An Experiment

• Tweet

• Tweet

I can’t tell you how many nights I have looked at a British Pound chart and just marveled at the number of pips that pair moves every night. So I started looking for ways to take advantage of this movement. I know that this is probably a bad way to look at it, but there has to be a way to do it.

So I put together a plan (sort of) based on some observations I made of previous price action. It seems like you generally want to fade the initial direction between 2:00 and 3:00 ET. That’s where the gray area is though…what is the direction? Sometimes it’s flat, sometimes it does a fake out.

I put on a position (1k lot) tonight and I faded the initial down move, but almost immediately it looked like down was going to be the prevailing direction of the night…faked out!

So when the position started moving against me, instead of just exiting, I started thinking about how I could take advantage of it. I decided to experiment with a hedge. I have never really used this feature before, but it may be a good way to at least take a position before the market starts to move.

This was probably the worst entry in the history of trading, but I’m starting to understand the value of being able to hedge. I didn’t hedge until I was down 24 pips and I didn’t take off the long until it was down 124 pips.

But I am now up 111 pips on the short position and it looks like it may have more room to run to the downside if it can overcome the 2.0100 psychological barrier. Anyway, I’ll analyze how this trade came out when I close the short…more to come.