I believe that we learn more from our mistakes than our successes, so I wanted to share a mistake today. Though this may not be a trading idea as such, I thought this might be interesting to some readers on here. If it’s not, then at least it is a good way for me to describe the lesson I learned here, making it educational to myself. All in all, nothing lost there!
A few days ago, I noticed a bearish triangle on the BCHUSD 240 chart (see www.tradingview.com/...ngle-last-move-down/). In a previous post, I had come to a price objective of $1130-$1070, so I took a short position within the triangle at the top line, around $1215. I had set a stop-loss above the triangle itself and was feeling pretty confident about it.
Time passed, and BCHUSD start making an aggressive move upwards, breaking the triangle upwards. However, volume didn’t seem to confirm this is a real breakout for me, so I stuck to my original conclusion. A little while later, I was stopped out as BCHUSD reached $1280 (where I had set my stop-loss).
Reflecting upon this, I feel there’s a valuable lesson I learned here: keep evaluating your scenarios.
When the triangle was broken upwards, I had expected a little throw-over before a move downwards to the area around $1100. At this point, I should have considered another possibility: that BCHUSD was going to make a WXYXZ-formation instead of sticking to the WXY-formation I had spotted in my original BCHUSD-post.
In previous analysis, I had seen that BCHUSD tends to correct around 50% in a retracement, which would have altered my perception of the situation unfolding to this:
Though the price objective for Z would have stayed the same for me, it would have gotten me thinking about the second X in that formation. My original stop-loss was based on the height of the triangle, not on a possible larger retracement. I should have considered this is a very likely possibility. This would have given me the following adjusted parameters for this trade:
Considering a 50% retracement on the previous XY-wave would have given me a new target for shorting BCHUSD at around $1300. A new stop-loss would, for me, be above a 78,6% retracement of that same wave if combined with increasing volume in the uptrend. These new numbers would have made me increase my short position along the ride up to $1300, with a price objective of $1100 and a stop-loss of $1425, giving a decent R:R-ratio on this particular trade.
Of course, after being stopped out and examining the chart, I did take a new short position at $1300 (as did many others, it would seem), and made up for my previous losses.
Nevertheless, for me today’s lesson is: keep evaluating and thinking in alternatives.
So, now what? Where is Z going? To be frank, I don’t know. I still consider the present price zone to be solid enough, though we even might break lower. However, I’d need more confirmation on that possibility before considering a new short position. For the time being, I’m happy to wait the next day or two out and see what happens. Who knows, we might even go into the area between $900-$850, which I considered a more drastic scenario a few days ago. I will not consider that a very likely scenario until we break the psychological $1000 barrier with volume confirmation.
A few days ago, I noticed a bearish triangle on the BCHUSD 240 chart (see www.tradingview.com/...ngle-last-move-down/). In a previous post, I had come to a price objective of $1130-$1070, so I took a short position within the triangle at the top line, around $1215. I had set a stop-loss above the triangle itself and was feeling pretty confident about it.
Time passed, and BCHUSD start making an aggressive move upwards, breaking the triangle upwards. However, volume didn’t seem to confirm this is a real breakout for me, so I stuck to my original conclusion. A little while later, I was stopped out as BCHUSD reached $1280 (where I had set my stop-loss).
Reflecting upon this, I feel there’s a valuable lesson I learned here: keep evaluating your scenarios.
When the triangle was broken upwards, I had expected a little throw-over before a move downwards to the area around $1100. At this point, I should have considered another possibility: that BCHUSD was going to make a WXYXZ-formation instead of sticking to the WXY-formation I had spotted in my original BCHUSD-post.
In previous analysis, I had seen that BCHUSD tends to correct around 50% in a retracement, which would have altered my perception of the situation unfolding to this:
Though the price objective for Z would have stayed the same for me, it would have gotten me thinking about the second X in that formation. My original stop-loss was based on the height of the triangle, not on a possible larger retracement. I should have considered this is a very likely possibility. This would have given me the following adjusted parameters for this trade:
Considering a 50% retracement on the previous XY-wave would have given me a new target for shorting BCHUSD at around $1300. A new stop-loss would, for me, be above a 78,6% retracement of that same wave if combined with increasing volume in the uptrend. These new numbers would have made me increase my short position along the ride up to $1300, with a price objective of $1100 and a stop-loss of $1425, giving a decent R:R-ratio on this particular trade.
Of course, after being stopped out and examining the chart, I did take a new short position at $1300 (as did many others, it would seem), and made up for my previous losses.
Nevertheless, for me today’s lesson is: keep evaluating and thinking in alternatives.
So, now what? Where is Z going? To be frank, I don’t know. I still consider the present price zone to be solid enough, though we even might break lower. However, I’d need more confirmation on that possibility before considering a new short position. For the time being, I’m happy to wait the next day or two out and see what happens. Who knows, we might even go into the area between $900-$850, which I considered a more drastic scenario a few days ago. I will not consider that a very likely scenario until we break the psychological $1000 barrier with volume confirmation.