Hit by the the holidays! Thanks to an invalidated technical setup and a couple of hawkish speeches from Fed members, I had to close my EUR/USD forex trade this week.
Original Trade Idea: Riding EUR/USD’s Uptrend!
As I’ve mentioned in my original trade idea, I bought EUR/USD at market after the FOMC statement revealed its lower growth and inflation projections as well as some dovish biases. At the time I took advantage of a rising trend line support on the 1-hour chart as the basis of my entry and exit orders.
Unfortunately for my trade, the pair drifted lower in the days that followed, mostly due to a lack of new catalyst to boost the pair. I even held the position open over the holidays in the belief that the pair would go back to its uptrend.
Instead, the pair just traded along the 1.1150 area while the 100 SMA crossed below the 200 SMA. Though the fundamental basis of the trade was still valid, it was no longer supported by the technicals on the 1-hour time frame.
I decided to close at market (1.1192) ahead of Yellen’s speech, which resulted to an 89-pip loss (-0.16%) for my account. Though Yellen’s speech eventually pulled the pair back higher, I think that closing an invalid setup was a good idea at the time.
In my next trades I’ll concentrate on placing looser stop losses or even using higher time frames. This way the trade can withstand more volatility as long as the fundamental part of the trade is still valid.
How about you? Did you have any trades that were affected by the holidays or by Yellen’s event this week?
P.S.: Remember to never risk more than 1% of a trading account on any single trade and to adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Better yet, read the Risk Disclosure!