Flipping your Trade BiasAs a currency trader, it is important to be able to flip your bias on a market as soon as possible provided you have objective technical evidence to support this flip. Too often, traders are influenced by a third party’s opinion about a long term trade bias that may be generated from fundamental analysis which is highly subjective. They tend to hold this bias for too long and end up taking counter trend trades resulting in losses or attempt to hold onto an open position and aiming for a huge profit target target which rarely eventuates.
We have found the technicals often paint a very clear picture regarding the stance on trade bias and you can often find your ‘Line in the Sand’ fairly quickly on a chart.
Attached is the Daily chart for AUDNZD. We have just flipped our bias from bullish to bearish after the recent bearish daily close. This means in our minds, we should only be looking for shorting opportunities since we believe the market is now in a bearish trend. It is important to stay in tune with a market’s bias so you know you are trading with the trend and not against it.
A trade bias is usually flipped when a major key line (horizontal and/or trendline) has a strong daily break and close.
