During our 11AM mentoring session today a good trade was presented and failed for 5 reasons.  Let’s review this trade and those reasons, with the hope that it will help you think through future trades.

FXCM has been In Play into the end of year, rising from 11-25, as you can see from the chart below.

The trendline broke below 20 and traders started looking to short pops. 

One of our traders discussed a short from today as seen by the chart below.

The short at 16.60 had five variables against it:

• the trade was made at reversal time- 10AM
• the consolidation pattern was short in duration around this level
• FXCM was 50c from VWAP
• while FXCM looked weak, we were still in the Price Discovery time of day
• it has a very high short interest that breeds spikes and pops, stopping out shorts

The short idea was a good one overall.  Perhaps just not at this price and time.  As traders we must not only be right about direction, but enter at the right time, while controlling our risk.  In this case, there were five reasons the trade failed.

I hope this helps you think through your future trades more comprehensively. 

*no relevant positions