Been missing out on solid forex trades recently, so today I decided to go with the flow and play the strong downtrend in EUR/NZD at market.
With both my NZD/CAD long and EUR/GBP short trade ideas not pulling back enough to get me into the trades before the trends resume, it looks like I’m missing out on some sweet setups being too conservative with my entry. Not today my friends!
Today, I decided to go short EUR/NZD, a pair I’ve been watching for quite some time and wanting to go short because of the general bearish sentiment on the euro and the high interest rates in the New Zealand dollar. As a bonus, recent New Zealand economic data has been generally upbeat, including the better-than-expected trade balance data released early in the Thursday session.
So, I’m shorting with small positions in between current market levels and the moving averages highlighted in the four hour forex chart above. My stop is my usual weekly ATR range from the average entry price, and because there are no support levels below 1.4790 (which makes this currency trade more enticing), I used the Fibonacci extension tool to identify potential support levels, purely based on the ideas there are other traders out there using Fib extensions as well. Here’s what I am doing:
Short half position EUR/NZD at market (1.4880), stop at 1.5440, max target at 1.3900
Short half position EUR/NZD at 1.5200, stop at 1.5440, max target at 1.3900
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.85:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!