize my losses and protect my profits as soon as possible.