EUR/USD: Shorting a Retracement – Trade Closed

Trade Closed: 2010-12-7 1:42

EUR/USD 1-hour Chart

Eeeeep!!! It looks like the markets aren’t willing to go back to fundamentals anytime soon! My order got triggered and stopped out on the same day! The upside surprise on China’s manufacturing PMI sure threw a mean curve ball on risk sentiment.

With that piece of news, mixed in with strong economic reports from the U.K., the U.S., and the euro zone, my trade had no chance! The sudden burst of risk appetite boosted EUR/USD to an intraday high of 1.3182, which was enough to hit my entry order and my stop loss. *sniff*

Ah well, it was all part of the risks I took with that trade anyway. As soon as I finish my second massage for the week, I’ll get back to those charts and move on to my next trade!

Trade Idea: 2010-12-1 1:19

EUR/USD 1-hour Chart

I hope it’s not too late to short the EUR/USD! It has fallen quite a bit (yes, I know that’s an understatement) since I last tried to short the pair, but I think it could go lower… especially now that Spain’s and Italy’s debt problems are starting to hit the limelight.

If you don’t know what I’m talking about, then you clearly have not been reading Forex Gump’s posts on the latest forex news events! Personally, I think they’re pretty amazing, as it allows a noob like me to understand complicated macroeconomic concepts and apply them to my trading.

In any case, I do agree with Forex Gump’s view. I believe that the spotlight remains on euro zone’s debt troubles, which means traders will try to find ways to short EUR/USD as much as possible.

There is one particular news event that could really botch my trade though… Of course, I’m talking about the upcoming NFP report on Friday! If the actual figures come above forecast, then we may see traders set aside their euro zone debt concerns and trigger a wide-reaching case of risk appetite. And that, dear readers, is very bad for my trade idea!

Now, if you take a look at the 1-hour chart, you’ll see that price is slowly creeping up to the Fibonacci retracement levels.

I drew the swing high at yesterday’s high and the swing low at yesterday’s low. I’m thinking of catching a pullback right at the 50.0% Fibonacci retracement level since this seems like a reasonable destination. I believe there will be enough volatility from all the economic reports that will be released later for my trade to trigger.

As for my stop loss, I’m setting it right above yesterday’s high at 1.6165. Hmm… I’m eyeing 1.2980, the recent low, as my first profit target. And I’ll be taking the rest of my position off at 1.2900, which should help improve my risk-reward trade-off.

Short EUR/USD 1.3060, pt1 at 1.2980, pt2 at 1.2900, stop loss at 1.3165.

That’s all for now! Off I go to get a much-needed manicure! And don’t forget to follow me on MeetPips.com. Toodles!

  • born2rich

    best luck to you… loonie….

  • born2rich

    best luck to you… loonie….

  • Buckscoder

    THIS trade was a bummer. ;)

    I’d just stick to your system if yours is profitable. Why collect losses with such trades? Or do you trade with demo “money”?

  • TalonD

    I was thinking that was a retrace also, I shorted at 1.310

  • Buckscoder

    THIS trade was a bummer. ;)

    I’d just stick to your system if yours is profitable. Why collect losses with such trades? Or do you trade with demo “money”?

  • Huck

    @BuckscoderI trade live, but I think it’s not that I’m collecting losses purposefully, it just so happens that sometimes I win, sometimes I don’t.

    I like to have both a discretionary and mechanical system. I’d like to think I’m still a newbie, so I’d like to explore my options first to find out what works best for me! :)

  • Huck

    @BuckscoderI trade live, but I think it’s not that I’m collecting losses purposefully, it just so happens that sometimes I win, sometimes I don’t.

    I like to have both a discretionary and mechanical system. I’d like to think I’m still a newbie, so I’d like to explore my options first to find out what works best for me! :)

  • Buckscoder

    Thanks for your answer, Huck! :)

    I was in your position, too. I found out that nothing beats a good system. I explore as well, but I wouldn’t trade live based on that anymore. If I find another edge, I build a new system around that, check it and if it works: Here we go. ;)

    In my opinion, discretionary trading is good for position traders, because then fundamentals play a bigger role. If you go to intraday, it will be hard to make consistent money with that.

  • JamesJones

    If I were you. I would learn how to count waves because a ABCD pattern just played out on the 4hr chart. That’s why your trade did not work.

  • JamesJones

    A fibo strategy works very well if you know your wave counts but if you do not you will get burn more often than not.

  • Buckscoder

    Thanks for your answer, Huck! :)

    I was in your position, too. I found out that nothing beats a good system. I explore as well, but I wouldn’t trade live based on that anymore. If I find another edge, I build a new system around that, check it and if it works: Here we go. ;)

    In my opinion, discretionary trading is good for position traders, because then fundamentals play a bigger role. If you go to intraday, it will be hard to make consistent money with that.

  • JamesJones

    If I were you. I would learn how to count waves because a ABCD pattern just played out on the 4hr chart. That’s why your trade did not work.

  • JamesJones

    A fibo strategy works very well if you know your wave counts but if you do not you will get burn more often than not.