Closed Order: 2013-12-19 13:50 ET
Bah Humbug! It looks like my conservative nature ahead of the Fed decision kept me out of another nice move in EUR/GBP. Missed moved means it’s time to close my orders.
The Federal Open Market Committee decided to reduce the Fed’s bond purchasing program by $10 billion, and re-assured the markets that interest rates will remain low until their unemployment target (6.5%) is reached.
It was risk-on for traders, and between the euro and sterling, the latter won out on the day as it continues to dominate against its major counter parts. This means no pullback on the session to my short entry at .8425. With the market now exhausted at the PWL and the weekend coming up, I’ve decided to close my open orders. No trade.
In retrospect, if could have easily blown up in my face in the other direction, but it didn’t.
So, to be better open to all possibilities, I’m gonna change up my entry technique in that I’m not going to let every major event throw me off from entering at market, especially on breakout plays like this. I’ll look into jumping in with small positions and wide stops ahead of big events and add/trail stop accordingly once the event has passed. I’ll give this technique a try more in 2014.
That’s it for me for 2013! It was a blast blogging and dancing with the markets this year. I’ll review it all very soon, so stay tuned to check out how I did and my thoughts on improving my processes for the new year!
Trade Idea: 2013-12-18 12:16 ET
Thanks to some very bullish data, EUR/GBP finally saw a break of its rising consolidation behavior today. Is this a new leg to the downside?
Today, we got a drop in the UK unemployment rate from 7.6% to 7.4%, as well as a positive surprise in claims (-36.7K vs. -35K). We saw a broad Sterling rally, and in terms of EUR/GBP, it was a breakout of the rising consolidation behavior that I noted in my Weekly Watch.
I’m ready to buy some British Pounds again as I think this could be a signal to traders to start jumping short into this pair, especially on the higher timeframes where there are lower highs and lower lows. Now, stochastic is indicating this move may be overdone, so I’ll be a bit conservative with my entry since today is FOMC decision day on the Taper; it could have a broad affect on the currency markets.
So, my short entry will be around the 50% Fib of the move today, with a stop that is one-half the weekly ATR. My target will be the previous week low. Here’s what I am doing:
Short half position EUR/GBP at .8425, stop at .8475, soft profit target .8350
This initial position gives me a potential return-on-risk of 1.50:1, on 0.50% risk. If the market does go my way and we see a strong break of my soft profit target at .8350, I may scale another position to maximize my profit.