What did you do once you entered the trade? Sit and wait? Or follow up the trade and try to find confirmations of your trade? What I would do with this chart, but surely not advice how to trade: If I look at the fast MA, I see that in previous longs, once in a trade the price stay above this MA, and even if price goes thru the MA the price is already higher than the entry price. (14 jan 18:00 and later) After you entered LONG, the MA was touched 1 time (about 10 minutes after entering), later was broken 1 time (around 15 jan 01:00) but the price wa still higher or at the entry level, and broke again (around 15 jan 02:15). This last broke should raise some questions as this did not happen in previous longs. In general you should always be on the right side of the MA, and you were clearly not anymore, you even touched or broke the MA three times. This is not really a confirmation of a good trade LONG to me. And a last remark: You wrote:I had no way of knowing what it would do. Of course you knew what to do: not get in a trade if you don't know what to do. In trading you ALWAYS know what to do, even if you don't know what to do.
Here's the hindsight answer to your hindsight question about "I had no way of knowing". Yes, there is a way of knowing and it involves being prepared if the price had continued higher and it involves being prepared if the price had rolled over southward (reversal). That's the issue with most traders...they are not prepared for both possible outcomes. Instead, they get married to one possibility and when the other outcome occurs instead...they get stopped out for a loss, breakeven or small profit and they sit there watching the price continue downwards with them on the sidelines just watching. I sometimes called that type of trading as a trader trying to outsmart the market instead of trying to make a profit...a trader that's fixated on one outcome instead of being fixated on two possible outcomes. An institutional trader once called such "dynamic trading" when you're prepared to take action on both possible outcomes. That pullback analysis you made at the moment of your trade was correct. Yet, you were not prepared if the price action "changed" after your entry regardless if it was 5mins later, 1hour later, 1day later or 1month later. Then when that price action rolled over southward...that's the other outcome (Short position) and you were not prepared to exploit that outcome because you were only focus on one outcome involving the price pullback continuing higher to make you money on that Long position. Therefore, the real question for you is this. Did you or did you not get a Short signal when it rolled over southward. This is something you need to seriously think about because a small profit, breakeven or small loss on that Long position is normal but missing that down movement is not normal. Once again, the goal is to be profitable and not to try to outsmart the market because the market is always smarter than us but we can still make money via being prepared for both possible outcomes. This is why its strange when I hear people say I only trade pullbacks or I only trade reversals or I only trade trends or I only trade range. Those are traders trying to outsmart the markets instead of being prepared for both outcomes when their trade doesn't work as planned. Simply, don't get fixated on one outcome (trying to outsmart the markets). Instead, be prepared to be wrong and then be prepared to for the other possible outcome so that you can exploit it. If you're prepared for both possible outcomes and you don't get a trade signal when the other outcome shows up...that's ok and you just wait for the next trade opportunity to show up. P.S. I do understand you were only talking about one trade position (Long position as a pullback trade) and that its possible you actually did recognize later that reversal price action resulting in you Shorting soon afterwards. If such happened for you...you were prepared for both possible outcomes (dynamic trader). That's why dynamic traders can be very profitable with a 50% win/loss ratio instead of trying to be right. They have a strong understanding that the goal is to be profitable and you can do that via being prepared for both outcomes.
So instead of just taking a stop, maybe you should always reverse the position AJ. Everytime you are stopped, take a trade in that direction
NO, because you might get "whipsawed". That means that at the moment you reverse your trade, the markets might be close to reversing again, which means stopped out again. If you are stopped, wait and take your time to study the situation and then try to find a good entry for the next trade. That trade can be long again, or short. You can be stoppped because you were completely wrong, or you can be stopped because timing of entry was not good. Makes a hell of a difference for the next trade. I see that in the meantime a chart from AJ2014 shows perfectly what I mean. Reversing resulted in another stopped trade. Could be avoided.
That implies you were still looking for Long signals until you were able to identify the price action as reversal (new price direction) around 08.05am. Did you get a Short signal anytime after that ? If so, you were then prepared for the other outcome. In contrast, had you identified its a reversal by 08.05am and it continue downwards for many points...you were not prepared for that outcome unless you were busy doing other things. By the way, in that other chart where you implied doing "position reversals"... I'm not a fan of "position reversals" involving the exit of a position is also entering a new position in the opposite direction. Simply, a stop out for a loss doesn't imply its a reversal signal because it could imply your Long entry was poor but the price direction is still bullish. Thus, that's an issue involving "stop placement" and "position reversals" as having more merit then the identification of the price action as a pullback or reversal. In fact, those I know that attempt to do such...they actually did not have a trade signal into the opposite direction. Instead, they were using their stop/loss placement as a trade signal for position reversals...stop placements to me are not trade signals. In contrast, if you get another trade signal in the opposite direction 1min after your exit, 1hour after your exit or 1day after your exit...take it instead of staying on the sidelines thinking about the prior trade. Thus, you're allowing yourself to trade both possible outcomes. That's where your identification of the price action comes into play. If you're Long in a pullback and you later see the price action change and you then identify it as a reversal...wait for a trade signal and then go Short. If you don't have a trade signal...there's nothing you can do. If such happens a lot or too many times...you then need to develop a plan B for those specific situations so that you can be prepared for both outcomes. Once again, the key is to be prepared for both outcomes regardless to the amount of time between when its a pullback price action to when it became a reversal price action. In contrast, instantly switching a trade position into another trade position via one trade execution as a "position reversal"...I don't recommend such because stop placements are not trade signals unless its just a coincidence that you got another valid trade signal when your stop was hit.
I am asking some very simple questions, in that if anyone posts some information about chart reading, then it makes perfect sense for the person to post an actual example with a live chart, otherwise the discussion is meaningless. J_S