Trade Closed: 2010-05-17 22:10
Oopsie, there goes my trade idea! I’m not feeling bad at all, because I think it was one of those trades that you risk very little and get paid in spades if it goes your way. Besides, I only put half my usual position size.
I’m not an expert in risk management but I think this is an example of a trade that newbie traders like me could learn a lot from. Even though the trade goes against the overall trend, I have managed my risk well and had the guts to put on a position.
Forgive me for being a cheesy but, in trading, just like in romance, you have to put your heart on the line to find true love!
Total Loss: -160 pips / -0.5%
Trade Idea: 2010-05-12 23:10
First of all, I think that with the recent developments of the EU–IMF bailout plan, we could see a brief euro relief rally. I think that European leaders from all sides will do their best to calm the markets and express confidence that the bailout plan will work. After all, what choice do they have? If they show more signs of uncertainty, it would just make things worse. It’s kinda like when a girl asks you how she looks – you have no choice but to say that she looks beautiful right?
Secondly, I think that all these concerns regarding the euro zone’s problems have already been priced in the markets. I don’t think we’ll see as wild swings anymore and quite possibly, last week’s dip to 1.2525 could be a bottom!
Looking at the economic calendar, I don’t see any red flags coming out today, so we may see more range like trading for today. With no major news from the euro zone, I don’t see any catalysts to push the euro even lower.
“Okay, given those things, what about the technicals Huck?”
Ah, well, this is the easy part. As you can see from the 4-hour chart I posted above, the pair is finding some serious support at the 1.2600 psychological handle. Notice that long-shadowed candle from last week? Yes, that red one… To me, that means that buyers were waiting at this support level to take the pair higher. I’m thinking we could see the same this week, as the pair refuses to go under 1.2600 and stochastics showing oversold conditions.
With that said, I’m buying in market hoping that the pair would go up to this week’s high at 1.3000, which would consequently form a double bottom. In case it breaks out, I’ll be setting another profit at 1.3350, last week’s opening price. As for my stop, I have placed it just below last week’s low at 1.2490.
I’m going to keep an eye out tomorrow though, since US retail sales figures are due. It is expected that sales rose once again by 0.3% last month, while the March’s figures could be revised up from 1.6% to 1.9%. This may just spark another run of risk appetite, which may send stocks higher. And if stocks rise, what does that mean? Well hopefully, the euro will follow suit!
Here’s the plan:
Long EURUSD at market (1.2650), pt1 at 1.3000, pt2 at 1.3350, stop loss at 1.2490.
Since this is a counter-trend trade, I will risk only 0.5%, half my usual position size. Wish me luck and don’t forget to add me up on MeetPips.com!