No Trade: 2011-10-18 09:15 ET
Good morning! As speculated, momentum carried over from yesterday as we saw further "risk-off" moves during the Asia and morning European sessions. Unfortunately for my trade idea, the retracement in EUR/USD was way too shallow for me to jump in. Check it out!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Before we go into the price action, I should point out that Chinese GDP came out weaker-than-expected (WTE) with a read of 9.1% vs. 9.3% expectations. This weak number was offset by a better-than-expected (BTE) Chinese industrial production number. I think the GDP number has more weight with traders, which may have influenced further risk taking.
Also, as expected, the ZEW economic sentiment data once again came out WTE, but I believe price action shows this was priced in ahead of the event.
On the chart above, we can see the market never reached my short order levels, so I missed a very nice intraday move. With the pair hitting my profit levels (and based on the divergence signaling a potential turn), I have decided to close my open orders. No trade.
So, for the second trade in a row, I was pretty good on the analysis, but was off on my entry. In both cases, the retracement was too shallow to hit my marked levels. Which brings me to the question, should I have a retracement and breakout options for intraday trend plays? Hmmm, I'll ponder this a bit more and let ya know, but until then stay tuned for new ideas and updates by following me on Twitter and Facebook!
Thanks for checking out my blog...good luck and good trading!
Trade Idea: 2011-10-17 18:23 ET
Good evening forex friends! I'm starting out the trading week with a day trade idea on EUR/USD. With a big sentiment shift sparked by Germany's lack of confidence for a real sovereign debt solution, it looks like it's time to jump back into selling euros.
As we can see in the one hour chart above, it was a bad day for the euro after European leaders lacked confidence that a sovereign debt solution will be crafted by the next summit of European leaders on Oct. 23. It's "risk-off" again in the markets, and while I don't know how long that sentiment will hold in this topsy-turvy environment, I feel it'll stick at least for the next few trading sessions.
So, I look to do a day trade, or possibly swing trade, short on EUR/USD if volatility takes it back up to that strong area of interest marked on the chart. With the stochastics indicating the pair is oversold, we may see a pullback higher before more sellers jump in.
I believe my trade will get a boost from the German and European ZEW Economic sentiment reports coming out later today. The trend continues to look down with expectations of both numbers to be worse than last months readings.
So, if retested, I look to jump in short at the major psychological round number, my stop will be half of the daily ATR, and my target will be just under the next support area marked on the chart. Here's what I am going to do:
Short EUR/USD 1.3830, stop at 1.3885, pt at 1.3665
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
Because it is a day trade, I am reducing my risk to 0.50%, but the potential reward-on-risk is about 2:1--more if I scale into the trade as it goes my way. Of course, I'll stay alert and flexible, so be sure to follow me on Twitter and Facebook for quick updates or adjustments. Good luck and good trading!
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- Day Trade Short on EUR/USD - Trade Closed 13:55 20 September 2011