Trading The News: Lesson Learned!

Trade Update: 2011-6-16 00:14

GBP/USD 1-hour Chart

Surprise, surprise! The U.K. Claimant Count Change report came out worse than expected yesterday, which resulted in a drop in Cable. In addition to that, risk aversion hit the spotlight again as EU finance ministers failed to come to a conclusion regarding Greece’s bailout.

Ugh, sentiment is as fickle as… well, me. One day traders are all happy and giddy buying up the pound, the next they’re selling it off because of risk aversion! Geez Louise, they can’t make up their minds!

So what was the outcome of my long GBP/USD trade yesterday?

Stopped out at 1.6320: -50 pips / -0.50%

While it was an emotionally painful loss, the hit to my account was relatively small. I knew beforehand that my entry was a bit aggressive so I reduced my usual position size. Let’s see if this next trade idea I have will be able to bag me some pips…

Trade Idea: 2011-6-16 00:14

USD/CHF 1-hour Chart

Rrrr! With USD/CHF chillin’ near the minor psychological handle and Stochastic showing a bearish divergence (making lower highs while price is making higher highs), you can’t imagine how tempted I am to short the pair at market!

Zooming out to the 4-hour time frame, we see that price is actually testing resistance at the 38.2% Fibonacci retracement level and Stochastic is already indicating overbought conditions.

USD/CHF 4-hour Chart

But I learned my lesson from my trade yesterday. I don’t want to get ahead of myself and pull the trigger ahead of the SNB interest rate decision and monetary policy assessment later.

From what I read on Pip Diddy’s daily forex fundamentals, the disappointing PPI report that came out yesterday may just give the Swiss central bankers one more reason to holler dovish words. Yikes!

So I this is how I’ll play this setup:

If the fundamentals line up with my bearish bias, I’ll wait for USD/CHF to stage a strong break below .8500 and place my stop above yesterday’s high around .8560. Ultimately, I’ll be aiming for the all time-lows at around .8325.

What do you think of my trade idea? Holler your thoughts to me on Twitter (@Loonieadventure) or write them on my Facebook wall. You can also leave them in the comment box below.

XOXO,

Huck

  • Hugh Kimura

    Great trade analysis.  Keep up the great journaling! 

  • Azrijaafar

    hi there, im a big fan of yours from kuala lumpur, malaysia. i tot of sharing something with you on the earlier post on cable.
    im actually applying part of your HLHB system in 1hr TF which is the crossing of the MAs as my triggering signal. and im using stoch only for sign of divergence. 
    i was about to buy but the MAs had just crossed meaning a signal to sell. so i waited them to recross as a signal but the candle moved further down. since we had a strong bearish morobozu, i sold and had my tp at PWL. 
    BTW, keep up the good works. after all it part of the game. hope in the future we can share our knowledge. cheers