Just to prove you are never too old – or too experienced – to learn a lesson (actually, relearn the same lesson over again) I concentrated on the AUSUSD (Australian dollar/US dollar) currency pair today. I got a late start (about 10:00) and being Friday, it would be a short work day.

Taking a quick look at the action in the AUSUSD, shown in the chart displayed in Figure 1, I noticed that the trend has turned up and price has twice been rejected by the SRV at .90370.

Figure 1

Then I made a major mistake – especially for a short term technical trader – and decided that price would likely go up and break that SRV at .90370. If that should happen, there is a very large space above for price to move upward with scant resistance. I am now predisposed to trade the long side – and I just gave away a substantial portion of my trading advantage.

I now have a predisposition to be long and therefore I will largely ignore situations that might make a short trade desirable. Not a good state of mind for a short term trader. Short term traders are supposed to not care which way price moves – only that they are on the winning side of the move.

I know I am not supposed to let myself fall into such a trap – but I guess my mental acuity was a bit dull today.

Suffice to say, that I worked hard – made several trades – all on the long side. Price tried repeatedly to break the SRV at .90373 but could not. I ended the day frustrated and with a very small net loss.

But I should have not had any loss – I should have made money. The signs were there – but my predisposition to be long blinded me to several clear signs that the market was going to move to the downside.

I still think that price is going to break that .90370 SRV and make a very nice move to the upside – but that will have to wait until next trading week. I will be watching for it – but I will trade the short side if the signals so indicate!

A good short term trader must always be open to trade in either direction. I knew that then – and I know it now. But for one day I forgot about it. Short term trading reminds me of piloting a small airplane (which I did for many years) – safe if done correctly, but can be extremely unforgiving of even a small error.

Fly safely.

 

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