Here’s a look at one I turned down.
There’s been an awful lot of volatility in the markets over the past couple of weeks, with geopolitical uncertainty dominating the landscape and nobody really sure (as the failure of the pools in the US to come anywhere close to an accurate representation of reality shows) what’s going on.
As a side note, that’s something I generally like to accept – nobody really known what’s going on. Anyone that claims they do, is hiding something. Sure, we’ve got experts in various fields, and they know their field, but when it comes to predicting human behavior, and especially when it comes to applying that prediction to any sort of model with a number of potential outcomes, it all falls apart.
That’s why my strategy works so well.
We don’t need to know what’s going on. Price tells us, and we respond in a risk appropriate manner. It’s that simple.
Anyway, back to the point.
Last week a pin bar presented itself on the USDJPY chart. It’s in the image below:
These are some of my favorite patterns, and it falls in line with my longer term USD fundamental bias, but I ignored the trade.
Because look at that tail! That’s why.
With these patterns, the tail defines my risk. Every time.
If I was to take the position, I would be looking at targeting somewhere in the region of 500 pips minimum, and that’s a stretch, even in line with my bias. If the reward doesn’t justify the risk, I leave it be. I may regret it over the next couple of days (price is running up towards the region I would have targeted) but I’ve been here before, and when my strategy says no, I have to listen.
There’ll be something else around the corner.