In this post, I give a detailed analysis of how did I lose 500 pips in one day. I hope you have read my previous posts where I have explained my swing trading system in detail. My swing trading system is very robust and can detect big moves in the market with precision. Just take a look a the following screenshot of EUR/USD H4 timeframe!
As you can see from the above screenshot RSI, Stochastic and the MACD, all three are showing strong bullish divergence signals. When I woke up on 9th July, I could have easily gotten into the trade around 1.27000 with a small stop loss of 30 pips. But I didn’t. Ramadan had started and I was fasting. So I took a cursory look at the chart and closed the terminal for the day. Now I also didn’t check the Forex Factory website where it was shown that Mr. Ben Bernanke is scheduled to speak at the end of the day. In the time zone where I live the event is scheduled for 1:10 AM in the night so I will be sleeping at that time.
The next day when I woke and checked the chart, this is what I found.
Did you notice the big bullish candle on the daily chart. Well it starts from 1.27640 and ends at 1.32050. What this means is that EUR/USD moved around 450 pips in just a matter of few hours when Mr. Ben Bernanke the FED Chairman reassured the markets that highly accommodating monetary policy is set to stay in place for the foreseeable future. Well, USD didn’t like this announcement and slumped big taking the EUR/USD pair up by around 450 pips.
As I did not open any position, I was not able to catch this big move in the market. But as you can see from the above analysis my swing trading system is robust enough to inform me hours before the big move that something big is brewing in the market. The moral of this story is that you should be willing to take small risks if you think that the trade setup is perfect and you have the opportunity to enter the market with a risk that is lower than 50 pips. As the above post shows sometimes the market can move big and you can make your monthly target in just 1 day. So don’t be afraid of taking small risks when you get the opportunity.