AUD/USD Momentum is bearish. AUD had a very good rally from 24/1/2014. Time to pause and correct. With a bearish engulfing, Below the 10 and 20 sma. Breaking the uptrend line from 3/4/14.
I completely agree with you, my trading system gives the same sell signal for AUDUSD. However I would like to ask you a question. Why do you put your target (0,9300) so close to current market level, when you have the stop at 0,9400? Or I can ask the other way around: if you have the 0,9300 as a target, shouldn't you move lower the initial stop to have a better risk/reward ratio? (of course it depends also on where you have opened the short position). Please don't misunderstand me or take it as some kind of offense, but I never really take any trades below 1:2 RR. Otherwise I like your chart approach, my question is regarding risk and money management.
ForceFollower
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I know this question wasn't addressed to me, but I think river_54 expected to face a strong support at .93, so he'd rather take the profit there before it evaporates. As river_54 said, "Time to pause and correct", finding it a "correction", not a down trend yet. As long as the low at 0.92025 remans inviolate, the trend is up, so as a counter-trend trade, it needs to have a close profit target.
As for the R:R ratio, you're right, Kumowizard, the higher the reward the lower success rate you need to have in order to at least break even. Basically, in order to make 2R (risking 1R), your winning percentage can be as low as 33.3% in order to BE. It doesn't mean you can't make money with a lower reward:risk ratio. If your success rate is at 66.6%, you'll break even on trades making 0.5 R of profit vs. 1.0 R of loss...
Kumowizard
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Fully agree! And now I understand his concept as well. We are different. Most of the times I rather let small gains to evaporate, but keep the chance for a larger move. I make it or break it, but of course I use proper ATR measures and trailing stops to control my risks and keep my capital protected. My mentality is different. I got very annoyed when I close positions too early and don't let them run. Evene when I reach my initial price targets, I rather just move in the trailing stops and check if it has chance to run further to an even better exit. :-D. Thx for the reply!
ForceFollower
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Your strategy is very good, esp. when:
1) you're trading with the trend,
2) looking to enter on the first correction of the new trend.
rv
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no problem at all.
there seems to be strong resistance, so the probability to stay under the .94 looked to be pretty high.
this trade, while open, can also be used as a hedge vs other positions as a strategy( but this trade being shown as standalone ), and yes trailing stops are being used. its also a 1st target. so this trade is a bit more dynamic, as you described.
generally speaking, sometimes the chances to find a larger move, diminish over time.
ty FF :)