Forex Trade Adjustment: 2014-05-13
It’s just not the euro’s week, is it? It was Draghi last Thursday and now the German Bundesbank commenting on potential stimulus today that had euro bulls running for the exits. With EUR/NZD down almost 200 pips since my entry level and some central bank catalysts, it’s time to trail my stop to lock in profits and create and get more aggressive with my trade.
Because we may be seeing a shift into strong momentum behavior because of the ECB monetary policy easing speculation, I decided to be more aggressive, but still limiting my risk. Instead of waiting for the previous swing low (around 1.5770) to be tested and break, I’m going short hear another quarter position at 1.5860 while moving my full position stop to 1.5950.
I essentially locked in 100 pip profit on my first half position, and if I’m fully stopped out at 1.5950 my second quarter position will take a 90 pip loss. Combined, my worse case scenario is a tiny gain of +0.08% and best case, I’ve increased my profit potential by 50%. To me, it makes sense to risk less and more, right?
Again, the momentum seems to be picking up, so I think the odds are okay that 1.5950 is out of reach for now unless we have an ECB member come out and surprise us with a statement contradicting the recent stimulus rhetoric from both the ECB and Bundesbank.
So, I’ll sit back and watch for now, and if I do see the market retest 1.5770 and break lower, I’ll repeat this process of getting bigger while locking in more profits. Stay tuned!