Cross-Eyeing: Day Trade on EUR/GBP – Trade Closed

Trade Idea: 2011-09-09 01:55

EUR/GBP 1-hour chart

Boy, where do I begin?! WATR held like a champ and EUR/GBP dropped like a rock, falling over 130 pips without so much as looking back! Great news, right? Well… not quite.

You see, I had planned from the very beginning not to hold the trade open once the BOE and ECB held their interest rate decisions. It would’ve entailed too much event risk for me, so my plan was to close the trade an hour before the statement releases.

And that’s exactly what I did. Using a time stop (if you don’t know what that is, read up!), I exited my trade at a 9-pip profit, which gave me a return of roughly 0.3%.

Closed trade manually at .8821: + 9 pips / +0.3%

Little did I know that the pair would eventually dive down past my profit target within a matter of hours!

While risk aversion had a hand in weakening the euro, what really dragged it down was ECB President Jean-Claude Trichet basically killed all hope for further tightening in the ECB press con. Not only did he announce that the central bank downgraded its growth forecasts for the economy, but he added that inflation risks to the upside have subsided. What a euro-killer!

Though it sucks to have missed the bulk of the move down, I can’t say I have any regrets. If I could go back in time, I wouldn’t have played it any differently. Closing before big events is always a wise thing to do if you want to avoid unnecessary event risks. It could’ve gone either way. If I had kept the trade open and price moved against me, I’d feel even more frustrated than I do now.

In any case, I’m glad I was able to walk away from this trade with a little somethin’ somethin’ in my pockets. I know some of you (Pipherder, Forex_Vendetta, and sampat369) got a bigger piece of the move. Here’s to more pip-tacular trades in the near future! Thanks for following, guys!

Trade Idea: 2011-09-07 05:13

EUR/GBP 1-hour chart

I’ve noticed that EUR/GBP has been providing some pretty good trade opportunities lately, so I decided to take a closer look at it this week. My eye is burning right now, not because I’ve got an irritation, but because I spot a pretty sweet setup on EUR/GBP once again.

After dropping late last week, the pair has retraced back up and is now slowly approaching a key area of interest at around .8830. How key has this level been? Well if you scroll back on your charts, you’ll see that over the past few weeks, .8830 has proven to be a solid support and resistance level. It also happens to line up perfectly with the upper WATR. I think that we may see a similar bounce from this level today, which is why I’m looking to short in that area.

I’m setting a pretty tight stop of just 30 pips, as I feel that if price goes beyond that level, it will just head off to test previous highs at around .8885. Also, since this is a Fibonacci retracement play, I think I can play it a little tighter than I usually do.

The reason why I like this trade is because of the awesome reward-to-risk ratio. I’m looking to take profit if the pair hits .8750, which will give me a net gain of 80 pips. That equals a reward-to-risk ratio of 2.66:1 if everything goes to plan! I know what you’re thinking – that’s slamtastic!

Short EUR/GBP at .8830, stop loss at .8860, take profit at .8750.

I will close this trade within the next 24 hours though, as we’ve got the Bank of England and European Central Bank making their monetary policy statements tomorrow. While neither are really expected to make any changes, you never know what kind of market reaction the decisions and accompanying rhetoric will elicit. Just look at what happened to EUR/CHF after SNB officials opened their mouths yesterday!

For now, I’m just gonna chill and see how this all pans out. In the meantime, I’m going to try to find some live streams of the FIBA basketball tournaments. The way the lockout is going, I ain’t too sure if we’re gonna have an NBA season next year!

If you have any other cross trade ideas, hit me up on Twitter or on Facebook, and who knows, I might just join you!


  • Pipherder

    A picture is worth a thousand words:  Here is a composite screen shot.
    It shows the set up and then the result.  

    I am amazed at the trade.  

    Thank you, Cyclopip!

  • Faisal Ahmed

    Hi, i have been following your Setups and they are great, but only manage to get on with them late or when its about to endm just because i see your blogs late as i have full time job. which is the best way for me to follw you or get your blogs as soon as you post them?
    thanks

    • cyclopip

      Thanks for following, Faisal!

      I usually use my Facebook (https://www.facebook.com/Cyclo… and Twitter (http://twitter.com/#!/cyclopip… accounts to give more timely and up-to-the-minute updates on the markets. I also use them to announce any new blog entries the minute I post them. Feel free to follow me, buddy!