That is the question. Well, not really. It is a no brainer to know that chasing price is a sure way to increase your risk, decrease your profit potential and, in time, probably blow your account. It can be tough to not pull the trigger when your initial price point was missed. Below, is an example.
This chart, the blue square, shows an order to go long in the GBPUSD. You can see by the placement that the order was placed before price was even thinking of going towards it. The red candles show that price was dropping pretty hard to the entry price and I was rubbing my hands as I noted the strength of the drop. I wanted to fade that move.
Price dropped within 5 pips of my order. That first yellow line was a risk reward area of 1-2 and I would have taken action, banked profit and breakeven stop, at that level. The market didn’t drop far enough. I kept the order in the market because there is clearly a lot more bulls in that area. Today, price came within 3 pips of meeting entry before rallying off for about +80 pips. Missed again.
Could I have just marketed in? Sure I could have and I still would have made profit. That is not a play I do though and doing it and then being rewarded by a winner is dangerous. It can lead you to think that breaking the rules is a good thing. Before you know it, your own trading has fallen from being rule based to simply “whim trading”. I could have altered my entry point and gotten in the second time. The setup I took called for a certain price. Clearly, I was in the right ballpark so changing the price would have been rewriting the plan.
In the end, I cancelled the order and will look further down for an entry. Price could again come to the area and fade a great distance. However, looking at the last rally tells me that the bulls are running out of steam at this point. This is only one trade in the line of many and I will stick to the probabilities. Price is telling a story and I will listen.
