Yippie! The Week Ends With a Win

At our level of trading, most of us are technical traders. That is, we look at candles and indicators and make our trading decisions accordingly. As mechanical measures go, the 3am Grid is no different in that regard. Based upon hundreds of observations it makes a measured recommendation. This does not obviate the need to pay attention to announcements and other macroeconomic indicators.

The Prediction

Yesterday, the 3am Grid predicted that the GBP would travel another 48 pips with an 81% probability. This was a strong indicator.

Retail Sales Announcement

By 5:15am the SELL at 1.4575 was tripped taking me into the trade. I knew that at 5:30am the monthly UK Retail Sales numbers were going be announced. Since the GBP economy had been tanking for the last few months, I deduced that perhaps the predicted shitty -0.3% falloff in sales might be lower.

As you can see from the chart on the right, the GBP trips the SELL but is hovering over the SELL while the market waits for the announcement. I did two things to prepare for the announcement:

1. I tightened up my STOP to 30 pips, because no matter what you think, you have to consider your down-side.



2. I loosened my LIMIT from 1.4527 to 1.4501 figuring that the GBP would likely blow through the prior day's low and find support at the next even numbered price.

BOOM, the announcement's made. The predicted -0.3% was obliterated by a -1.9% actual! The GBP plunges, but immediately bounces back across my SELL. Bummer.

Now I have a dilemma. I know that in a couple of hours the US is going to announce the monthly Unemployment Claims. Living through one announcement is stressful enough, living through two could be deadly.

Knowing the Exit

I was agonizing over this trade. When faced with indecision, I ask myself, "Why am I in this trade?" I go around the horn to the different charts. The 240, 60 and 15 minute charts were all registering overbought conditions to a greater or lesser degree, but definitely all showing overbought.

I'd noticed that 30 minutes after the GBP announcement, the GBP was approaching the prior day's low and it quickly retreated back above it. Obviously no one wanted to keep the GBP below the prior day's low when the US Unemployment numbers might drive it up significantly. That logic stream only gave me one option. I tightened up my STOP to breakeven and resolved to get out when the GBP approached the support again, reasoning that the natural tide of being overbought would have it flirting with the low again before the US markets opened.

I rewarded for not panicking when the GBP dropped again briefly below 1.4540. At 1.4530, I was at 95% of my day's goal and I GOT OUT. A not too shabby 45 pips gain for the day.

Moments Later Karmic Satisfaction

At 8:30am, the US numbers get announced. They came out at about what was expected, 650 thousand unemployment claims. The market surges up, then starts a huge falloff. I was on the sidelines. I'd made my money for the day.

Bottom Line

Announcements can make or break your day. Your strategy, no matter how well thought out, can be run over by the news. Probabilities, indicators and chart reading all great, but knowing when to get out is still an art.