4 Dec 2014: USDCHF daytrade

This was a discretionary trade on the USDCHF. 

The European Central Bank had just held a press conference, causing the USDCHF to plummet like a rock. While the H1 and H4 charts showed bullish momentum, I didn't think the dive on the USDCHF was worthy of fading, and so stayed out. Market movements around central bank decisions are usually authentic and un-trappable. 

When price formed support, I saw the break of this support level as a good area to go short, using a very tight stop loss. I knew that short-term momentum was extremely bearish, and it wouldn't take much to break this support level.

When the support level did break, I entered short with a VERY tight stop loss. My reasoning was that this support level was either going to collapse entirely on its first test, or it was going to hold strong and trap alot of bears. If it was going to collapse, then you don't need a large stop loss. Price should pass through support like a hot knife through butter.

Indeed, this is what pretty much happened. However, there was a tiny bullish retracement. It wasn't that big, and it didn't hit my stop loss. However, I decided to manually close it at breakeven, just in case.

Price resumed moving downward, hitting my intended profit target at 4R. 

I think the lesson is that if your stop loss is very tight to begin with, there's little need to get out at breakeven. A tiny loss is almost as inconsequential, but I missed out on a relatively large reward of 4R+. 

The premise of the trade was very good. The management of the trade wasn't as good.

(click to enlarge)