Back To The Classics: USDCHF – Trade Closed

PoD Chart

Boo-hoo, I just came back from work and I found out that my USDCHF trade got stopped out. It seems that I made the mistake of keeping my order open far too long. I should’ve closed my order when I saw the pair make a new low as this invalidated the Fibonacci retracement levels that I drew when I first cooked up the trade idea. At the very least, if I still had that short bias, I should have adjusted my short orders for a more appropriate price.

According to Pip Diddy, the risk aversion switch was turned on when a Chinese official said that global recovery might be uneven. Traders also grew tired of the lack of “positive” economic data and started to doubt that recovery would be sustainable once government stimulus programs have ended.

Stopped out at 1.0185
Total: -60 pips / 1.0% loss

Trade Idea: 2009-11-09 21:45
PoD Chart

The first day of the week got pretty hectic for me because, well, people needed their coffee to wipe out their Monday blues! I got home late last night and, after freshening up, I decided to read up on what happened in the forex world…

It seems that dollar weakness dominated on Monday, after reports indicated that G20 nations want to keep stimulus and interest rates at current levels. I don’t think this is too good for the dollar… Just yesterday, we saw the greenback get dumped! Also, with more and more people speculating that US interest rates will stay low until 2010, then fewer people would want to invest in the USD, right?

Anyway, when I looked at the charts, I noticed a nice setup on the USDCHF 1-hour chart. The pair just broke below support at 1.0130 and tumbled down. The 50% Fibonacci retracement level of the latest swing move is nearly in line with the broken support level. This level also coincides with the previous week low. Given this, I suspect a lot of sellers are just waiting to short the pair at a much better price, especially since the pair is forming a bearish divergence.

The pair moves, on average, 100 pips per day so I will place my stop at 1.0185. I believe that, assuming the trade gets triggered, the pair only has 50 pips to climb before the buying pressure gets exhausted. In addition, 1.0185 is also beyond the 61.8% Fibonacci retracement level.

Here’s what I will do:

Short at 1.0125, profit target at 1.0050, stop at 1.0185.

As usual, I will adjust my position size to make sure I risk only 1% of my account. I also plan to close the trade before the European session ends.

  • PRN

    Hi Huck. Intrestingly enough I had axactly the same trade idea since the support was broken!! I put a sell limit order on Monday (yesterday) which hasn’t been triggered yet. We differ slightly in the entry and TP. My entry is at 1.0140 and TP at 1.0070 as I would not want it too close to the swing low (1.0054). I like you analysis of the potential trade…

  • Huck

    Hey PRN, thanks for reading my blog! It’s good to know that we’re kind of in the same boat on this one although I don’t think our entry orders got triggered. The price just bounced off the 38.2% Fib level…

  • PRN

    Hi Huck. Intrestingly enough I had axactly the same trade idea since the support was broken!! I put a sell limit order on Monday (yesterday) which hasn’t been triggered yet. We differ slightly in the entry and TP. My entry is at 1.0140 and TP at 1.0070 as I would not want it too close to the swing low (1.0054). I like you analysis of the potential trade…

  • Huck

    Hey PRN, thanks for reading my blog! It’s good to know that we’re kind of in the same boat on this one although I don’t think our entry orders got triggered. The price just bounced off the 38.2% Fib level…