Got updates on my last two forex trades! Notice that I closed both right before major central bank events. Did I make the right decisions?
Almost a month ago I shorted EUR/USD right after the FOMC minutes hinted at a rate hike. It was a pretty good deal to buy the dollar especially since Mario Draghi and his friends were busy hinting at more stimulus. Fast forward to early December when I adjusted my stop loss right before the actual ECB decision. It turned out to be a good play, as EUR/USD JUMPED when the ECB did announce more stimulus. Talk about selling the rumor and buying the news! I ended up closing my position 75 pips (+0.30%) lower than my entry levels.
I’m taking cues from my EUR/USD trade and taking off my trade before a major central bank event. This time I closed my USD/CHF position at .9906 and incurred a small loss (-0.08%) after buying it at .9935 last week. See, I zoomed in on the 1-hour time frame and saw that the .9900 “support” that I was watching was turning out to be a resistance area. It also doesn’t help that the 200 SMA is hanging over the bulls’ heads. Of course, let’s not discount the fact that market players have been pricing in a Fed rate hike for the longest time and we could see massive unwinding of positions if and when Janet Yellen and her gang decide to bite the bullet and raise their rates.
What do you think? Would you have done the same and closed positions ahead of big events such as central bank decisions?