I knew there were issues with the trade, so I didn't take the first visit, preferring instead to wait for further signs of reversal. I thought we got that in the form of a 90 pip fall from 0.9270, broken trend line, M15 QM and M15 bearish bat at 0.9260 (see below).
In light of this additional confirmation, I took the short at 0.9260, happy to fade the spike resulting from the PBOC's 50 bps reduction in reserve ratio requirements.
But there was a problem...the time of entry...3 hours before US open and outside my stated entry times. If not for this breach I would have been at peace with the outcome, but instead now feel a nagging disappointment.
I have always found the "time of day" rule hard to keep. Saying "no" to a trade on the basis of time is difficult, particularly when you have been stalking it for days, if not weeks. I justified the decision with logic that seemed reasonable at the time, but the rule is there for a reason. Entering into low liquidity is fraught with danger, and last night proved it in spades.
Soon after the Chinese news came word of the co-ordinated Central Bank initiative to reduce interest rates on FX swaps by 50 basis points. AUDUSD rallied 2 cents in 10 minutes, and I got my face ripped off. No surprise that both pieces of news came during low liquidity to get maximum bang for the buck.
Although I could not have anticipated the FED announcement, I would have avoided the spike had I honoured entry times. I'll use this loss to reinforce the importance of entering during the prescribed times. Tough lesson.
