Yesterday, I added to an AUD/USD short position established the previous day at 1.0753. The second entry level was 1.0648. Overnight, I’ve suffered a “dirty” stop out – the market

moved up through the stop loss level, but is now back below the entry level.

This is the “two edged sword” of trading 24 hour markets. Trading overnight means less slippage – in particular, less gaps. However, it can also mean the frustration of coming in to a profitable level on the AUD/USD, but no longer having the position.

You can follow the trade as it unfolded:

http://blog.cmcmarkets.com.au/2012/02/21/sell-audusd-on-riskreward/

http://blog.cmcmarkets.com.au/2012/02/22/sell-more-audusd/

All is not lost – I’m still short from the original entry (the stop loss order for the original sell is above 1.0700, and the overnight high was 1.0686).

What to do now? Here’s the daily chart:

You can see why I’m happy to stay short – the up-trend is clearly broken.  I still want to add to shorts, targeting 1.03990 and possibly 0.9865. I won’t let a dirty stop out deter me from my trading plan – to maximise gains where the trade is right.

Where to increase my shorts? I’ll re-enter on a move up towards the overnight high, and SELL AUD/USD at 1.0680, with a stop above 1.0700. Alternatively, I’ll SELL AUD/USD on a breach of yesterday’s low, at 1.0605, with a stop above 1.0620.