Another Chance to Short EUR/USD? – Trade Closed

Trade Closed: 2011-05-26 23:00

Good evening! It was fast and furious price action during Thursday’s US trading session as the markets flipped around on weak US data. My trade was triggered, and after a few quick decisions to adjust to price action, my trade was closed. Check out my review after the jump!

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework post.

PCDPOD20110525.review.png

As I mentioned up top, price action was lively due to weak US data, so for today’s review I zoomed into the 15m chart above.

EUR/USD slowly grinded higher during the Asian and European trading session, and it wasn’t until after the weak US data was released (GDP 1.8% vs. 2.2% and Initial Claims 424k vs. 404k) that we saw a retest of 1.4200. Traders went into “risk off” mode with the fear of slowing growth into the US, and started to buy US assets. This pushed EUR/USD lower, hitting my second short order at 1.4120.

With the European session quickly coming to an end, and the market looking too tired to the strong area of interest around 1.4080, I decided to adjust my stop on both positions to 1.4120 (which I alerted on my Twitter and Facebook pages).

Eventually, traders went back into USD sell mode, pushing the pair back higher and getting me out of the market at 1.4120.

1st position: +80 pips
2nd position: +00 pips
Total: +1.00% gain

So, no 6:1 return-on-risk, but I think I made the right decision to lock in profits. Of course, I could have done better by closing out at the close of the European trading session, and strong area of interest (1.4080), as my position maxed out just above 2% gain at one point, but overall it was a good trade.

We still have one more trading session to go before we close out the week, so stay tuned for a possible day trade idea. If nothing pops up, then I hope everyone has a great weekend! Thanks for checking out my blog!

Trade Idea: 2011-05-25 23:20

Good evening fellow forex fanatics! After an extended drop from last Friday to Monday of this week, EUR/USD has grinded higher in a relatively calm trading week. With the pair still in a downtrend, is this rally higher a new opportunity to get short?

PCDPOD20110525.png

Fundamentally, the European sovereign debt crisis is still an ongoing issue as the recent focus has been on the restructuring of Greek debt, or even perhaps a default…Gasp! Definitely bad news for the common currency, but we did see a boost in euro buying with recent reports that China will purchase European Bailout bonds (read about this and more euro news at FreshPips.com). In my opinion, this doesn’t fix the debt problem, so I see it as another opportunity to short the euro and ride the downtrend at a better price.

Technically, I used the Fibonacci retracement tool to find potential resistance points, and it looks like the 61% Fib lines up with the major psych level of 1.4200. This level attracted quite a bit of attention over the past couple of weeks, pulling the market around it like a magnet. If retested, it could attract an increase of orders, hopefully more sell orders than buys to play my fundamental bias.

I look to short there, and since I think that could be the top for the week, I’m going with tight stop for a swing trade–1/4 the weekly ATR of 360 pips. My target will be this week’s low around the bottom ATR (1.3965). Here’s what I am going to do:

Short EUR/USD at 1.4200, stop at 1.4280, pt at 1.3960

Trailing stop and scaling in full positions every 80 pips.

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

With this trade structure, I have a potential return-on-risk of 6:1. Also, I will monitor the news and environment, and if there is a catalyst that warrants a strong move lower in EUR/USD I will adjust my trade accordingly to maximize my profit.

We also have a packed forex calendar to close out the week, so stay on your toes, focused, and flexible!

Stay tuned for updates and adjustments by following me on Twitter and Facebook! Good luck everyone!

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12 comments

  1. Jeremy2trade

    Excellent play the run up in the Asian market yesterday turned this into a perfect setup.  Pulled in 150 pips djia direction assisted.

    Reply
  2. Terenacious

    I was looking at very similar setup :) gives me more confidence knowing that u planning something similar! good luck and lets make some pips !!

    Reply
  3. Paddy B

    Awesome setup!  I saw it too.  (Missed entry though, ugh).  Nice trade!  Nailed another one!  Suhhhhweeet!

    Reply
  4. Nc_chew

    I agree. I was also in a short trade from 1.4070 but stopped out at 1.4150. No thanks to China. I swear to god they have kicked my trades out the umpteenth time. It’s like they exist to kick my forex butt. Luckily I only risk 2% per trade.

    I’m going in again on this one Pip Crawler, thanks for giving me another push to attempt another short.

    Reply
  5. Buckscoder

    Well, I was hoping you will do what you did. Again, well done! I was long again when I saw some long setups, but got stopped out with a small profit. Congrats to everybody who got the long ride. :)

    Reply
  6. Lea

    hello Pipcrawler…

    been reading your blog, very interesting, thanks for sharing. Am new here….just wanted to ask you which fx plateform you use pls, or any you’d advise. thank you. Lea

    Reply
  7. Pipcrawlerpipcrawler Post author

    Hey @213840d3983b47f06b25886e42cdb897:disqus yeah, it’s been a bumpy ride this week with no strong trends.  Let’s see if US GDP can give us the volatility we need to grap some pips.  Good luck to you!

    Reply
    • Nc_chew

      Grats, you picked the top.

      As for me, I never got into a short EURUSD afterall BUT, figuring that US data isn’t very pretty I got an idea to short EURCHF instead. Works the same so far but I can’t resist hugging onto the falling trend of EURCHF.

      Reply
  8. Buckscoder

    Congrats, well done! I’ve seen a volume spike so I jumped out with a profit out of a long trade when you jumped in short, lol.

    Reply
  9. Gan Kai Yi

    argh totally miss this trade lol. great analysis by u Pipscrawler =) hopefully i can do something similar in the future

    Reply
  10. Terenacious

    Thanks Pipcrawler I refined my trade to conform more with urs, the entry has been triggered and we now in :) +100pips so far and stops have been adjusted to b/e, scaled in another position. How do u recommend placing the scaled in positions stop? above previous swing high? and if so what if that gives u a near 1:1 risk/reward? as i think my trading could be improved in this area :) Thanks

    Reply

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