Getting the right balance….

I was watching the Spanish Grand Prix yesterday where Lewis Hamilton and Nico Rosberg, the two Mercedes drivers took each other out of the race. Lewis was behind Nico in the first lap and went for an aggressive overtaking manoeuvre when he saw an opportunity. Unfortunately, Nico saw where Lewis was trying to go and so blocked him off, sending him onto the grass. This resulted in Lewis’s car spinning and crashing into Nico’s, sending them both off the track and out of the race.

Ultimately neither driver was deemed to be at more fault than the other and so it was deemed to be a racing incident which is fair enough as both of them had been aggressive in their own way.

When it comes to trading we have to strike a balance of being aggressive at times and knowing when to back away. For example, should we place a day trade just before Non-Farm Payrolls are released? That would certainly be seen to be aggressive but if it was a different lighter impact news release, it wouldn’t.

There are times as traders when we can be more aggressive in our approach. After a winning spell, many traders will put their foot down harder to capitalise on their gains. Personally, I tend to be more aggressive in the winter months and more passive in the summer due to the lower volumes and my personal desire to be out more.

There are also times when we should generally be more careful in our trading. For example if we’ve had a drawdown, the last thing we should be doing is trading with aggression. We should be reducing position size after a drawdown, not increasing it. That way, it helps us to regain any lost confidence and get back in the saddle knowing that we’re not going to be risking as much per trade. Yes it may then take longer to come out of the drawdown, but it’s better emotionally and protects capital when trading conditions weren’t suited to our style.

Knowing when to trade aggressively and when to back off is all important. Just like our Formula 1 racing drivers, there are times to go for that proverbial gap and times when we should be patient and wait for a better opportunity…..

Over to the markets, the Euro dollar has been an interesting pair this year. It’s had multiple tests of the 1.1450 resistance zone and I believe that longer term, it could want to go for a full scale break of that level yet. But for the time being, looking at the weekly chart, I would like to see the Euro pull back over the coming weeks. It’s currently sitting on its 50dma so that’s not a great place to be shorting from. However, sometimes you can have a view on a market but not necessarily trade that view. It just helps with trading other markets, in this instance the USD/JPY. Anyway, I’ll be looking to see if the Euro does indeed weaken over the coming weeks but am not interested in the noise of the daily chart….


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Thursday, 26th May, 7pm BST

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Charlie Burton,

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