Trade Closed: 2011-3-21: 1:29
I think I jinxed my trade again by calling 1.4000 a top! Boo! After I entered my trade, EUR/USD only dipped to a low of 1.3751 before skyrocketing past the resistance at the falling trend line and stopping my trade out at 1.4050. Drats!
I thought I’d hold on to my trade amid fears of a nuclear breakdown in Japan. Too bad for me, the mixed U.S. reports didn’t give the dollar enough espresso shots to rally like a 5-year-old on a caffeine high!
I’m definitely not happy that I lost on this one, but I’m not gonna let it rain on my parade. As far as I know, I had a sound trading plan. The market just didn’t go my way. And besides, this is only my second loss of my discretionary trading system this year!
Sometimes, that’s just how the cookie crumbles.Surprise news may help some trades, but prove to be detrimental on others. Let’s just see what kind of trade ideas I come up with next!
Closed at 1.4050: -159 pips / -1.0%
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Trade Idea: 2011-3-9 1:21
As you can see from the weekly chart, EUR/USD has found resistance right on the falling trend line that extends AAALLL the way back from July 2008. When I saw this, I knew that I had a good trade in front of me and it was just a matter of zooming in to a smaller time frame for a more precise entry.
On the daily chart, I noticed that a “three inside down” candlestick formation has appeared. I have learned from the School of Pipsology that the “three inside down” candlestick formation is a very strong reversal pattern and could mean that the bears are starting to take control again. My short bias is also confirmed by the divergence between price and Stochastic.
This is a long-term trade so I plan to milk it for all its worth if price goes in my direction. While I’m ultimately aiming for 1.3000, I’m going to add to my position every time price falls 160 pips but also move my stop loss 160 pips to make sure that my total risk does not change. I believe my trade idea will be invalidated if price breaks the falling trend line and goes above this year’s high.
Alright, that’s it for technicals… Let’s move on to my fundamental reasoning.
Yesterday, ECB Member Axel Weber talked about the possibility of inflation in the region being stronger than it is perceived. That should have been bullish for the euro, right? But guess what, it still lost against the dollar!
I did a little research and found out that Greek bond yields skyrocketed to record highs yesterday. Portuguese and Spanish yields have also been on the rise lately which could mean that the focus is shifting away from an ECB interest rate hike and moving back to Europe’s debt crisis! Hmmm, can anyone holler risk aversion?
Rumors about the Fed scrapping the “extended period” portion of its usual rhetoric are also making me more giddy about my trade. But I guess we’ll have to see a handful of sexy digits to fuel this speculation. I’ll be sure to keep my fingers crossed for better-than-expected figures from this week’s roster of high-caliber reports which includes data on employment, trade balance, and retail sales.
Once again, here are the details of my plan:
Short at market (1.3891), sl at 1.4050, pt at 1.3000, add every time price falls 160 pips from my entry.
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